Sovereign Funds Agree on Voluntary Rules

NYT DealBook, September 3, 2008:
A working group of the International Monetary Fund said it reached a preliminary agreement on guidelines for sovereign wealth funds that invest abroad. It didn’t disclose specifics of the voluntary code of conduct, which is to be presented to I.M.F. members in October.
Government-run funds in the Mideast and Asia have recently stepped up their investments in overseas assets, taking minority stakes in companies — and especially troubled financial firms — in the United States, Europe and elsewhere.
This trend has created concern in some circles, because these sovereign funds generally disclose little information about their strategies or holdings. In some cases, these investments have generated a debate about potential national security implications.
The International Working Group of Sovereign Wealth Funds, whose members include representatives from more than 20 countries, including the United States and the United Arab Emirates, agreed on a set of principles after a two-day meeting in Santiago, Chile, that ended Tuesday.
In a joint statement, the group’s two co-chairs, Hamad al Suwaidi of the Abu Dhabi Investment Authority and Jaime Caruana, director of the International Monetary Funds Monetary and Capital Markets department, said, “These principles and practices will promote a clearer understanding of the institutional framework, governance, and investment operations of SWFs, thereby fostering trust and confidence in the international financial system.”
The details of the new guidelines weren’t revealed, but some are already speculating that they may not address all of the concerns out there.
“A voluntary set of principles and practices goes a long way to help de-mystify the methodology of sovereign wealth funds and how they invest, Debbie Fuller of law firm Eversheds told the BBC News. “However, a voluntary code will not satisfy certain governments who were hoping for some form of compulsory transparency rules.”
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