IMF Board OKs Plan to Devise Sovereign Wealth Code.
The International Monetary Fund's executive board on Friday approved plans to develop a code of best practices for sovereign wealth funds in an effort to mitigate concerns about their investment strategies.
Jaime Caruana, director of the IMF's monetary and capital markets department, said the set of principles agreed to Thursday by the U.S., Abu Dhabi and Singapore was a welcome contribution to its own work. He noted that the three countries endorsed the multilateral effort under way by the IMF and Organization for Economic Cooperation and Development to develop a set of best practices for both sovereign wealth funds and the countries in which they invest.
"I think we are all moving basically in the same direction," Caruana said on a conference call. "We think a better understanding of the role and the practices of the sovereign wealth funds, and the development of this set of best practices, would be mutually beneficial to all the parties." The IMF plans to hold a round-table with the state-owned funds in April, with the aim of coming up with a draft of a code by August.
U.S. Treasury Secretary Henry Paulson on Thursday announced an agreement with officials from Abu Dhabi and Singapore, which operate sovereign wealth funds, on sets of principles for both the funds and their recipients.
The joint statement called for the funds to make a formal pledge to invest for commercial rather than "geopolitical" reasons, as well as for strong disclosure and governance standards. Recipient countries were urged to avoid protectionist measures or discriminate against the funds, according to the principles.
Recent investments in cash-hungry Wall Street firms totaling over $35 billion show that they can contribute to global financial stability, Caruana said, but added that best practices would help "mitigate" concerns about the funds and their investment strategies.
The funds, which have grown rapidly to as much as $3 trillion globally, have come under greater scrutiny as they have shifted more assets into equity holdings. The IMF projects that they could expand to $10 trillion in five years, while other estimates anticipate as much as double that amount.
The International Monetary Fund's executive board on Friday approved plans to develop a code of best practices for sovereign wealth funds in an effort to mitigate concerns about their investment strategies.
Jaime Caruana, director of the IMF's monetary and capital markets department, said the set of principles agreed to Thursday by the U.S., Abu Dhabi and Singapore was a welcome contribution to its own work. He noted that the three countries endorsed the multilateral effort under way by the IMF and Organization for Economic Cooperation and Development to develop a set of best practices for both sovereign wealth funds and the countries in which they invest.
"I think we are all moving basically in the same direction," Caruana said on a conference call. "We think a better understanding of the role and the practices of the sovereign wealth funds, and the development of this set of best practices, would be mutually beneficial to all the parties." The IMF plans to hold a round-table with the state-owned funds in April, with the aim of coming up with a draft of a code by August.
U.S. Treasury Secretary Henry Paulson on Thursday announced an agreement with officials from Abu Dhabi and Singapore, which operate sovereign wealth funds, on sets of principles for both the funds and their recipients.
The joint statement called for the funds to make a formal pledge to invest for commercial rather than "geopolitical" reasons, as well as for strong disclosure and governance standards. Recipient countries were urged to avoid protectionist measures or discriminate against the funds, according to the principles.
Recent investments in cash-hungry Wall Street firms totaling over $35 billion show that they can contribute to global financial stability, Caruana said, but added that best practices would help "mitigate" concerns about the funds and their investment strategies.
The funds, which have grown rapidly to as much as $3 trillion globally, have come under greater scrutiny as they have shifted more assets into equity holdings. The IMF projects that they could expand to $10 trillion in five years, while other estimates anticipate as much as double that amount.
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