Can a sovereign wealth fund really work?

South Korea may use the increase in tax revenues generated by its booming semiconductor industry to create a National Future Fund. According to Het Financieele Dagblad, the fund is intended to tackle growing social inequality and strengthen the country's long-term competitiveness. But do these types of sovereign wealth funds actually work? We called Maarten Lafeber, macroeconomist and senior strategist at APG, to find out.

Where exactly did South Korea's idea for this Future Response Fund come from?

"South Korea has two companies that are currently benefiting enormously from the AI boom: tech giant Samsung and chipmaker SK Hynix. Both their stock prices and profits have risen dramatically over the past year. For example, SK Hynix's pre-tax profit hovered around $4 billion annually between 2020 and 2023. In 2025, that figure reached approximately $35 billion. Samsung's profits have also increased sharply, although it was already generating strong profits before the AI boom. Expectations for both companies in 2026 and 2027 point to further significant growth.

People often talk about the Magnificent Seven in the United States, but if you look at the MSCI Emerging Markets Index, you see something similar. You have TSMC in Taiwan, alongside these two South Korean companies. Together, they now account for roughly 30 percent of the emerging markets index.

For South Korea, this also means higher tax revenues. As corporate profits increase, more money flows to the government. The question then becomes: what do you do with it? You can spend it, invest it, pay down debt, or cut taxes. But you can also put it into a fund. One of the advantages of that approach is that the money does not immediately become part of the regular government budget."

Norway's sovereign wealth fund, the largest of its kind, is often seen as the gold standard. What can South Korea learn from Norway?

"Norway's Government Pension Fund Global, which is financed by oil and gas revenues, has grown to around €2 trillion. That's an enormous amount of money. What the Norwegians understood very well is that the success of a sovereign wealth fund depends heavily on its governance structure.

The fund operates independently from day-to-day politics and cannot simply be treated as a national piggy bank. Each year, the government is allowed to withdraw up to 3 percent of the fund's value. That figure is based on the fund's expected long-term return, meaning that, in principle, only the investment gains are spent while the underlying capital is preserved for future generations.

The investment rules are equally clear. The fund can invest in equities, bonds, and real estate, but not in Norway itself. That helps avoid conflicts of interest. Otherwise, politicians might be tempted to influence investment decisions for domestic purposes. South Korea would therefore be wise to pay close attention to the governance framework of the Norwegian model."

Besides governance, what else matters when setting up a sovereign wealth fund?

"South Korea has identified three objectives for the new fund. The first is to support growth sectors, particularly AI and the broader ecosystem around it. The second is to benefit younger generations, for example through jobs, housing, and support for startups. The third goal is to reduce inequality. All of these are understandable objectives, but they are also fairly broad. The risk is that, over time, the fund gets pulled into supporting an ever-growing list of policy priorities, even though it was originally established to pursue a specific set of predefined goals. It would therefore help to define the mission more narrowly. What exactly is the country trying to achieve, and how will success be measured?

Another question is how much additional tax revenue these companies will ultimately generate and how sustainable those revenues will be. There is no guarantee that today's exceptional growth rates will continue indefinitely.

What is striking, however, is that the South Korean government seems to be working closely with these companies. At the same time the fund was announced, major investments were unveiled in data centers and infrastructure around Seoul. According to the government, these projects are intended not only to strengthen South Korea's leadership position in chips and AI, but also to promote economic development outside the Seoul region. The goal therefore appears to be less about siphoning off corporate profits and more about spreading the prosperity generated by the AI boom more evenly across the country."

Some people argue that the Netherlands missed an opportunity by using its natural gas revenues to fund government spending rather than placing them in a separate fund, as Norway did. Is there any truth to that?

"I'm somewhat more nuanced on that point. It's true that the Netherlands received enormous gas revenues in the 1970s. At the same time, I think our pension system is, in some respects, fairly comparable to the Norwegian model. It, too, represents a vast pool of capital—around €1.7 trillion—that operates independently from politics.

Dutch pension funds have clear rules governing how much risk can be taken and how assets are managed. In that sense, the system has a lot in common with Norway's sovereign wealth fund and is probably successful for many of the same reasons. You could therefore ask whether the Netherlands really needed to build up a second massive pool of capital alongside its pension assets."

Norway's sovereign wealth fund is famous for its unparalleled success. Do sovereign wealth funds ever go wrong?

"One example is Malaysia's 1MDB fund. It was established in 2009 as a sovereign investment and development fund intended to support the country's economic development. Unlike Norway's fund, it was not primarily financed by oil and gas revenues. Instead, a large portion of the funding came from borrowing. Eventually, the fund became embroiled in fraud and corruption involving dishonest intermediaries.