21 March 2008

US Treasury agrees on principles for Sovereign Wealth Funds

The US Treasury agreed on a set of principles for investment by sovereign wealth funds with with Abu Dhabi and Singapore. The agreement should also serve as a stepping stone on basic principles currently discussed within the IMF and the OECD.

Policy Principles for Sovereign Wealth Funds (SWFs)

1. SWF investment decisions should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals of the controlling government.  SWFs should make this statement formally as part of their basic investment management policies.

2. Greater information disclosure by SWFs, in areas such as purpose, investment objectives, institutional arrangements, and financial information – particularly asset allocation, benchmarks, and rates of return over appropriate historical periods – can help reduce uncertainty in financial markets and build trust in recipient countries.

3. SWFs should have in place strong governance structures, internal controls, and operational and risk management systems. 

4. SWFs and the private sector should compete fairly.

5. SWFs should respect host-country rules by complying with all applicable regulatory and disclosure requirements of the countries in which they invest. 

Policy Principles for Countries Receiving SWF Investment

1. Countries receiving SWF investment should not erect protectionist barriers to portfolio or foreign direct investment.

2. Recipient countries should ensure predictable investment frameworks.  Inward investment rules should be publicly available, clearly articulated, predictable, and supported by strong and consistent rule of law.

3. Recipient countries should not discriminate among investors.  Inward investment policies should treat like-situated investors equally.

4. Recipient countries should respect investor decisions by being as unintrusive as possible, rather than seeking to direct SWF investment.  Any restrictions imposed on investments for national security reasons should be proportional to genuine national security risks raised by the transaction.

Press release

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