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July 8, 2008

Singapore hosts wealth funds meet
Sovereign wealth funds that control an estimated $3 trillion in assets will meet in Singapore this week to discuss a code of ethics aimed at allaying Western fears that their investments are politically motivated, reported Reuters.

The International Monetary Fund's international working group of sovereign wealth funds (SWFs) will gather on July 9-10 to thrash out voluntary guidelines that the IMF hopes will be finalized by October this year.

Highly-secretive wealth funds, investment funds owned by national governments, have become increasingly active in buying Western assets in the past year, often armed with cash piles from soaring oil prices and trade.

Several have participated in multi-billion-dollar capital infusions into banks such as Citigroup and UBS , which were reeling from losses from the collapse of the US subprime mortgage market.

Goldman Sachs estimates US and European banks may need a further capital infusion of more than $200 billion. Analysts say banks have already written off $400 billion in bad investments.

But the funds' growing clout has fuelled political concerns about foreign influence over domestic assets. That could spur protectionism, chilling the climate for foreign investment in the West even as the global economy slows, analysts say.

It's important to establish some guiding principles. This will help contain the risk of a backlash in the West and also establish some kind of trust between investor and investee," said Chua Hak Bin, chief Asian strategist for Deutsche Bank Private Wealth Management in Singapore.

Analysts do not expect a breakthrough at the meeting in Singapore, which has already agreed with Abu Dhabi and the United States to a voluntary set of principles.

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