Qatar Investment Authority's lack of transparency goes against standards for sovereign wealth funds
Sovereign wealth funds act on behalf of the nations they serve to help with pursuing capital opportunities that are intended to lift economies and create symbiotic international business partnerships.
The sovereign wealth fund, functioning on behalf of an oil-rich Gulf state of Qatar, is considered by some to be the only sovereign wealth fund not compliant with a set of global standards called the Santiago Principles. For example, the Wall Street Journal reports that the QIA does not disclose the total amount of capital that it manages or publish an annual report as stipulated by the standards.
This is a big deal because the Santiago Principles were set up in 2008 to ensure that sovereign wealth funds operate in ways that promote better international relationships.
The International Forum of Sovereign Wealth Funds (IFSWF) has been instrumental in enacting these policy standards.
At an annual speech late last year, New Zealand Superannuation Fund CEO Adrian Orr, who chairs the IFSWF, talked about some of the strategic investments by sovereign wealth funds that brought some ballast to national economies as financial danger loomed.
“Sovereigns - our own members standing tall among them - played a stabilizing role in deeply uncomfortable times, investing counter cyclically during and since the financial crisis.” Orr said. "The Santiago Principles highlight this. First as the idea that enduring stability and commercial purpose are the twin defining features of sovereign capital. And second as 24 items of practical guidance on the institutional governance and risk management frameworks necessary for sound long-term investment practice… the forum exists in the service of these principles.”
Orr said the principles were conceived “as a defensive reaction to wariness about sovereign capital.”
Pointing to different types of partnerships that the IFSWF has built, Orr said building a broader base of collaboration has given the project greater legitimacy.
“These endorsements are extremely helpful in marking this sovereign capital as high-quality from a long-term perspective, and distinguishing it from other capital sources," Orr said. "To put it bluntly, the scrutiny brings financial reward.”
As for calling out some of the sovereign wealth funds that fail to deliver on meeting the Santiago standards, the organization has declined to comment.
“It is not part of the IFSWF’s mandate to comment on member practices.” Orr said in a Wall Street Journal report in December 2015.
More recently, members of IFSWF staff contacted by the Gulf News Journal declined to speak on the specific status of individual sovereign wealth funds.
It's clear from the group's proactive support of the Santiago Principles, however, that they're calling sovereign wealth funds to a high standard.
In the Wall Street Journal piece, Orr said members should adopt the “highest standards of transparency and governance... . Not doing so bankrupts the principles, leaving them worthless for all.”