"As for sovereign wealth funds, I would also suggest four guiding policy principles. First, invest commercially, not politically. Sovereign wealth fund investment decisions should be based solely on economic grounds, rather than political or foreign policy considerations. Sovereign wealth funds should make this statement a formal part of their basic investment management policies. Second, convey world-class institutional integrity. Sovereign wealth funds should be transparent about their investment policies and have strong risk-management systems, governance structures, and internal controls. Although not highly leveraged and, in principle, long-term investors, sovereign wealth funds can represent large, concentrated, and opaque positions and thus may cause worries of systemic risk. Third, compete fairly with the private sector. Sovereign wealth funds should be careful not to be seen as having an unfair advantage in competing with the private sector for transactions, including by financing acquisitions at below-market rates. Finally, respect host-country rules. Sovereign wealth funds should comply with and be subject to all applicable regulatory and disclosure requirements of the countries in which they invest.
These principles will help inform the international dialogue on the issues raised by sovereign wealth funds. The principles also provide a framework for thinking about what we believe is the most appropriate international response to these issues: multilaterally-agreed best practices for sovereign wealth funds and for the countries in which they invest.
Last year, the United States proposed, along with other nations, that the IMF identify a set of voluntary best practices for sovereign wealth funds. This work, I am pleased to say, is already underway in the Fund. Building on existing IMF guidelines for the management of foreign exchange reserves, best practices could cover the overall objectives and principles of sovereign wealth funds, their institutional arrangements, their risk-management frameworks, and their transparency and accountability. Best practices would provide guidance to new funds seeking to make sound decisions on how to structure themselves, mitigate any potential systemic risk, and help demonstrate to critics that sovereign wealth funds will continue to be constructive, responsible participants in the international financial system."
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Here another piece on SWFs:
RGE - Sovereign Wealth Funds as Development Funders
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