IFSWF Report on Compliance with the Santiago Principles: Admirable but Flawed Transparency
Sarah Bagnall and Edwin M. Truman examine the International Forum of Sovereign Wealth Funds (IFSWF) report, which claims to be "a solid, initial step toward a better understanding of the IFSWF and of the Santiago Principles," and find this to be largely true, with a few limitations. The report, released July 7, 2011, is a self-assessment of the voluntary compliance of 21 member sovereign wealth funds (SWFs) with the Generally Accepted Principles and Practices of SWFs, issued in October 2008. Bagnall and Truman find that the extent of compliance with the Santiago Principles is somewhat exaggerated. In addition, some of the 21 funds have substantially lower rates of compliance than others, which is not reported. However, the report is frank about many of the issues that arise with respect to the interpretation of its results, for example regarding the application of the principles on investment policies and on nonfinancial restrictions on SWF investment decisions. Ultimately, presentation may obscure some results in the IFSWF report, but Bagnall and Truman find the report credible and admirable.
Transparency , Long-term Investment , and the Political Economy of Sovereign Wealth Funds
Whereas Anglo-American financial institutions dominated the financial history of the twentieth century, the recent and rapid growth in the twenty-first century in the number of sovereign wealth funds (SWF), mostly from outside North America and Western Europe, represents an important structural change to the global economic landscape. If the conventional model of investment by large beneficiary institutions is to hold small passive stakes in firms as part of large diversified portfolios intermediated by asset managers in the leading financial centers, many SWFs seem to be partially rejecting this model for more tightly focused portfolios with larger stakes. Despite a range of securities regulations in the major capital markets that oblige transparency in terms of ownership and control, skepticism remains in political circles of the west regarding the motives underpinning the behavior of SWFs. Some worry SWFs will be used by their sponsoring governments to underwrite mercantilist industrial policies or to control the flow and access to natural resources, as many SWFs work under a shroud of secrecy. This paper evaluates this tension considering the scope of SWF regulation in the context of changing spatial and functional structures of institutional asset management, while providing a conceptual framework for appraising SWF transparency. *University Research Fellow, Institute for Advanced Studies, University of Bristol. †Lecturer, School of Geographical Sciences, University of Bristol. E-mail: adam.dixon@bristol.ac.uk. Transparency and Sovereign Wealth Funds
Sovereignty, Accountability, and the Wealth Fund Governance Conundrum
Sovereign wealth funds – state-controlled transnational portfolio investment vehicles – began as an externally imposed category in search of a definition. SWFs from different countries had little in common and no particular desire to collaborate. But SWFs as a group implicated the triple challenge of securing cooperation between deficit and surplus states, designing a legal framework for global capital flows, and integrating state actors in the transnational marketplace. This Article describes how an apparently artificial grouping of investors, made salient by the historical and political circumstances of their host states in the mid-2000s, became a vehicle for addressing some of the hardest policy problems of the past century and a site for innovation in international law-making and institution-building. I suggest that the funds’ hybrid public-private and transnational character makes them hard to define and govern, but also makes them exceptionally apt reflections of contemporary global finance and its multiple constituents. I elaborate this character in a four-part accountability matrix. The task of governing SWFs, just like the task of governing global finance, is about negotiating among public, private, internal and external demands for accountability in the absence of a stable hierarchy among them.