Investors talk to sovereign wealth fundsMajor institutional investors Institutional Investor
A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. plan to urge the sovereign wealth funds Sovereign wealth fund (SWF) (Sovereign wealth funds) is a fund owned by a state composed of financial assets such as stocks, bonds, property or other financial instruments. (SWF See Flash.
(filename extension) swf - /S W F/ The filename extension for Adobe Shockwave Flash animated vector graphics files, common on the World-Wide Web.
A rarely used alternative expansion is "Small Web Format". ) that have propped up the world's banking system to be transparent in their activities and conscientious shareholders.
The international investment community is planning to meet some of the leading sovereign wealth funds next month to discuss their investment strategies and their attitudes to key corporate governance Corporate Governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. issues regarding such matters as boardroom structure and executive pay.
Their initiative comes amid mounting concern about the increasing financial muscle of the sovereign wealth funds, so called because they manage countries' investments. In recent months they have snapped up $25bn (£12.7bn) of shares in major investment banks The following is a list of investment banks Financial conglomerates
Large financial-services conglomerates combine commercial banking and investment banking, and sometimes insurance. that have been wounded by the credit crunch Credit Crunch
An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. . But very little is known about the motivation of these funds, which are often built on oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints.
Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally and usually based in Asia. They are estimated to manage $2tn-$3tn globally and among the most active are the Kuwait Investment Authority The Kuwait Investment Authority (KIA) is Kuwait's government investment arm, specializing in local and foreign investment. It was founded to manage the funds of the Kuwaiti Government in light of financial surplusses after the discovery of oil. , Singapore's Tamasek and the China Investment Corporation.
State-owned companies have also been demonstrating their financial capabilities. The Chinese-owned aluminium company Chinalco recently bought a 12% stake in Rio Tinto Rio Tinto may refer to:
The concern about SWF was underlined at the weekend when the Australian government said it is to study more closely investments into the country from funds owned by foreign governments. A statement from the Australian treasurer's office said: "Foreign governments may not operate solely in accordance with normal commercial considerations and may instead pursue broader political or strategic objectives".
Several other countries have voiced similar concerns. Last week, Dutch officials said the government should exercise more oversight over sovereign wealth funds, and France has expressed concern about the motivation of sovereign wealth funds and has pledged to protect local businesses from their investments.
The US Senate's banking committee said it was also looking into the effects that sovereign funds have on the US economy and financial security.
The investors, who will meet through the International Corporate Governance Network, are not expected to back calls from some politicians and bankers for a new regulatory regime for sovereign wealth funds. Instead they will urge the sovereign wealth funds to be transparent in their motivations.
Peter Montagnon, chairman of the ICGN ICGN International Corporate Governance Network , said sovereign wealth funds could do one of three things: be passive, politically motivated, or be conscientious investors. He urged them to be the latter
Montagnon is also head of investment affairs at the Association of British Insurers, whose members control a fifth of the shares traded on the London stockmarket.
The meeting in Gothenburg next month will be attended by institutional investors from major investment houses around the world as well as key sovereign wealth funds. Among those expected to attend are the China Investment Corporation and the Kuwait Investment Authority
Investors are thought to believe that existing rules for the markets, particularly competition rules governing monopolies, should be sufficient to ensure sovereign wealth funds should not be able to wield too much influence.
However, they are keen to encourage transparency and full disclosure of shareholdings. Karina Litvack, head of governance at F&C, said: "We advocate disclosure and feel there is a case for funds not to be passive."
The International Monetary Fund is keen to draw up disclosure ideas for sovereign wealth funds and is working with Singapore, Norway and Abu Dhabi Abu Dhabi (ä`b thä`bē, zä–, dä–), Arab. Abu Zabi, sheikhdom (1995 pop. 928,360), c. , three states with active funds, to devise some plans.