As sovereign wealth funds continue to accumulate assets and make high-profile investments around the world, some lawmakers in the United States and abroad are calling for new laws that would regulate the funds’ activities and mandate
transparency.
A few critics have suggested that the International Monetary Fund (IMF) should step in as worldwide supervisor to sovereign funds.
The regulation debate
However, as the recent lifeline extended to major U.S. banks demonstrates, sovereign funds present a substantial and readily available source of capital.
Opponents of stricter regulation point to sovereign investment as an important engine for worldwide economic growth. If a country were to restrict the activities of sovereign funds within its borders, it might find itself at an economic disadvantage, with important investment dollars going to other nations.
In addition, some proponents of the funds express concern that public mistrust of overseas investment and isolationist sentiment could cause an overreaction on the question of regulation. This, they say, could have far-reaching consequences not only financially, but in terms of diplomatic and economic relationships with other nations.
