SWF code will not improve efficiency: Kuwait


A code of conduct requiring full transparency at state-backed sovereign wealth funds would not improve financial market efficiency, a top Kuwait Investment Authority official said on Wednesday.


The International Monetary Fund is drawing up a voluntary code of conduct for the cash-rich sector, laying down best practice principles in governance and transparency.


Politicians have come under pressure from the public and companies worry that some funds may have political rather than commercial motives.


But the Kuwait Investment Authority's (KIA) managing director, Bader Al Saad said, said his fund already met most proposed requirements on governance and transparency and an official code of conduct would not help.


"Complete transparency would raise more questions than answers," he told a conference hosted by the Luxembourg government.


The KIA and others have invested huge sums in Wall Street banks hit by liquidity problems stemming from the U.S. subprime mortgage crisis and the subsequent credit squeeze.


At nearly 55 years old, KIA is the world's oldest sovereign wealth fund, managing about $225 billion (Dh825.75).


"History has shown that all KIA investments are made purely on a commercial basis with no political bias. The KIA looks at the bottom line," Saad said.


Sovereign funds have swelled with revenues from rising prices in oil and other commodities and the IMF estimates the sector will grow from $2-$3 trillion now to $6-$10 trillion within five years.


Countries where SWFs invest in should also have similar codes for hedge funds, private equity and pension funds as well to create a level playing field, Saad said.


The European Union recently endorsed general principles to be included in a global SWF code of conduct. Saad said KIA had already met with all the requirements on governance and nearly all on transparency.


"The KIA is completely transparent. None of the recipient countries are able to explain how transparency with (the) size of assets under management will enhance global markets," he said.


Al-Saad said SWFs only account for 5 per cent of global assets under management and a high percentage of their assets were in domestic investments.


More discussions between the EU, United States and SWFs were needed to clear up misunderstandings, he added. (Reuters)

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