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.
Reconciling transparency and long-term investing within sovereign funds
One of the potential consequences of the international community's focus on transparency and commercial orientation, when it comes to sovereign wealth funds, has been to shorten the latter's investment time horizons. As a result, these theoretically long-term investors are pressured into behaving like many short-term investors in the marketplace today, pushed by structural conditions that demand short-term performance in order to secure legitimacy. In evaluating the tension between transparency and long-term investing, we offer a conceptual framework for thinking through different types of transparency pertaining to the investment process as a means of discussing and communicating acceptable and non-acceptable asymmetric information in relation to financial performance.
Economics of Sovereign Wealth Funds: Issues for Policymakers
The book covers a wide range of topics of relevance to policymakers in countries that have sovereign wealth funds (SWFs) and those that receive SWF investments. Renowned experts in the field have contributed chapters. The book is organized around four themes: (1) the role and macrofinancial linkages of SWFs, (2) institutional factors, (3) investment approaches and financial markets, and (4) the postcrisis outlook. The book also discusses the challenges facing sovereign wealth funds in the coming years, from an inside perspective on countries, including Canada, Chile, China, Norway, Russia, and New Zealand. Economics of Sovereign Wealth Funds will contribute to a further understanding of the nature, strategies and behavior of SWFs and the environment in which they operate, as their importance is likely to grow in the coming years.