Over the past decade, there has been a notable increase in the establishment of sovereign wealth funds (SWFs), driven largely by a boom in commodity markets and accumulating foreign exchange reserves. Governments from Chile to the United Arab Emirates (UAE) have used these funds to diversify their economies and investment portfolios, secure long-term wealth, and provide stability against economic shocks while seeking higher returns in various asset classes.

This expansion of SWFs has added liquidity to financial markets, and many of these funds have become prominent players in global finance. As a result, other governments are closely observing this trend.

Recently, a new generation of SWFs has emerged, not necessarily driven by traditional sources of revenue like oil and gas. For example, Egypt’s Sovereign Fund of Egypt has launched a new fund focused on industrial investments within the country, targeting sectors such as food, building materials, and railway supplies. This approach is reminiscent of Singapore’s Temasek, which invests in national industries without being overly concerned about local economic inflation.

The structure of the Egyptian fund allows for collaboration with other sovereign funds and governments, potentially including the UAE, to enhance regional economic and security cooperation.

Similarly, Ireland, with a significant surplus from corporate taxes paid by foreign multinationals, has announced plans to create two new sovereign funds. These funds are designed to reinvest this surplus into both local and international markets. The Irish government has allocated approximately $100 billion to these funds, one of which focuses on local and short-term investments. This strategy reflects a broader trend of leveraging new capital sources and supporting local industries in an environment marked by inflation and high interest rates.