Where does the money come from? The funding behind sovereign funds

Oil and gas is the most common main source of money for national sovereign funds, but it is far from the only one. Of the 78 core national funds on our list, 32 are funded mainly by oil and gas. Another 16 are funded from budget surpluses or government borrowing, 15 from state equity or privatisation, and 7 from minerals and mining. Widen the view to all 231 entities and state equity edges ahead of oil and gas, 70 to 67, because of the many state holding companies built from existing company stakes.

What we counted

Each profile on our list records one or more funding sources, taken from the fund's own documents or its founding law. We sorted each entity into a single main class:

• Oil and gas: petroleum revenue, oil surpluses, gas revenue.
• Fiscal surplus or budget capital: budget surpluses, capital put in by the treasury, or proceeds of government borrowing.
• State equity or privatisation: stakes in state companies transferred to the fund, or the proceeds of selling them.
• Land, royalty or trust income: the US-style permanent funds built from public land sales, leases and royalties.
• Minerals and other commodities: mining revenue, diamonds, phosphate, copper and similar.
• Foreign exchange reserves: money carved out of the central bank's reserves.
• Other: pension contributions, contributions from citizens, settlements and other sources outside the classes above.

Reinvested returns are not a class of their own, because almost every fund keeps some of its earnings. Where a fund has more than one source, it gets one class, chosen in a fixed order: oil and gas is checked first, then minerals, then land and royalty, then reserves, then state equity, then fiscal. So a fund funded by both oil revenue and budget transfers counts as oil and gas.

Finding 1: the overall mix

Source: our dataset. Basis: our classification of the funding source list in each profile.

Oil and gas accounts for 32 of 78 core national funds, which is 41% (our arithmetic). That is the largest group, but it means 59% of national funds have some other main source.

Finding 2: each type of fund has a typical source

The table shows a clear split by type.

• Core national funds lean on oil and gas (32), with fiscal money (16) and state equity (15) next. Our profiles give many examples. Norway's fund receives net state petroleum revenue. Singapore's GIC is one of 4 core national funds in the foreign exchange reserves class, although our profile notes its assets also include proceeds from government securities and budget surpluses. Botswana's Pula Fund and Chile's Economic and Social Stabilization Fund fall in the minerals class.
• State holding and development entities are mostly built from company stakes (45 of 67). That fits how they work. Our Temasek and Khazanah profiles describe companies that hold and manage state stakes.
• Sub-national funds are mostly oil and gas funds (24 of 56), followed by land and royalty trusts (8) and other sources (8). The Alaska Permanent Fund sits in the oil and gas class; its profile describes a constitutional fund built from mineral royalties. The Texas Permanent School Fund, whose roots go back to the 1845 Texas Constitution, lists both land income and oil and gas income, so the fixed order also places it in oil and gas.
• Central bank arms are a small group of 5: 2 draw on foreign exchange reserves, 2 on oil and gas and 1 on minerals.
• Proposed funds already have an intended source in their profiles. Oil and gas leads with 8 of 25, followed by other sources (5) and minerals (4).

Finding 3: the regional picture

Source: our dataset. Counts include all 231 entities, proposed funds too.

Some patterns:

1. The Middle East is not only oil. It has 10 oil and gas entities and 18 built from state equity, reflecting the large number of holding companies in the region. The headline Gulf funds, such as the Abu Dhabi Investment Authority and the Kuwait Investment Authority, sit in the oil class.
2. Europe is equity and fiscal. Of Europe's 35 entities, 16 are state equity and 11 fiscal. Only 3 are oil and gas, including Norway.
3. Asia is mostly state equity. State equity (22) leads by a wide margin, and Asia holds 8 of the 11 entities funded from foreign exchange reserves.
4. Africa leans on resources. Oil and gas (16) and minerals (9) together make up 25 of Africa's 38 entities.
5. North America is oil and land. The 18 oil and gas entities include the Alaska Permanent Fund, and the 8 land and royalty trusts are all US funds. The North Dakota Legacy Fund receives 30% of the state's oil and gas production and extraction taxes, and the Alberta Heritage Savings Trust Fund was set up in 1976 to save part of Alberta's non-renewable resource revenue.
6. Latin America is oil. 12 of its 21 entities are oil and gas funds.

Why the funding source matters

How a fund is filled shapes how it behaves. A fund that receives oil revenue gets more money when prices are high and less when they fall, and many such funds have a stabilisation job as well as a savings job. A fund built from state company stakes starts with a concentrated domestic portfolio. A fund capitalised from the budget depends on future budget decisions. These differences help explain why funds that look alike in a ranking can have very different portfolios and rules.

For how funds spend and save that money, see how sovereign wealth funds work. For when these funds were created, see the sovereign fund boom.

Caveats

1. One class per fund. Funds with several sources get one main class, using the fixed order above. A fund that mixes oil revenue and budget transfers is counted as oil and gas, and a US land trust that also receives oil royalties is counted as oil and gas too.
2. The order matters. 107 entities list more than one source besides reinvested returns, so a different order would move some of them between classes.
3. The "fiscal" class is broad. It covers surpluses, treasury capital injections and borrowed money. These are different in practice.
4. Proposed funds are classed by intended source. The 25 proposed or not yet operating funds have not all received money yet.
5. Counts will move as profiles are updated.

Methods note

Population: all 231 entities on our list, proposed funds included. Classification: the funding source list in each profile, applied in this order: oil and gas, minerals, land and royalty, foreign exchange reserves, state equity, fiscal (surplus or borrowing), then other (pension contributions, citizen contributions and other sources). Reinvested returns are ignored for classification. Percentages are our arithmetic on the counts shown. Full method: methodology.