Sovereign fund code seeks new members among central banks

Nigeria's finmin, Okonjo-Iweala

Signatories to an international set of guidelines on governance and transparency for sovereign wealth funds are exploring whether to take in a wider pool of state-backed investors including central banks.
The International Forum of Sovereign Wealth Funds (IFSWF), a grouping founded with International Monetary Fund backing that promotes the code, said it would welcome more members to the club in a statement issued late on Thursday.
"IFSWF members spend significant time discussing best practice in long-term investment and in sharing knowledge and experience about maximising risk-adjusted returns across all asset classes," said Bader Al Sa'ad, managing director of the Kuwait Investment Authority and chair of the IFSWF.
"(The) IFSWF welcomes sovereign investors meeting our membership requirements to join us and participate in those discussions."
The existing voluntary code of practice - known as the Santiago Principles - was drawn up in 2008 for sovereign wealth funds which are standalone vehicles set up by states to invest money often coming from accumulated oil and gas export revenues.
The principles were drafted following concern about the rising clout of these funds on financial markets and fears that some could make investments for political rather than purely commercial purposes
But increased participation in capital markets by other types of state investor not covered by the code has led to calls for the code to be extended to a wider variety of signatories.
A report earlier this year from the Official Monetary and Financial Institutions Forum (OMFIF), which researches public financial institutions, noted that growth in central banks foreign reserves is creating "a new source of risk".
State institutions are sitting on unprecedented pools of money, often swollen by revenues from natural resource exports but also reflecting years of currency intervention by monetary authorities buying dollars to keep their own currencies competitive.
According to OMFIF, sovereign investors manage assets worth $29.1 trillion - equivalent to 40 percent of the global economy - which are held by 157 central banks, 156 public pension funds and 87 sovereign wealth funds.
In seeking to manage this money, state investors such as central banks, are increasingly acting like sovereign wealth funds investing in financial markets around the world, prompting calls for more of them to sign up to the Santiago Principles.
"Asset-rich entities from the developing world should be persuaded of the benefits of disclosure. Western counterparties should behave accordingly. The International Forum of Sovereign Wealth Funds’ Santiago Principles on transparency can be extended to other asset managers," OMFIF said.