Western policymakers cannot credibly call for disclosure by sovereign wealth funds, or SWFs, beyond what they apply to their own foreign exchange reserve management and other investors operating under their jurisdictions, a leading US investment bank has said.
Rather than complain about the growth in SWFs, some developed countries with excess reserves, such as Japan and Western Europe, should probably develop their own, Goldman Sachs said in an economics paper released on Wednesday.
The US and European Union are pushing for more disclosure as the government-owned investment vehicles swell with record oil prices and rising currency reserves. Such funds, whose owners include Kuwait, Abu Dhabi, China, Russia and South Korea, have helped to shore up the balance sheets of financial companies including Citigroup and Merrill Lynch after $382 billion of sub-prime-related writedowns and losses worldwide.
Assets controlled by the funds may gain fourfold to $12 trillion by 2015, according to Morgan Stanley.
So far there is no evidence of politically motivated acquisitions in the West becoming an issue for SWFs, Goldman said, "and, in our view, there is no serious prospect of it becoming one".
It added: "Focusing on SWFs as a vehicle for such investment seems misplaced. Despite close scrutiny by the press, the only example of a possible conflict known to us is the otherwise widely praised Norwegian Government Pension Fund – Global, which is reported to have voted at a shareholder meeting for tougher greenhouse gas emission limits for Exxon Mobil than what applies under Norwegian legislation to state-owned StatoilHydro.
"The common practice among new SWFs has been to extricate themselves from any perceived conflict, for example by giving up their voting rights associated with major investments. To the extent governments want to make politically motivated investments, they are much more likely to do so via state-owned or state-controlled enterprises."