Sovereign funds agree to voluntary principles

John Lipsky, first deputy managing director of the International Monetary Fund, said in a speech Wednesday that by embracing the principles, the funds "could ... help to mitigate the risk of protectionist pressures on their investments and restrictions on international capital flows."

The agreement, reached Tuesday after two days of talks in Santiago, Chile, was brokered by the IMF. Lipsky's remarks were posted on the IMF's Web site.

The government-run funds, also known as sovereign wealth funds, made several high-profile investments early this year in financial companies that lost billions in the housing slump, including Merrill Lynch & Co. Inc., Citigroup Inc. and Morgan Stanley.

But those moves sparked concern among some politicians in the United States and Europe about the impact of the funds and their motives. Some of the largest funds are located in the Middle East and China, and several members of Congress warned they could invest for noncommercial reasons, such as to gain access to sensitive technology.

Lipsky said the funds played a "notably positive" role in the financial market turmoil of the past year.

But he also urged them to be more transparent about their investment objectives, their sources of funding, and their size. One of the largest funds, the Abu Dhabi Investment Authority, based in the United Arab Emirates, hasn't officially disclosed how much it holds in assets. Analysts estimate it controls between $500 billion and $900 billion.

The International Working Group of Sovereign Wealth Funds, convened by the IMF, said it won't publicly release the principles until it presents them to the IMF's policy committee in Washington next month.

The working group is co-chaired by Hamad al Suwaidi, an official in Abu Dhabi's Finance Department and a director of ADIA, and Jaime Caruana, director of the IMF's monetary and capital markets department.

Members of the working group include sovereign funds from Australia, South Korea, Norway, Singapore, and the United Arab Emirates. The United States is also a member, according to the group's Web site.