A sovereign wealth fund (SWF) is an investment vehicle owned by a country and used to invest in real and financial assets, with money sourced from its surplus reserves. It allows the country to use that extra cash to earn a return and build future wealth.
Its investment strategy may include a specific goal, such as the Canada Strong Fund announced by Prime Minister Mark Carney in 2026, which was created to invest locally and preserve Canadian wealth. It was launched partly in response to the economic uncertainty the country is facing amid ongoing trade tensions with the U.S.
All sovereign wealth funds aim to make a return and develop the economy of the country that creates them.
Key goals of sovereign wealth funds:
- Savings: These funds are meant to preserve a country’s wealth for future generations. For economies that rely on natural resources such as oil, for instance, a SWF allows them to broaden their investments away from a single asset, manage the volatility of oil prices, and build reliable wealth. Norway’s $2 trillion sovereign wealth fund, the Government Pension Fund Global (GPFG), invests surplus revenues from its oil and gas sector into global stocks, bonds, real estate, and renewable energy infrastructure.
- Stabilization: These funds are the “rainy-day” funds for the national budget. They can absorb excess revenues when commodity prices are high and give a cushion to fund government spending when prices drop, providing a buffer for spending without tax hikes and liquidity during economic downturns.
- Development and diversification: SWFs tend to invest in strategic local sectors such as infrastructure, clean energy and technology to create jobs and grow the local economy. They can also invest into sectors the country feels can help develop their economy and prepare for transformations in a specific economic sector.
- Macroeconomic management: The sectors these funds choose to invest in and the way they use surplus reserves mean they can also help manage a country’s overall financial health by balancing inflows of foreign currency as well as local revenues. It’s a different approach than that of central banks, who use monetary policy to manage inflation, but some SWFs can provide the government funds during downtowns, stabilizing revenues.
- Pension reserve funding: Certain funds are created solely to meet future pension liability. These Pension Reserve Funds (PRFs) are a specialized type of sovereign wealth fund aimed at meeting specific public pension liabilities rather than for immediate budget stabilization. These are typically funded through government transfer payments and budget surpluses, and provide retirement income to federal public servants, such as members of the Canadian Armed Forces or the RCMP.
Canada Strong Fund
The Canada Strong Fund is the first Canadian sovereign wealth fund, and includes an initial investment of $25 billion over three years.
Carney described the fund as a “national savings and investment account,” which will work with the private sector to support national projects for the government, although individual Canadians (retail investors) will also be able to invest in the fund. The initial cash going into the fund will be borrowed, and all investments will be made domestically.
Here’s a look at other SWFs:
| Alberta Heritage Savings Trust Fund | The fund collects revenue from the oil and gas industry. The first investment was $1.5 billion in 1976 and has grown to $31.9 billion. |
| China Investment Corporation | The fund began with capital of $200 billion in 2007 and has grown to $1.56 trillion, with the purpose of managing part of the foreign currency reserves. |
| Norway Government Pension Fund Global | Valued at US$2.2 trillion in assets, the fund is looking to grow and maintain wealth for the future of Norway, using the surplus that is generated from the Norwegian petroleum sector. |
| Saudi Arabia Public Investment Fund | Valued at US$900 billion assets under management, the fund aims to diversify away from oil and generate sustainable returns for the future. |
