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WASHINGTON: The world's major sovereign wealth funds or SWFs have unveiled a set of principles aimed at making such funds better understood and their investment intentions more transparent.
The funds have agreed to abide by a list of 24 voluntary principles - which were presented at the International Monetary Fund's annual meeting in Washington.
SWFs have come into the spotlight following several high-profile investments in major Western companies.
There have been concerns, especially among Western countries, that SWFs would invest for political considerations rather than pure economic and financial goals.
Given these worries, SWFs are concerned that they would face discrimination when making overseas investments. But these funds have insisted they have long-term investment horizons and because of their financial resources, they can serve as a stabilising force in financial markets.
Hence, over the past few months, the International Working Group of Sovereign Wealth Funds has come out with 24 voluntary rules called the Santiago Principles.
These include a call on SWFs to invest only for economic and financial gains and not for political reasons.
SWFs would help maintain a stable financial system through their investments. These would also comply with regulatory and disclosure requirements in recipient countries.
And the funds would have to put in place a transparent and sound governance structure.
The International Working Group is made up of countries with large funds, such as China, Qatar, Russia and Singapore, as well as recipient countries such as the US.
In the past year, SWFs have made investments in major financial institutions including Merrill Lynch, Morgan Stanley, Citigroup and UBS.
Responding to the principles, Singapore's Finance Minister Tharman Shanmugaratnam said it was important for SWFs to continue building trust with investment recipient countries.
He said Singapore supports the principles in full, and the Government of Singapore Investment Corporation (GIC) and Temasek Holdings will adhere to these practices.
During the IMF meeting, SWFs also said they have formed a committee to explore the creation of a permanent international sovereign wealth fund body.
SWFs are estimated to hold more than US$3 trillion in assets.
- CNA/ir
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