Sovereign wealth funds (SWFs) are playing an increasingly important role in the management of government windfalls and income surpluses from a variety of sources. The rise of SWFs is evident from two major developments. First, there has been a significant increase in the size of assets under their collective management (now estimated at over $5 trillion globally), making them one of the largest – and fastest growing – pools of institutional capital in the world. Second, SWFs are gaining in popularity, as a large number of new funds have been established over the past decade and many more are anticipated in countries and regions with recent resource discoveries and other government surpluses.

While SWFs have received growing attention over the past decade, existing policy and academic debates tend to misrepresent or ignore the enormous diversity of sovereign investor models. These differences cut across all the critical dimensions of SWFs: their institutional mandates, economic function, source of funding, the distribution and use of their capital and income, their investment models and practices, and their governance and operational structures.

A joint research project of two leading research centers at Harvard Kennedy School, the Belfer Center for Science and International Affairs and the Center for International Development (CID), addresses this shortcoming by studying in great depth the governance and institutional foundations of sovereign wealth funds. The project identified leading practices among existing funds and established a practical framework for assessing the critical policy and institutional questions that policymakers, legislators and practitioners need to answer in establishing a new sovereign fund or reforming existing ones.