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In meeting requests for disclosure and transparency, sovereign wealth funds should not be disadvantaged vis-à-vis other investors, like hedge funds or private equity groups, says a director of Singapore’s largest SWF in a recent interview with London’s Financial Times newspaper.



GIC sees two priority issues for international guidelines: the purpose of the investment and the governance of the fund. “If the guidelines are eventually drawn up they should be general, they should be flexible, and to some extent they should be voluntary because funds are different, countries are different,” said Tony Tan, deputy chairman and executive director of Singapore’s Government Investment Corporation.



He confirmed that the International Monetary Fund had been asked to draw up a code of best practices in order to address issues and concerns raised by the operation of SWFs.



“I think it’s understandable that there should be some concern in Europe and in America as to what the agenda of these funds are. Do they have political motives? Are they investing for other than commercial reasons? Our view from Singapore is that these concerns are quite valid and have to be addressed.”



SWFs – state-owned funds with foreign investments - have existed at least since the 1950s, but their clout has increased dramatically over the past 10-15 years. In 1990, they didn’t hold more than $500 billion worldwide. The current total is an estimated $2-3 trillion, half the foreign exchange reserves in the world. According to the IMF, that total could reach $10 trillion ($10,000 billion) by 2012, and, according to UK bank Standard Chartered, $13.4 trillion by 2117.



GIC itself is secretive, even by SWF standards. Mr Tan indicated that “GIC manages well over $100 billion of funds,” but the amount could be over $300 billion according to analysts. Mr Tan promised that the fund would disclose more, as “there is more interest in GIC, not only internationally but also within Singapore”. But he conceded that the degree of disclosure was ultimately up to the government. Change at GIC is expected to be gradual and limited.



Something that would put SWFs at a disadvantage to other investors would be a requirement to issue a full list of all the private equity groups they work with, said Mr Tan. “We don’t really see the purpose of this, and we think that this would be something that is undesirable and would hinder the operations of GIC.”



A level playing field between private equity and SWFs has been urged by the private equity business too. In the UK, Sir David Walker, author of national guidelines for the private equity industry, has called for sovereign wealth funds to sign up to his code of conduct. That has been supported by the Confederation of British Industry, the employers’ and business group, and the BVCA, the private equity association.



Mr Tan said Singapore had responded positively to requests to play a leading role in drawing up international guidelines. According to a report, Norway and Abu Dhabi, like Singapore the homes of huge SWFs, are the two other countries that the IMF has asked to lead efforts to draft guidelines.



Mr Tan said the length of time needed to draw up guidelines would depend on IMF processes, but he thought there was some intention to have preliminary views available by the IMF’s spring meeting. He sees the matter as very complex and taking shape over a period of time. “One of the things, for example, which will give rise to a lot of debate is what is a SWF,” he said. “The term is used very, very loosely. When you actually sit down to draft some code of practice I think you have to be more precise.”



Global Unions' statement to the annual meetings of the IFIs in October called on the IMF to address the implications of the rapidly growing international role of sovereign wealth funds, and also regretted the IMF’s failure to develop an international regulatory framework on hedge funds and buy-outs by private equity funds.