The US Treasury said Thursday it had reached a series of agreements with two powerful sovereign wealth funds based in Abu Dhabi and Singapore covering investments in US markets. The agreements were hammered out in a meeting at the US Treasury hosted by Treasury Secretary Henry Paulson and come amid mounting congressional scrutiny of foreign government funds, some of which are buying up large stakes in corporate America. “The US welcomes sovereign wealth fund investment and looks forward to continuing to work with these two countries and others to support the initiatives underway at the IMF and OECD to develop best practices for sovereign wealth funds and recipient countries,” the US Treasury chief said. The International Monetary Fund and the Paris-based Organization for Economic Cooperation and Development are also trying to thrash out similar voluntary principles governing sovereign wealth funds. Paulson announced the agreements after meeting Singapore's Finance Minister, Tharman Shanmugaratnam, and the deputy chairman of the Government of Singapore Investment Corporation (GIC), Tony Tan. The GIC controls investment funds of more than $100 billion. Government of Abu Dhabi executive council member Hamad Al-Hurr A-Suwaidi and the executive director of the Abu Dhabi Investment Authority (ADIA), Hareb Masood Al-Darmaki, from United Arab Emirates, also participated in the talks. Analysts estimate that ADIA has around $300 billion in assets. The three governments agreed that sovereign wealth funds' investment decisions should be based on commercial grounds, rather than the geopolitical strategies of a controlling government, Paulson said. Some countries have run sovereign wealth funds for decades, but other states - such as Russia and China - have set up funds in recent years as their economies have grown. Such funds typically seek to earn returns on foreign investments to support domestic programs. Paulson said it was also agreed that funds should be more open about their finances and investment aims, that they should run strong risk management programs and respect other governments' laws. The principles also state that countries receiving investment flows should not erect protectionist barriers against foreign investment and should not discriminate between rival funds. Treasury officials said they had been analyzing sovereign wealth funds more closely of late due to their mounting investment clout, especially as Wall Street endures one of its worst financial crunches in decades. US officials stressed that they welcome foreign investment and are working to make sure congressional lawmakers are kept informed about market developments. The Treasury chief has expressed concern that a lack of transparency by the funds could spark a rise in US protectionism. The European Commission last month called for an international accord to limit the political influence of the state-owned capital pools, which have grown in number to about 40, managing between $2 trillion and $3 trillion. The three countries agreed that all investments must be based only on commercial grounds, and the funds should increase the disclosure of information and make sure they have strong risk management and governance controls. They also agreed that countries that receive investment shouldn't set up protectionist barriers and have consistent, non-discriminatory investment rules. “SWF investment decisions should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals of the controlling government,” the agreement stated. The Abu Dhabi Investment Authority said in a statement that it “looks forward to supporting and implementing these principles.” __
