The U.S. Treasury is urging the International Monetary Fund and the World Bank to come up with a best practices guide for emerging sovereign wealth funds that invest in foreign exchange assets, stating that while the funds allow for diversification and higher returns to governments, their growth also threatens the stability of the international financial market. “Sovereign wealth funds raise issues of the appropriate institutional arrangements, governance, operational and risk management, accountability, and – critically – transparency of the funds rules, operations and asset management guidelines,” said Acting Undersecretary for International Affairs Clay Lowery. Now estimated to value $1.5 to $2.5 trillion, sovereign wealth fund assets are not regulated by their domestic financial authorities, a situation that Lowery said needs to change. He warned, however, against the likelihood of the international institutions ?competing with the private sector to manage reserves or sovereign wealth fund assets,” saying “this is clearly beyond their mandates.” (Source: UPDATE 1-US Treasury eyes IMF, World Bank wealth fund guide/Reuters)
