Originally published: Chief Investment Officer, 05 December 2024
A recent report from the International Forum of Sovereign Wealth Funds investigated why Latin America lags behind other emerging markets in developing sovereign wealth funds beyond stabilization funds.
“It is striking that, in Latin America today, there are 12 sovereign wealth funds, nearly all of which are traditional stabilization funds,” the report stated.
Unlike most sovereign wealth funds, stabilization funds can be drawn on by governments to reduce the impact of volatile revenue on the economy. Because the assets in the funds might be needed on short notice, stabilization funds typically invest in liquid, low-risk assets and are usually managed by a county’s central bank or finance ministry.
Ortec Finance and research firm Pureprofile surveyed 50 executives from public, corporate and multiemployer pension funds representing $670.4 billion in assets under management. The firms conducted the survey in November.
