Very often we read in newspapers/magazines about Sovereign Wealth Funds. Which of the following is/are the correct description of the same?begin{enumerate}item These are the funds or the reserves of a government or central bank of a country which are invested further to earn profitable returns.item These are the funds which were accumulated by some people over the years but were not put in active circulation as they retain them as black money for several years.item The funds which are created to be used as relief funds or bailout packages.end{enumerate}

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Very often we read in newspapers/magazines about ‘Sovereign Wealth Funds’. Which of the following is/are the correct description of the same?

A	Both 2 and 3 only
B	Only 2
C	Only 3
D	Only 1

Explanation:

Detailed explanation-1: -A sovereign wealth fund (SWF), also known as a social wealth fund, is the surplus money that a country accrues over time. The government-backed pool of funds is mostly funded from a country’s foreign exchange reserves. Other sources of funds for an SWF account include: Bank reserves.

Detailed explanation-2: -Abu Dhabi Investment Council (ADIC) is sovereign wealth fund funded by the oil industry and owned by Abu Dhabi, the capital of the United Arab Emirates (UAE). China Investment Corporation is the sovereign wealth fund of China that invests in public and private assets to diversify foreign exchange holdings.

Detailed explanation-3: -In short, this defines sovereign wealth funds as having three key characteristics: A sovereign wealth fund is owned by the general government, which includes both central government and sub-national governments. Includes investments in foreign financial assets. They invest for financial objectives.

Detailed explanation-4: -Sovereign wealth funds typically allocate their assets across four investment classes: (1) cash and equivalents; (2) fixed-income securities; (3) global, public equities; and (4) alternative investments, which include direct/private equity, venture capital and hedge fund, real estate, and infrastructure investments.

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