Biggest fund in the world – Revealed!
Ever wondered what the biggest fund in the world is?
I did.
I set off with the notion that it had to be a hedge fund.
Hedge funds
You know the ones. They are often headed by a superstar fund manager. For many people they have a certain mystique because most normal investors don’t have the opportunity to invest in this kind of specialized fund. This adds exclusivity to their appeal.
On top of this, hedge funds use all kinds of techniques to maximize returns and minimize losses. They can be more aggressive than other funds. They can invest in just about anything, use derivatives, short sell and leverage up their trades.
In theory, this means that they can make money when the markets go up, and when the markets go down.
There have been lots of articles recently about how hedge funds are taking positions in the UK based on their belief about the outcome of Brexit. Basically, if the UK makes tank they’ll make money.
Bridgwater Associates
There is no doubt that these sophisticated funds, headed by financial genius’, certainly get big. Bridgwater Associates, headed up by Ray Dalio is the worlds biggest hedge fund firm with assets under management of £169 billion dollars.
Dalio is as big a financial superstar as they come. He’s written lots of books and is always on Bloomberg and CNBC. He’s even got a model portfolio for DIY investors called the All Weather Portfolio.
The assets under management at Bridgewater are split between different strategies and funds. The biggest fund had about $36 billion in assets just over 1 year ago. On the face of it, that is a lot of money, but it isn’t the biggest fund in the world.
Hedge funds tend to be for what is commonly termed sophisticated investors i.e. rich people! Most of us can’t get access to them, not the good ones anyway.
Mutual
So most average investors don’t invest in hedge funds. Instead they invest in mutual funds. Mutual funds are a simple concept. Individual investors pool their money together to make investments.
Once up on a time they were all run by highly paid fund managers charged with selecting stocks to out perform the market. However, gradually over time more and more of them are becoming passive. (you can read more about the active vs passive debate here)
In the UK, mutual funds are usually called Unit Trusts or OEICs although we also have Investment Trusts.
The UK’s biggest investment fund Standard Life Global Absolute Return Strategies (GARS) only has about $26 billion in assets.
It seems a bit of a contradiction in terms saying only $26 billion, but if we really want to find a big mutual fund we need to go across the pond.
As with many things in life the US has the biggest! The Vanguard Total Stock Market Index Fund Admiral (VTSAX) has assets under management of $657 billion dollars.
That blows Standard Life and Bridgwater’s offerings out of the water. At that size, the biggest mutual fund is about 18 times bigger than the biggest hedge fund! That would surprise many people I know.
Of course most people have heard of Vanguard. It is the largest provider of mutual funds in the world. Most famously, Vanguard’s founder John C.Bogle is credited with the first ever index fund.
When he started the first index fund he was mocked and accused of being un-American. Now Vanguard has a humungous $5.3 trillion dollars in assets under management.
That’s a lot of assets under management and $657 billion dollars is a gigantic fund, but it isn’t the biggest fund in the world. Not by a long shot!
Government intervention
It turns out, the biggest investment fund in the world is in fact state-owned. There are lots of them. These sovereign wealth funds invest on behalf of governments.
Seeing that both Vanguard and Bridgwater are US companies nobody could blame you for thinking the biggest sovereign wealth fund is a US wealth fund, but it isn’t.
China has a big one, the UAE also has a big one, but the biggest fund in the world belongs to a little European country with a population of 5 million people. A country who in a previous life terrorized Europe wearing horned helmets and beards.
Who’d have thought Vikings would have gone on to discover oil in the North sea and then use the proceeds to start investing.
The Norwegian Sovereign Wealth Fund
The biggest fund in the world is the Norwegian Sovereign Wealth Fund. Since 1990 they’ve been saving their oil proceeds for a rainy day. The Norwegian central bank has $1 trillion tucked away in their oil fund. With a population of 5 million that equates to $200,000 per person.
It is run by the highly educated Yngve Slyngstad, who has degrees in Philosophy, Politics, Economics, Law and Business.
