The bad guys in James Bond movies are often backed by faceless, malevolent organisations bent on world domination. Given these criteria, it is entirely possible that the next Bond adventure will see 007 grappling with the evil plans of a sovereign wealth fund (SWF).

The perception of SWFs in some parts of the West verges on paranoia. Politicians talk darkly of the dangers of SWFs controlling strategic assets while bankers mutter about transparency and distortions in the market. If any of this feeds into popular culture, Bond could soon be on his way to the Gulf.

Most of these concerns are utter rubbish, of course. The Western banking system has been perfectly happy to accept SWF bailouts and, as a result, we have been spared a crisis that could have plunged the United States and Britain into recession. SWF money has also given companies access to capital at a time when mainstream banks in London and New York have decided to stuff their mattresses with cash rather than risk lending it.

However, the SWFs have not done themselves any favours with their reluctance to talk. There has been far too little discussion about the motivations behind multi-billion dollar investments in the banking system, allowing conspiracy theories to flourish. The lack of transparency in these funds and the impossibility of knowing what they have invested in has reinforced that situation.

In an attempt to ease concerns, the SWFs, led by Singapore and the Abu Dhabi Investment Authority (Adia), have been working with the International Monetary Fund to draw up a set of operating guidelines. These are due to be published in September and will be called the Generally Accepted Principles and Practices (Gapp). This mouthy title came about because the SWFs balked at anything that sounded like a code of practice – anything, in other words, that sounded like the IMF imposing rules.

These principles will almost certainly turn out to be pointless and unnecessary but the dialogue between SWFs and the IMF and Western governments has been useful. The more we talk, the more we will learn and the more we will trust each other.

For example, take the supposed lack of transparency. Is this a reflection of Middle Eastern secrecy or simply a risk-based investment strategy? By not detailing where every dollar or dirham goes there is no hysteria when a particular investment loses money and this allows SWFs to invest for the ultra long-term without worrying about how a stock is performing in the short term.

SWFs also actively manage their investments to ensure that they do not appear on share registries. This gives the impression of secrecy but in most cases is about avoiding the extra reporting rules that go with becoming a large shareholder. In the US, for example, an investment company with more than 10 per cent of a company must provide the passports of its board for inspection by the authorities. As many SWFs have boards that include a head of state or other eminent personalities, that is an inconvenience that is not worth the hassle.

Adia, which is thought to be the largest SWF with about $700 billion (Dh2.5 trillion) under management, is leading the way in trying to demystify the way SWFs operate. It has hired a communications director from London and has begun to brief Western political leaders and journalists on what it does.

As a result, I have learned that about 80 per cent of Adia's equities are managed by other people – mutual funds, hedge funds etc. Only about 20 per cent, including the $7bn Citigroup stake, is managed internally.

Between 40 per cent and 50 per cent of the portfolio is held in North America and up to 35 per cent in Europe. Up to 15 per cent is in developed Asia and roughly the same in emerging markets, which feels a bit light to me – particularly for a long-term investor. Equities account for between 55 per cent and 70 per cent of the fund with the rest held in assets such as property, bonds and infrastructure.

This looks very similar to any other conservatively run pension fund and it seems the more we learn about SWFs, the more we realise they are not malevolent capitalist forces but are actually rather dull. However, there is a number that will keep the Bond scriptwriters interested. According to Adia, it holds up to five per cent of its fund in cash, which means there could be a bank vault somewhere with $35bn sitting in it. Now, tell me that won't get the bad guys interested!


- David Robertson is business correspondent of The Times of London