Sovereign funds say progress made on principles

SINGAPORE (AFP) - Representatives of the world's sovereign wealth funds wrapped up two days of meetings in Singapore on Thursday, saying they are halfway toward drafting voluntary guidelines.

Sovereign wealth funds (SWFs) are government-created investment vehicles that have emerged as a potent force in global markets, leading to concerns over a lack of transparency and national security in recipient countries.

In a bid to develop "generally accepted principles and practices" for the funds, the International Monetary Fund (IMF) gathered 25 of its member states with SWFs on May 1 to form the International Working Group.

"We are halfway through this process," Hamad al Suwaidi, one of the group's co-chairs, told reporters in a conference call.

The group has targetted an October completion date for establishing the voluntary principles but Suwaidi said they should be ready a month before.

"We should have generally accepted principles and practices by early September," said Suwaidi, a director of the Abu Dhabi Investment Authority (ADIA). "The group is committed at arriving at those set of principles."

ADIA, of the United Arab Emirates, is the world's largest sovereign wealth fund and co-chair of the working group with the IMF.

With direct SWF input through the working group, the principles aim "to promote a clearer understanding of the institutional framework, governance, and investment operations of SWFs that continue to support the maintenance of an open and stable investment climate globally," a statement from the co-chairs said.

The group said it will next meet in Santiago, Chile, on September 1.

Even after the guidelines are in place, the working group may continue to meet periodically for a review, Suwaidi said.

"This process will continue after we arrive at these principles and practices," he said.

In their statement, the co-chairs said representatives of countries receiving the funds, including the United States and Britain, also attended the talks.

The working group seeks to keep its process "open and consultative with the recipient countries" to develop guidelines that serve recipients and investors equally.

Asia Pacific members of the working group are Australia, China, New Zealand, South Korea, East Timor, Singapore and Vietnam.

Sovereign wealth funds today manage between two and three trillion dollars in investments, according to the IMF, an amount that is projected to grow to up to 10 trillion dollars in the next five years.

Singapore's state-linked investment firm Temasek Holdings, and the Government of Singapore Investment Corporation (GIC), are among the largest sovereign wealth funds in the world.

They recently made multi-billion-dollar investments in global financial houses battered by a US housing slump.

In March the US Treasury said it had reached a series of agreements with ADIA and GIC covering investments in US markets.

Leaders of the three countries involved agreed that SWFs' investment decisions should be based on commercial grounds, rather than the geopolitical strategies of a controlling government, Treasury Secretary Henry Paulson said.