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Sovereign Wealth Funds - Concerns Placed on SWFs

Several countries are keeping their economies far from SWFs due to the concern that some investments are diverted for political objective to get power over strategically important assets. It is often observed that OPECs are already diverting large pool of funds in establishing strategic assets and purchasing important sectors like infrastructure, telecom, energy and media across developed countries. After much opposition from US Congress, Abu Dhabi's Investment Authority were required to withdraw by reviewing the ADIA Dubai Port after 9/11 terror attacks.

China Investment Corporation's $5 billion stake in Morgan Stanley and buying of Citigroup by Abu Dhabi Investment Authority for $7.5 billion was severely criticized as soon as the recent subprime crisis.

Not enough transparency may be a significant concern for nations which can be experiencing increasing http://www.sovereignfunding.com within their economies. SWFs are criticized for inadequate disclosures regarding size and source of funds, investment objectives along with their holding in equity finance funds. Whilst in the U.S., these concerns are addressed from the Exon-Florio Amendment for the Omnibus Trade and Competitiveness Act of 1988, European preferred to avoid SWF funding. Some experts opine that a real fear is unwarranted whenever we compare how big is SWFs assets ($2 trillion) using the sized global investment funds assets ($20 trillion) and securities traded in dollars ($50 trillion).

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