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Sovereign Wealth Funds - Concerns Along with SWFs

Several countries are keeping their economies faraway from SWFs because of the concern that some investments are diverted for political objective to accumulate power over strategically important assets. It has been observed that OPECs have already been diverting large pool of funds in acquiring strategic assets and purchasing important sectors like infrastructure, telecom, energy and media across civilized world. After much opposition from US Congress, Abu Dhabi's Investment Authority needed to withdraw by reviewing the ADIA Dubai Port after 9/11 terror attacks.

China Investment Corporation's $5 billion stake in Morgan Stanley and acquiring Citigroup by Abu Dhabi Investment Authority for $7.5 billion was severely criticized following your recent subprime crisis.

Deficiency of transparency remains a significant concern for nations which are experiencing increasing sovereignfunding structured settlement cash within their economies. SWFs are increasingly being criticized for inadequate disclosures regarding size and method to obtain funds, investment objectives in addition to their holding in equity finance funds. Whilst in the U.S., these concerns are addressed through the Exon-Florio Amendment to the Omnibus Trade and Competitiveness Act of 1988, European preferred to avoid SWF funding. Some experts opine that this kind of fear is unwarranted if we compare how big is SWFs assets ($2 trillion) with the height and width of global investment funds assets ($20 trillion) and securities traded in dollars ($50 trillion).

IMG attempted to address this concern of transparency and governance by issuing the Santiago Principles in 2007, a set of 24 voluntary principles to be sure transparency and sound governance by sovereign wealth funds (SWFs). However, hardly any SWFs have already been following these principles seriously.