This one comes from the Financial Times:

US agrees on principles for wealth funds

By Daniel Dombey in Washington

The US announced on Thursday that it had reached an agreement with Abu Dhabi and Singapore on a set of principles for investment by sovereign wealth funds, a step it hopes will assuage concerns about such funds’ transparency and behaviour while encouraging them to continue investing.

Washington also wants the agreement to serve as a stepping stone for wider-ranging efforts by the International Monetary Fund and the Organisation for Economic Cooperation and Development.

“It’s the first time to my knowledge that there’s been a set of principles on this type of issue that include both sovereign wealth funds and a recipient country,” Clay Lowery, US Treasury Assistant Secretary for International Affairs, told the Financial Times.

“In terms of transparency and disclosure what you saw today was two funds that are basically willing to step up and say: ‘We believe there should be greater information and disclosure,’” he said. He emphasised the two countries’ commitments in areas such as institutional arrangements and decision-making structures and financial information, notably asset allocation and benchmarks.

The two countries’ investment funds are among the biggest in the world. The 32-year-old Abu Dhabi Investment Authority and Corporation is the world’s largest, with between $500bn and $875bn in assets, according to recent estimates by the Peterson Institute for International Economics cited in a report this year by the US Congressional Research Service. Abu Dhabi last year bought a $7.5bn stake in Citigroup.

Singapore ranks second globally in the size of its sovereign wealth funds, with Government of Singapore Investment Corp having estimated assets of between $100m-$330bn and Temasek Holdings holding assets of more than $100bn.

Singapore’s sovereign funds have been the biggest buyer of overseas assets, mainly financial, among such funds since January 2007, according to a new study by Dealogic, the financial research group.

The Bush administration is particularly keen to ensure continued investment by sovereign wealth funds at a time when US authorities are seeking to prevent the credit squeeze from further damaging the economy. The US is one of the world’s biggest recipients of such investment.

“We can protect our people against investments that jeopardise our national security, but it makes no sense to deny capital, including sovereign wealth funds, from access to the US markets,” President George W Bush said last week. “It’s our money to begin with,” he added in a reference to other countries’ profits from oil and manufacturing trade with the US. “It seems like we ought to let it back.”

But members of the US Congress have expressed concern at the economic power that could be accumulated by sovereign wealth funds from Arab states, Russia, and China.

The agreement on Thursday was reached after a meeting in Washington between Henry Paulson, Treasury secretary, officials from the governments of Singapore and Abu Dhabi, and the two sovereign funds.

The agreement also stated that sovereign wealth fund investment decisions “should be based solely on commercial grounds, rather than to advance directly or indirectly the geopolitical goals of the controlling government,” the need for “strong governance structures” and internal controls for the funds and respect for host country regulatory disclosure rules.

The US agreed that recipient countries “should not erect protectionist barriers”, and “should ensure predictable investment frameworks” and “not discriminate among investors.” The accord also held that “any restrictions imposed on investments for national security reasons should be proportional to genuine national security risks raised by the transaction.”

Mr Lowery said that the agreement was intended to support the IMF and OECD’s more detailed efforts at later this year setting out best practices for funds and recipient countries.

“We are not trying to be exclusive at all; we were just trying to come up with some principles and show some leadership,” Mr Lowery said.