Academic

Thanks to the gang here at the Glom for giving me the chance to blog with them over the past two weeks.

Although every day seems to bring another take on sovereign wealth funds, I was interested in the comments of Knut Kjaer, who ran Norway's SWF for years.  First, he argues that

Particular regulations for SWFs would be a step in the wrong direction. Instead, we should discuss what conditions are needed for the professional management of publicly owned financial assets.

He then contrasts the delegating and "empowering" money-management culture to the "top-down" public governance culture that often results in group-think and that may result in SWFs "giving away returns and, in some cases, taking dangerously wrong decisions" (not that delegation doesn't create risks to be managed; see Kerviel, Jerome and Leeson, Nick).  He also notes that transparency of results is an important component of professional management since it creates accountability, and accountability forces the management to explain its investments objectives and strategy to the media and public.

Finally, he reminds of the dangers of a quick and one-size-fits-all management model for public funds:

None of the current governance models are perfect. But the end game is not a universal model. The huge variety of purpose in fund as well as cultural and political considerations will lead to different ways of building successful management.

Good advice, since Norway and even the Middle-Eastern SWFs don't worry legislators very much--the big concerns are obviously Russia and China (which apparently hopes to operate its SWF as transparently as Norway's SWF, according to the recent 60 Minutes report).  He implies that China will need to do even more than Norway currently does to allay fears about its activities.  For now, though, I'd just take a basic annual report from China.