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February 7, 2013 4:06 pm
London’s campaign to enhance its position as a global financial centre could soon receive a boost from a group of large sovereign wealth funds.
The International Forum of Sovereign Wealth Funds, an association of 24 funds, headed by China, Russia and the Gulf states, is planning to establish a permanent secretariat and many members favour London.
The forum, an informal grouping with combined assets of about $4tn, is planning to move out of its premises inside the International Monetary Fund’s headquarters in Washington.
The British capital would welcome its presence, especially at a time when other EU members are questioning the UK’s commitment to the union and are promoting rival financial centres, notably Paris and Frankfurt.
George Osborne, the UK chancellor, has been courting SWF investment in UK infrastructure but the funds have sometimes been a focus of controversy because of the security risks that might come from another country pouring its funds into industries considered “strategic”.
While other locations, including Kuwait, are also in the frame, many members back London because of its central role in the finance industry. “Our members are considering London. We will make a decision soon,” Jin Liqun, chairman of the forum and of the China Investment Corporation, told the FT during a visit to London.
Gerard Lyons, the chief economic adviser to Boris Johnson, the London mayor, said: “[This] is a positive reflection of both London’s independence and its strong competitive global position.”
The forum, which was founded in 2009 with the support of the IMF, was established to promote co-operation and “best practice” among SWFs.
Its stated purposes are to help maintain a stable global financial system, the free flow of investment, compliance with regulations in investment destination countries, investment on the basis of economic considerations, and the creation of sound governance structures for funds.
In essence a talking shop, with investment decisions taken mainly in national capitals, its officials exchange views with each other and with professional advisers, more so as their investment strategies become more complex. Many funds are diversifying away from their original holdings in bonds, into equities, property and private equity.
While many funds prefer to keep a low profile, bigger SWFs have made high-profile investments, not least in the UK.
For example, China’s CIC, Singapore’s GIC and the sovereign wealth fund of Qatar are all shareholders in FGP Topco, the company that owns several British airports, including Heathrow.
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