Wealth fund fears unjustified, say experts

WEF: Funds are solving global economic problems and should not be over-controlled.
Wealth fund fears unjustified, say experts
By Lynne Roberts and Reuters
Thu 24 Jan 2008 02:25 AM

Protectionist fears about the influence of sovereign wealth funds (SWFs) have so far been unjustified and they should not be over-controlled, secretary-general of the Organisation for Economic Cooperation and Development (OECD) said on Wednesday.

Angel Gurria said such funds should be transparent and abide by market rules. But they could help solve some problems such as global economic imbalances, he told a panel discussion at the World Economic Forum (WEF) meeting in Davos.

"We have already enough protectionism on trade and investments. We are now adding protectionism [fears] on SWFs without any evidence that they've done anything wrong so far. We should incorporate them.” he said.

SWFs are run by countries with large current account surpluses, notably in Asia and the Gulf, and designed to manage national wealth more actively. The top SWFs now hold around $2.5 trillion in assets and the total size is expected to reach $12 trillion by 2015 - almost 10% of all financial sets in the world.

International concerns have centred on fears that the rapidly growing funds will allow foreign governments to gain control over key industries.

The funds have gained prominence by buying stakes in US and Swiss banks which have had to make big writeoffs due to the US subprime mortgage crisis.

"The OECD is saying buyers have to have transparency, abide by market rules. But sellers: don't overreact, don't overregulate, don't overcontrol, don't overlegislate. They are helping investments, solving some of the problems, like global imbalances. They could become sovereign development funds”, Gurria said.

A leading Citigroup banker also defended the funds, saying they had effectively been the saviours of Wall Street and London’s City.

Chairman and co-chief executive of the bank’s markets and banking department, Michael Klein, said: “I would make an argument today that the greatest single benefit to the longevity of the US and UK financial structure is investment made by sovereign wealth funds into financial institutions.”

For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.