"Government investments in income generating assets is not only a good diversification strategy but it is a must."
Prudent investment by the government is a topic often linked to oil resources. Some governments spend all the money from oil. A few smart ones save some of the oil money into an investment fund. The investment fund generates annual returns, which can be even bigger than the annual oil revenue. This has happened in Alaska. Other countries with big investment funds from oil money include Norway and Kuwait. UK, unfortunately, belongs to those who spend all their oil money.
But why stop at oil resources and oil revenue? Governments can divert money to a sovereign wealth fund regardless of where the money comes from. The sovereign wealth fund will eventually be able to generate huge returns. The Singapore government has achieved this. It has a lot of money from other resources that is placed in its sovereign wealth funds. The returns per capita are humongous!
Instead of poor governments stretching out their hands to beg, steal and rob from their citizens year in and year out, we should expect governments to actively invest money for good returns. In the long run, governments should have so much investment that they are oozing with money, with enough to support a great citizen dividend or a universal basic income.
Let us consider a simple analogy. A startup company needs money from shareholders. If the company is successful, eventually, the company should be oozing with money to give back to its shareholders. Governments and citizens must change our views. A government cannot remain as a startup company forever, every year demanding money from its citizens. Citizens must demand that their governments be like successful companies oozing with money for their citizens.
The simple and very effect strategy is for each government to start and commit to a few sovereign wealth funds. There are already many success stories.
Yes, it is good strategy, it is a must, it is a responsibility of every government to create income generating assets for their citizens.