SWFs Caution Against Investment Restrictions

Uncertainty is affecting investment policy and combined with the recent heightening of sovereign risk, is resulting in a highly complex operating environment for sovereign funds.

(May 14, 2010) — The International Forum of Sovereign Wealth Funds (IFSWF) has issued a statement urging regulators to avoid restrictions that could distort investment regimes, warning that excessive regulation impacts the free flow of capital across borders.

The IFSWF revealed that economic uncertainty is affecting investment options for Forum members, cautioning against steps that would place restrictions and other limitations. Consequently, the Forum said it welcomes multilateral efforts by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).

This year, more than 24 sovereign wealth funds met in Sydney for a three-day closed conference, reflecting the opaqueness of the industry and the tendency for SWFs to shy away from the public eye. The meeting was hosted by Australia’s Future Fund and was attended by senior representatives from the Asian Development Bank, European Commission, IMF and World Bank.

SWFs remain important actors in their home and host countries, IFSW stated on its website. “While not escaping the effects of the 2007-09 global economic and financial crisis, Forum members felt they had proved their significance during this period. Many funds provided liquidity to stabilize rising fiscal deficits, as per their mandate, and some funds also supported stimulus packages to support economic activity.”

The Forum will next meet in Beijing in April 2011, hosted by the China Investment Corp.

IFSWF is a voluntary group of Sovereign Wealth Funds that was established by the International Working Group of Sovereign Wealth Funds (IWG), in Kuwait City in April 2009. It held its inaugural meeting in Baku, Azerbaijan in October 2009. IFSWF exchanges views on issues of common interest, and promotes the Santiago Principles and SWF activities, according to the forum’s website. The staff of the International Monetary Fund (IMF) facilitates the work of the Forum.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742