What is a sovereign wealth fund?

A sovereign wealth fund is a state-owned investment fund that is primarily used to invest the surplus revenues generated from a country's natural resources, such as oil, gas, or minerals. These funds are established by nations to stabilize their economies, save for future generations, and manage national savings in a manner that contributes to long-term economic growth. A sovereign wealth fund can also serve to diversify national income sources beyond volatile resources.

In contrast, other options do not accurately define a sovereign wealth fund. The first option pertains to funds for agricultural initiatives, which are typically categorized as development or agricultural funds, rather than investment funds based on national wealth. The third option describes an international aid organization, which focuses on humanitarian assistance rather than investment and wealth accumulation. The fourth option refers to private investment groups that operate independently of state control, which diverges from the nature of sovereign wealth funds as state-owned entities. Therefore, identifying a sovereign wealth fund as a state-owned investment fund based on natural resources captures the essential characteristics and purpose of these financial instruments.