IMF increases scrutiny of sovereign wealth funds

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WASHINGTON, Mar 22 (AFP): The International Monetary Fund signalled yesterday that it was ratcheting up its scrutiny of sovereign wealth funds (SWFs) due to their rapidly growing financial clout.
IMF officials are planning to develop a blueprint of voluntary best practices for the government-run investment funds which straddle international markets and control estimated assets of between two and three trillion dollars.
"Official and private commentators have expressed concerns about the transparency of SWFs, including their size, and their investment strategies, and that SWF investments may be affected by political objectives," an IMF staff paper surmised.
A number of governments, including oil-rich Middle East states, run large investment pools, some of which have snapped up big stakes in corporate America.
The Abu Dhabi Investment Authority (ADIA) of the United Arab Emirates and Singapore's Government Investment Corporation (GIC), which control funds with estimated assets of hundreds of billions of dollars, are two of the world's biggest funds.
ADIA invested 7.5 billion dollars in Citigroup, the US banking giant, in late November followed by GIC which snapped up a 6.8 billion dollar shareholding in the financial group this year.
The IMF staff paper, which was released to the media, also stated that the funds have become concerned about potential protectionist barriers which might be erected by some governments and could hamper their investments.
IMF officials said they hope to establish an international working group of sovereign wealth funds to develop a set of best practices.
The staff paper suggested that a set principles and practices could be presented to the IMF's board of directors for review ahead of the Fund's 2008 annual meetings in October.
The Washington-based IMF, which has 185 member countries, would put together a blueprint for best practices under its remit of promoting global financial stability.