Sovereign Wealth Funds in the European Union - General trust despite concerns

Julien Chaisse, World Trade Institute, Bern
Philippe Gugler, University of Fribourg

Abstract

Sovereign wealth funds have become major players in the global finance system and recently have been attracting increasing public attention. The International Monetary Fund (IMF) and some governements are calling for increased controls and regulation. This recent move is aimed to prevent countries like China and Russia using investments in the US or EU to obtain political influence in strategic sectors, such as energy and defence. The rapid growth of sovereign wealth funds risks provoking a protectionist response by industrialised countries, notably within the EU. The European Commission’s approach calls for a code of conduct ensuring transparency and that the basic motives for the investment of these sovereign wealth funds become clear and that the funds themselves apply good corporate governance. The proposals discussed by European leaders would feed into international efforts, both at the Organisaton of Economic Co-operation and Development (OECD) and IMF levels.