Those new punk SWFs

Posted By Daniel W. Drezner Wednesday, September 3, 2008 - 1:50 PM Share

The IMF announced "preliminary agreement" on a voluntary code of conduct for sovereign wealth funds yesterday. The indispensible SWF Radar has a roundup of links. For me, Krishna Guha's story in the Financial Times provides the most revealing detail:

The International Working Group of Sovereign Wealth Funds had to bridge significant differences between funds with different histories, domestic political environments and mandates. People familiar with the discussions say some funds are more sophisticated and politically savvy than others, with differences surfacing between more established funds and relative newcomers. Some funds were also more resistant to financial transparency than others, a divide that did not necessarily tally with how long the funds had been in operation. Some saw value in formalising transparency regimes in order to reassure their domestic audiences that the money was being wisely invested and accounted for. Others wanted to retain a greater degree of secrecy.

This cleavage among SWFs doesn't surprise me -- what surprises me is that it took so long for this schism to be reported in the press. My impression had always been that older, more established funds -- the ones based in Abu Dhabi, Singapore, Kuwait, etc. -- were pretty steamed that nouveau riche funds from China and Russia were bringing so much negative press attention onto them. It doesn't surprise me that the older funds were willing to commit to standards that would placate recipient countries. [So, does this agreement mean anything?--ed. Since the actual Generally Accepted Principles and Practices (GAPP) for Sovereign Wealth Funds won't be released until October at the earliest, it's hard to say. One would think a voluntary code of conduct would not matter so much, but compliance with principles on transparency and governance are pretty easy to observe and monitor. This, combined with the fact that the biggest recipient countries and the largest SWFs have a big incentive for the GAPP to work, leads me to think that this will mean something.]

EXPLORE:ECONOMICS, GLOBALIZATION, SOVEREIGN WEALTH FUNDS

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TOM

2:56 PM ET

September 3, 2008

How come "SWFs" these days is

How come "SWFs" these days is only used to describe the funds that make people uncomfortable. Almost no one mentions Norway, in spite of the fact that its fund is the second largest in the world.

BRETT KELLER

8:51 PM ET

September 3, 2008

At the very least, having a

At the very least, having a voluntary code of conduct will act as a benchmark against which the behavior of the funds can be compared. In a guidelines vacuum, most actions can justified or rationalized. The same will hold true even the GAPP out there, but there will be at least one standardized resource--to which most of the major players will have agreed--that can be used to point out when they fall short.

Tom--how many people fear Norway? For better or worse, the debate over SWFs has been based on the fact that the emerging funds mostly belong to countries Americans and Europeans distrust.

RACHEL ZIEMBA

12:38 AM ET

September 12, 2008

a very good point on the

a very good point on the divisions between sovereign funds. Though I think its not as much about old versus new. As far as I can tell at least one of the older funds in age (say Kuwait) are also some of those most wary of codes of conduct. But most of the statements that the transparency push was unfair have come from the Chinese press.

And one of the reasons people aren't as worried about Norway is that they release so much information

I also wonder if the process itself of talking about governance and risk management issues might not actually end up being the bigger payoff, even if the agreed guidelines are pretty loose (and they could be) there could be some

A very very long-time lurker on this blog who very much enjoyed your recent paper on the emerging regime

Rachel