Funds under management by sovereign wealth funds, or SWFs, are expected to increase to $10 trillion (Dh36.7trn) in five years, the IMF has forecast, with the GCC countries holding about half.
Saying that sovereign funds are "widely perceived" to have played a stabilising role in markets, possibly because their long investment horizons are reflected in longer holding periods, the IMF said it will continue to make efforts to formulate international best practice for such funds.
Capital injections into US and European financial institutions by sovereign funds have topped $40bn since November 2007 in the wake of the US sub-prime crisis. "The recent substantial increase in SWF assets has raised concerns about their lack of transparency, the expanded role of governments in international markets and industries, and the potential of SWFs for carrying out transactions based on non-commercial motives," the IMF said.
In contrast, countries with sovereign funds are concerned about protectionist restrictions on their investments, which could hamper the international flow of capital.
The IMF estimates SWFs will rise from $2-$3trn today to about $6-$10trn in five years, with the GCC states holding about one-half of these assets. While SWFs are sizable compared with global financial assets, they are relatively small as a share of world financial and real assets.
The IMF is undertaking a survey to help identify SWFs' institutional frameworks, investment objectives, and risk management practices, and plans to co-ordinate the work of an international working group to help develop best practices for current and planned funds.