Sovereign wealth funds
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This article is written by Ramanuj Mukherjee, CEO, and Kashish Khattar, Team LawSikho.

What are sovereign wealth funds?

You might be aware of different types of investors, such as venture capitalists, private equity investors who are looking for the best return on their investments. 

Have you ever heard of countries trying to have their own funds to invest in different assets? We don’t have a prominent one in India, but it is per for the course for many wealthy countries. These funds are called sovereign wealth funds. 

The idea gained prominence in the 1950s when Kuwait started their own Investment Authority as they had excessive oil revenues. This was like a backup plan regarding the capital they were earning because of their free natural resources. What if they run out of oil someday, due to overdrilling? Or the value of oil comes down drastically in the market? Well they are making money right now and putting into a fund that may be used later. 

The idea is fascinating because they are using capital as a resource to gain more capital. Converting natural resources to more liquid and accessible resources for the nation. A powerful idea definitely.

A sovereign wealth fund is basically a state-owned investment fund which is made up of the money earned or generated by the government. 

They are typically derived from a country’s surplus reserves. They are usually massive in size. Their investment strategy often aligns with the strategic interests of the country. Apart from this, they are likely to be run as regular investment funds are run. 

How is an SWF set up? Where does the surplus money come from?

A sovereign wealth fund can get its funding from a lot of different places. They are typically funded through surplus funds from the sovereign owned natural resources or the sovereign wealth; it could be from trade surpluses; bank reserves; foreign currency; money from disinvestments or privatisation and government transfer payments. 

World’s biggest SWFs

According to Sovereign Wealth Fund Institute, these are the biggest 10 SWFs around the world:



Norway Pension Global Fund 


China Investment Corporation 


Abu Dhabi Investment Authority


Kuwait Investment Authority


Hong Kong Monetary Authority Investment Portfolio


GIC Private Limited


Temasek Holdings


Public Investment Fund


National Council for Social Security Fund


Investment Corporation of Dubai


India has set up an infrastructure wealth fund of its own 

The National Investment and Infrastructure Fund (“NIIF”) is India’s version of a domestic SWF, the fund was proposed to invest in the country’s infrastructure. It is said to fund commercially viable greenfield projects. It is not a proper SWF so to speak as it takes funding from other sources rather than the Government of India, although the government also invests some money.

It is difficult for Indian government to set up an SWF that actually invests in the best investment opportunities around the world as it is hard for political reasons for the government to prioritise profits and it normally invests most of its surplus towards social needs. NIIF types of funds are probably the closest thing to an SWF that India can do.

As of now, NIIF focuses on highways and clean-energy investments. It has planned to raise funds amounting to INR 40,000 Cr of which 20,000 Cr will be provided by the Indian government. Abu Dhabi Investment Authority is said to have committed USD 1 Bn in the NIIF already. 

NIIF has managed to secure USD 4 billion of capital commitments so far, some of them being:

  1. Saudi Arabia’s Public Investment Fund is investing Rs 11,367 crore in Reliance Industries Jio Platforms for a 2.32-per cent stake;
  2. Asian Infrastructure Investment Bank (AIIB) invested USD 200 million in National Investment and Infrastructure Fund in June 2018;
  3. Canada Pension Plan Investment Board to invest up to US$600 million through the National Investment and Infrastructure Fund (NIIF);
  4. GVK signs binding agreements with ADIA, PSP Investments and NIIF for an investment of Rs. 7,614 crore in its airports holding company;
  5. AustralianSuper and Ontario Teachers’ Pension Plan to invest up to USD 2 billion through the National Investment and Infrastructure Fund (NIIF);
  6. Temasek, a global investment fund headquartered in Singapore has invested $400 Million in NIIF;
  7. NIIF and the UK Government have committed GBP 120 million each into the fund.

Significant investments by SWFs in India

It has been reported that PE deals surged at around USD 19 Bn, the highest in a decade. 

SWFs and pension funds participated in around two thirds of that amount. Here are some remarkable investments in India by SWFs from around the world.

  1. Singapore’s GIC wealth fund and the Abu Dhabi SWF made an investment of USD 495 Mn in renewable energy firms; they are also expected to buy out some substantial stake in the airport business;
  2. GIC invested in Indian Telecom Towers;
  3. Temasek has invested 11 billion USD in India over last 15 years;
  4. ADIA invested a billion dollars in Kotak Mahindra bank; and
  5. GIC invested 1662 crores in the latest ICICI bank equity raise;
  6. Canada Pension Plan Investment Board and GIC in 2019 participated in a $145.8 million buyout of Oakridge International School in India;
  7. As of February 2020, Norway’s Government Pension Fund Global, the biggest sovereign wealth fund in the world, has increased its bets on India by 27.2 per cent to $9.4 billion.

Why is India an attractive place for investment for SWFs

In some words: A billion people. 

To explain further: A market of a billion people. 

India with a median age of 26 years has a rising middle-class cosmopolitan population which likes to spend its disposable income on luxury goods and services. This is a growing and very large category of consumers. 

