SWITZERLAND - Delegates at the World Economic Forum (WEF) in Davos have passed judgement on sovereign wealth funds (SWFs), broadly supporting the financial vehicles but calling for regulation to stop potential abuses.
They pointed to the role of SWFs in the post-sub-prime bailouts of several large financial institutions as evidence of responsible investing and said the influence of SWFs in financial terms was equal to that of large public pension funds.
Stephen A. Schwarzman, chairman and CEO of Blackstone Group, USA, said: "[SWFs] are among the most professional investors in the world. In our experience, there is virtually no difference between going to a sovereign fund [for investment capital] and going to a state pension fund in the US."
Delegates said there was a disconnect between the public fears and actual SWF activities. They said by bringing a large pool of stable, long-term capital to the table, SWFs had exerted a calming effect on volatility.
The panel also predicted that at current growth rates and based on present trends in oil-prices, SWFs could reach US$15trn within the next five years.
Robert Kimmitt, US deputy secretary of the Treasury, said G7 nation leaders and the International Monetary Fund (IMF) needed to co-operate to put in place an effective code of practise or regulatory framework that guaranteed a freedom from political manipulation from all parties. Drafts of the guidelines should be ready by Autumn.
In December, Gail Cook-Bennett, chair of the Canada Pension Plan Investment Board (CPPIB), raised concerns that pension schemes could be covered by future legislation relating to sovereign wealth funds (SWF), which could restrict certain investments in their countries.
She said CPPIB did not have any off the major characteristics which caused fear in the context of the SWFs and it should therefore not fall under the same legislation.
Here are key takeaways from our 2019 Asset Allocation Outlook on how we are positioning asset allocation portfolios in light of our outlook for the global economy and markets.
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