(August 14, 2013) — Most of the new entrants into the sovereign wealth fund (SWF) sector have ranked poorly on the International Forum of Sovereign Wealth Funds’ transparency rankings, scoring 30 out of a possible 100 or less.
A report compiled by the Peterson Institute for International Economics, said the overall number of SWFs scoring 30 or less had increased since 2009, driven by the new entrants.
“We could find essentially no reliable public information on these funds, which was not unexpected, but we wanted to include them because they are members of the IFSWF and, in principle, adhere to the Santiago Principles,” the report said.
“For each of the five newly scored SWFs with very low scores, it might be argued that there are extenuating circumstances. A more disturbing conclusion is that despite the availability of the Santiago Principles… to guide their policies on transparency and accountability, these funds have fallen substantially short, or continue to fall substantially short, of many of their peers.
“It is also discouraging that only two of the SWFs that registered 30 or less on the 2009 scoreboard have moved up significantly: Bahrain’s Mumtalakat Holding Company, whose score improved marginally to 39, and United Arab Emirates’ International Petroleum Investment Company, whose score increased to 46.”
Some of the newcomer’s older and larger cousins performed markedly better.
Out of a possible score of 100, Norway’s SWF topped the list of 58 funds by only dropping two points, pushing New Zealand’s Superannuation into second place with 94 out of 100.
Chile’s Economic and Social Stabilization Fund came joint third with a score of 91, sharing the honours with Alaska’s Permanent Fund. Ireland’s National Pension Reserve Fund ranked fifth with a score of 90.
But being older and bigger does not necessarily make you more transparent. Norway’s Government Pension Fund-Global was the only SWF out of 17 institutions with more than $50 billion in assets to score highly rankings.
Two of the biggest funds, the Qatar Investment Authority (more than $100 billion) and the Libyan Investment Authority (more than $50 billion), ranked in the bottom five for transparency.
At the bottom of the table, Equatorial New Guinea was the worst-ranked SWF, scoring just two out of 100 for transparency for its Fund for Future Generations.
The Libyan Investment Authority fared little better with a score of 6, and Angola’s Fundo Soberano de Angola ranked third from bottom with a score of 15. The United Arab Emirates’ Istithmar World and the Qatar Investment Authority scored just 17.
The report was particularly damning about the Qatar Investment Authority, saying that having started with an extremely low initial score in 2007 and having no improvement in the past five years, was “troubling”.
“Qatar fancies itself as a major political, economic, and financial player, and as such should hold itself to a high standard,” the report said.
The call for greater transparency from SWFs has grown louder in recent years as new entrants have come into the market. Investors want to know that SWFs’ investment decisions are being driven by economic, and not political, grounds.
SWFs that are also classified as pension plans all performed better than the average overall score of 59, ranging from 95 for California Public Employees’ Retirement System to 70 for China’s National Social Security Fund.
The full report can be read here.
Transparency does come with its drawbacks however. It allows people to air their ire at some of your investment decisions.
A report published by the Norwegian Church Action group, said the small allocation to developing markets by Norway’s Government Pension Fund-Global was failing to reap rewards from their higher growth patterns, and help those in dire need of improved infrastructure and stable markets.
“Despite high growth rates and abundant investment opportunities in poor developing countries only 1% of this fund has been invested in the low income and lower middle income group of countries,” the group said in the introduction to its report.
“This group (of countries) accounts for 13% of the world’s GDP. In our opinion this is not just a missed opportunity for the fund, but also unfair and robs developing countries of capital needed to create jobs.”
You can’t please all the people, all of the time. Read more from the Norwegian Church Action Group here.
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