This is one of the reasons why India attracts a lot of global investment interest. 

The other reason being that a large part of India is on the cusp of development. The young population grows up and looks for job opportunities. They will need houses to live in, cars to ride on, and offices to go to. 

With a mere 5-6 metro cities running the whole show right now, the country expects to build up new cities, colleges and universities to cater to the growing demand of its young population. India’s tier 2 cities have shown massive promise as well and have grown at a phenomenal speed.

As the infrastructure grows and the young population grows, every investor will get a bang on their buck. The RoI could be huge for all the stakeholders involved.

Another very important reason is, the Finance Ministry of the country is being extremely supportive of SWFs investment in the country, even encouraging it. 

The Budget of 2020 is a significant milestone for SWF investments:

“In order to incentivise the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March 2024 and with a minimum lock-in period of 3 years,” said Finance Minister in her budget speech. – (Source)

What kind of legal work will this generate 

A lot of work opportunities that come from SWFs investing in India are related to corporate lawyers. It is a great opportunity for corporate law firms to advise SWFs with respect to large investments, buy outs and large scale lending. Most of the time, this kind of work is bagged by large and mid tier law firms. Boutique law firms with deep relationships abroad can also benefit from these deals.

SWF related work is definitely an exciting bright spot for the future of India. Government will be spending more on infrastructure and will make it easier and safer for foreign investments from SWFs to come into India. While the pandemic has temporarily slowed the economy, the essential sector continues to strive and grow. We are also seeing that the government is more willing to make critical reforms and disinvestments. India’s service economy will also benefit from a new boom in outsourcing and work from home trends thanks to a trained English proficient workforce as many jobs from advanced economies will move to India. 

We can expect a more efficient and mature Indian economy to emerge out of this pandemic, led by foreign investors who will find investments cheap and attractive in a market that holds great promise.

What will the M&A and investment lawyers do? 

The transactional and the general corporate team would be working on many investment and acquisition deals by SWFs.

Work would range from due diligence, negotiations and drafting, tax advisory and investment structuring, and compliance. Large deals that SWFs usually invest in generate large legal fees and are considered lucrative. 

There may also be work related to land transfer, due diligence, registration and stamp duty. 

There may also be work for banking and finance lawyers as sometimes these SWFs lend money as well, apart from investing in equity, usually as part of consortiums.

There will be syndicate agreements, consortium loan agreements, term loan agreements and drafting of various guarantees, warranties and instruments related to these will be drafted.

What will projects lawyers do? 

Infrastructure and project lawyers are likely to be busy in the years to come and the government figures out the funds to crank up public investment in the country to improve the economy. 

There will be project and project finance lawyers who would be working on structuring, documentation, financing, compliance for large government backed infrastructure projects.

Usually, a transaction involving hundreds of millions of dollars and a foreign client like the SWF typically have a team working from a magic circle firm in London or Singapore along with an Indian counterpart. 

The Indian law firm and the foreign law firm work together by coordinating the intricate details with the other counsels of the stakeholders in the deal. Needless to say, you will be working with the biggest names in the market when it comes to clients and deals like these. 

The work will include: 

  1. Due diligence reviews; 
  2. Drafting of construction contracts, equipment supply contracts, operation and maintenance contracts, transportation and offtake agreements;
  3. Then there would be coordinating the due diligence reviews with local counsels and specialists. These will include lawyers from real estate, regulatory, environmental law backgrounds;
  4. There could be first drafts on the financing agreements also – agreements such as credit agreements, security agreements, note purchase agreements;
  5. Making various checklists for conditions to be met before closing or signing of various documents and instruments. 

What will disputes lawyers do? 

Disputes teams are often called on during transactions to advise on the nature of and liability that may arise from existing disputes. 

Apart from this, SWFs in the past have gotten into disputes in India. Where there is business, there will be a dispute. Contracts like these have a special clause for dispute resolution in foreign jurisdictions in most cases. They also have additional protection through bilateral investment treaties with foreign countries which involves governments and foreign investors going to arbitral tribunals under those treaties. 

An investor state dispute mechanism kicks in when SWFs investments are harmed due to state action or discrimination. Normal international arbitrations are far more common though, whenever there are shareholder disputes especially. 

All such disputes can keep disputes teams at large law firms quite busy.

How can LawSikho help if you want to work on deals like these?

If you want to work on deals like these, you can acquire expertise in M&A and investment laws. You can also develop your knowledge in banking and finance laws. You can also develop your knowledge of arbitration law.

We, at LawSikho, are determined to help our learners get the best training to do cutting edge work for their employers and in turn, their clients. 

We have exclusive courses on where we teach you investment and M&A law which can prepare young lawyers who aspire to work on deals like these.

If you want to learn arbitration law, check out this arbitration law course which can put your learning and career development on fast track. 

If you want to be a projects or projects finance lawyer, you must start from this banking and finance law course

Further, the contract drafting course can help you do wonders in your career. We help you to learn to draft over more than 100+ contracts

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