In a recent interview with Bloomberg, Slyngstad talked about the most important decision he has to make. You might be surprised to find that it is not which algorithm to apply to which market or which stock to short.
No, instead rather like all the DIY investors out there, the most important aspect of the fund is the split between stocks and bonds.
In fact, it turns out the fund has a mandate for a risk preference from the Norwegian people that more or less says 70% stocks and 30% bonds. (You can read more about the split between stocks and bonds here)
In fact, originally it was only allowed to invest a maximum of 40% in the stock market. This was raised to 60% in June 2009 and then 70% in May 2014.
The fund is an ethical fund, meaning it takes a socially responsible investing approach. 17 tobacco companies were excluded in 2010 for example. (You can read more about socially responsible investing here)
So far it has generated an annual return of 5.5%.
The following table shows the top 10 stock holdings.
The top 10 holdings (Stocks)
| Name | Industry | Market Value(USD) |
| Microsoft Corp | Technology | 7,473,560,009 |
| Apple Inc | Technology | 7,245,475,994 |
| Alphabet Inc | Technology | 6,655,876,675 |
| Amazon.com Inc | Consumer Services | 6,325,247,763 |
| Nestle SA | Consumer Goods | 6,226,207,520 |
| Royal Dutch Shell PLC | Oil & Gas | 5,921,409,251 |
| Roche Holding AG | Health Care | 4,570,028,073 |
| Novartis AG | Health Care | 4,560,919,682 |
| Berkshire Hathaway Inc | Financials | 3,859,857,969 |
| Johnson & Johnson | Health Care | 3,370,333,809 |
There are a lot of familiar names there. Half of them are in the top 10 of the FTSE All-World Index, so the biggest fund in the world’s stocks probably aren’t going to be that far removed from a typical DIY investor’s global stock index fund.
And that 30% allocation of bonds is packed with government bonds too. Here are the top 10 bond holdings. All of which are government bonds.
Top 10 bond holdings
| Name | Market Value(USD) |
| US Government | 73,761,836,002 |
| Japanese Government | 27,390,563,172 |
| German Government | 12,254,814,647 |
| UK Government | 7,488,532,511 |
| French Government | 5,543,093,695 |
| Korean Government | 5,008,086,306 |
| Mexican Government | 4,919,009,628 |
| Spanish Government | 4,779,705,357 |
| Italian Government | 4,217,138,576 |
| Australian Government | 4,203,500,529 |
Is Britain still a tempting investment?
As a British investor worrying about Brexit, it was reassuring to know what Slyngstad had to say about Brexit:
The longer perspective in our view is still that we are invested in the U.K. with a long-term horizon. How much we will invest will not be changed depending on the result of this development. If we look past this—10, 20, 30 years—the U.K. will be an important economy in Europe, and it will remain in Europe. We expect business on that timeline to develop positively no matter the outcome.
Yngve Slyngstad
Here are the top 10 UK stocks in the fund.
The top 10 UK stock holdings
| Name | Industry | Market Value(USD) |
| Royal Dutch Shell PLC | Oil & Gas | 5,921,409,251 |
| HSBC Holdings PLC | Financials | 3,120,446,987 |
| BP PLC | Oil & Gas | 2,929,604,454 |
| GlaxoSmithKline PLC | Health Care | 2,100,806,997 |
| AstraZeneca PLC | Health Care | 1,974,920,540 |
| Diageo PLC | Consumer Goods | 1,870,956,114 |
| Prudential PLC | Financials | 1,700,053,448 |
| Unilever PLC | Consumer Goods | 1,546,355,778 |
| Vodafone Group PLC | Telecommunications | 1,403,951,206 |
| BHP Group PLC | Basic Materials | 1,149,221,784 |
And here are the top 10 UK bond holdings:
Top 10 UK bond holdings
| Name | Type | Market Value(USD) |
| United Kingdom Government | Gov | 7,488,532,511 |
| HSBC Holdings PLC | Corp | 826,445,452 |
| Lloyds Banking Group PLC | Corp | 629,248,915 |
| Nationwide Building Society | Corp | 618,362,095 |
| Lloyds Bank PLC | Corp | 471,089,035 |
| British Telecommunications PLC | Corp | 376,914,414 |
| Royal Bank of Scotland Group PLC | Corp | 360,593,492 |
| Santander UK PLC | Corp | 319,366,143 |
| Barclays PLC | Corp | 299,561,593 |
| BP Capital Markets PLC | Corp | 294,420,984 |
The biggest fund in the world also invests in lots of UK property, including large holdings in London, Birmingham, Coventry, Milton Keynes and a 50% holding in the Meadowhall Shopping Centre.
