Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, September 18, 2008

SWF’s to the rescue?

With the financial world in various levels of financial meltdown, the search is already on for solutions. Regulators are inevitably reaching for their rulebooks, others are looking to sources of capital.

Sovereign funds have already proved their value to the world economic system by helping to recapitalise the US banking system over the past year. And the shape and size of their available assets represent a substantial potential opportunity for other banks. But there is still suspicion of SWF's motives and governance structures, and concern that they have the potential to tilt the playing field in global markets.

However the world's main sovereign wealth funds have now agreed to a voluntary code of conduct and to consider establishing a standing committee to represent them in international policy debates. The decisions reached during a two-day summit hosted by the International Working Group of Sovereign Wealth Funds in Chile, come in the middle of the gloom about the sustainability of the global financial system and heightened attention to the role of these state-owned funds.

The 24 “Santiago Principles” will be published in October, but are likely to focus on the areas emerging from the survey – released today. The survey recognises that public disclosure by SWFs varies significantly.

One SWF publishes extensive information describing the objectives of the fund, its institutional framework, agency arrangements, investment policy (including a broad discussion of the implementation of ethical guidelines), risk management framework, audited financial statements and accounting policies, actual portfolio composition (including a complete list of all assets held by the fund and the manner in which it has exercised its voting rights), and performance data. However the survey acknowledges that this is not typical, and whether this will be the 'standard' for all SWF's remains to be seen.

The International Working Group of Sovereign Wealth Funds have had to bridge significant differences between funds with different histories, domestic political environments and mandates.

Some signs of a stabilising – and well governed - force on the horizon?


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