Friday, February 29, 2008
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Sovereign wealth fund = greater transparency?
A common lament about sovereign wealth funds is their lack of transparency -- no one knows their investment strategy. The chart below -- cribbed from a Standard Chartered report summarized by the FT's Martin Wolf -- makes this visually clear:
It's generally assumed that a chief source of this opacity is that the governments chruning out SWFs are largely authoritarian and this impervious to domestic scrutiny.
I tend to agree with this assessment. But I did find this Wall Street Journal op-ed by Heidi Crebo-Rediker and Douglas Rediker to be counterintuitively interesting on this point -- transparency on SWFs would have domestic effects within these countries as well:
When even the most secretive sovereign wealth fund makes an investment, it must comply with the disclosure obligations of the countries in which it is investing. So, when the newly formed China Investment Corporation bought into Blackstone last summer, it was compelled to disclose the terms of the deal and other material information as part of Blackstone's regulatory filings in the U.S. That turned out to have some very real consequences back home.Read the whole thing. posted by Dan on 02.29.08 at 02:38 PM
I read that article a while back while doing a research paper on SWFs (I even cited your blog in my bibliography - never done that before) and it formed the basis for my conclusion - that SWFs already have enough checks and balances to offset most national security concerns.
One aspect of SWFs that I was not exploring in the paper, but that kind of stuck out to me was how they are tending toward handing their cash over to US-based investors to invest on their behalf, racking up billions of dollars in fees for those entities. Charles Schumer apparently has a lot of contacts within that industry. And, coincidentally, he is among the most outspoken members of Congress leading the charge for SWF regulation. This odd coincidence and the fact that he looks like a cartoon villian in no way made me suspicious of his motives.posted by: Joseph Sixpack on 02.29.08 at 02:38 PM [permalink]
I pine for the old days when SWF meant Single White Female.posted by: Mitchell Young on 02.29.08 at 02:38 PM [permalink]
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