The US Treasury is stepping up efforts to persuade powerful sovereign wealth funds to be more transparent and accountable to counter unease about their investments in the country's banks and other businesses.
Treasury officials are using this week's meeting of the World Economic Forum in Davos to hold intensive talks with representatives from state-controlled funds from Asia and the Gulf and press them to play a more active, public role in addressing market concerns.
"To date we have seen sovereign wealth funds which have largely been long-term, stable, commercially driven investors," David McCormick, undersecretary to the Treasury, told the Financial Times yesterday. "However, the growth of these funds and increased levels of their investment does raise legitimate questions about how we can ensure that that investment continues to be commercially driven."
SWFs control assets believed to be worth at least $2,000bn and have recently invested more than $30bn in Wall Street banks, including Citigroup, Merrill Lynch and Morgan Stanley.
The Treasury, which considers the discussions with the funds a priority, hopes it can pursue its agenda through the International Monetary Fund, which is drawing up a code for SWF investments, expected in draft form in April.
The scale of the funds' investments has left US government officials keen to accelerate the talks and ensure the IMF code will be credible enough to offset the risk of a political backlash.
"One of our key objectives is to reinforce the message that the US remains very open to investment," Mr McCormick said.
The role of SWFs is one of the themes of this year's gathering of business leaders and regulators in the Swiss town of Davos. A survey of leading economists and policymakers at the conference yesterday showed 81 per cent of delegates considered the funds "the new powerbrokers" of financial markets.
Lawrence Summers, former US Treasury secretary, cautioned: "It is one thing to invest in a passive index but what is going to happen if a bank which has sold preferred stock to a foreign government gets into trouble?"
However, Ibrahim Dabdoub, chief executive officer of the National Bank of Kuwait, said: "We in the [Gulf] and Arab world are being blamed for everything and it is really pathetic. SWFs are not political players, they are financial players."
Davos reports, Page 5
