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A strategic investment fund is a portfolio worth a particular sum that is used for a definite purpose. The assets in a strategic investment fund could be raised in the financial markets from exposure to securities, such as stocks and bonds, as well as real estate assets. Sometimes, the partners of a fund might make cash contributions or even borrow money for the purpose of setting aside funds to accomplish a strategic goal. Individual states, countries, or businesses might develop investment funds for one or more initiatives.
Typically, an investment fund is run by some internal investment committee. While the portfolio may grow to a certain size from profits earned in the financial markets and otherwise, a fund's sponsor might limit the size of individual allocations made by that fund. For instance, if the strategic investment fund's purpose is to invest in energy development, the fund sponsor might place a cap on the amount of money that can be devoted to one individual project.
Individual countries might develop strategic investment funds to improve the conditions or support regional businesses. For instance, the assets in a strategic fund could be raised to finance infrastructure development. The direction of the money in such an investment portfolio is dependent on the core strategies outlined in a fund's origination documents.
Another way that a country could use a strategic investment fund is in a defensive manner. If an economy slows and production in a certain industry falters, a country's leaders could be concerned about the threat of foreign investors stepping in with predatory intentions to obtain large stakes in businesses. Resources in a strategic investment fund may be usedin a proactive manner by investing in suffering industry and thereby avoiding the interference of unwanted investors who might be interested in controlling foreign assets.
There are different reasons why a corporation might form a strategic investment fund. This type of portfolio could be used to keep a business on the cusp of new and emerging technologies or systems used in a given industry. For instance, a company might set aside money that will eventually be used to invest in start-up companies behind some of the new systems that are likely to influence, shape, or change an industry in the future. By forming an investment fund to strategically finance the operations of these businesses, a corporation is positioning itself to stay ahead of the competition and also share in the eventual profits of the start-up companies.
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