The UK sovereign wealth fund (that might have been!)
In case you are wondering if the UK sovereign wealth fund reciprocates and invests heavily in Norway, the answer is a big ‘no.’
And that’s because, unfortunately the UK doesn’t have a sovereign wealth fund! That might be quite a surprise to some people seeing as once upon a time we had a load of oil too.
Apparently we spent our North Sea oil money on cutting national borrowing and keeping down taxes.
The Institute for Public Policy Research (IPPR) estimates that the UK would have nearly $650 (£500) billion if Westminster had followed Norway’s example.
The Callaghan government of the 1970’s did at least consider setting up an oil fund, but unfortunately the economy had an economic crisis to deal with then, so they started using the money to handle that.
In fact, the Norwegian government wasn’t much different in their approach until the price of oil collapsed in the 1980s. But after that shock they thought they had better start investing.
Perhaps we can take some solace from the fact that even if we had used our oil money more wisely and saved up that £500 billion, it wouldn’t have gone as far as the Norwegian fund because we’d be dividing it between 66 million people rather than just 5 million.
At least that’s what I’m telling myself.
But if the UK did have a $650 billion dollar sovereign wealth fund, it would be the forth largest in the world today.
The following list is the top 10 sovereign wealth funds.
The top 10 sovereign wealth funds
| Country | Fund | Assets billions (USD) |
| Norway | Government Pension Fund – Global | 1002 |
| China | China Investment Corporation | 941.4 |
| United Arab Emirates Abu Dhabi | Abu Dhabi Investment Authority | 828 |
| Kuwait | Kuwait Investment Authority | 642 |
| Saudi Arabia | SAMA Foreign Holdings | 514 |
| Hong Kong | Hong Kong Monetary Authority Investment Portfolio | 456.6 |
| China | SAFE Investment Company | 441 |
| Singapore | GIC Private Limited | 359 |
| Qatar | Qatar Investment Authority | 320 |
| China | National Social Security Fund | 295 |
China’s sovereign wealth funds
Eagle eyed readers may notice that even though the Norwegian Government Pension fund is the largest, it is only a little bigger than the 2nd ranked fund, China Investment corporation.
In fact, you can see that 4 of the top 10 sovereign wealth funds are Chinese.
Both Norway and China each have an additional fund outside the top ten. The Norwegian fund has a further 30.6 billion in theirs, so in total Norway has 1 trillion 30 billion invested. That’s a lot, but nowhere near as much as China. Here are China’s funds:
- China Investment Corporation ($941 billion)
- Hong Kong Monetary Authority Investment Portfolio (456.6 billion)
- SAFE Investment Company ($441 billion)
- National Social Security Fund ($295 billion)
- China-Africa Development Fund ($5 billion)
That means China has $2.1 trillion dollars in total invested, around double Norway.
On the face of it, that’s a sizable sum of money, but seeing as though China has a population of around 1.4 billion to Norway’s 5 million the Norwegian population are still going to get a much bigger share of their pie.
The bottom line
So there you have it. The biggest fund in the world is the Norwegian Sovereign Wealth Fund, but China has double the amount of money invested through multiple funds.
In contrast the UK doesn’t have one of those.
All the more reason for Brits to invest themselves!
