Steve Weisman: Hello, this is Steve Weisman at the Peterson Institute for International Economics. I’m here today with Ted Truman of the Institute who has written a new policy brief. The authors are Sarah Stone and Ted Truman on sovereign wealth funds, which have played an increasingly important role in the international economics scene.
Ted has been doing scoreboards for these funds over the last 10 years and his new policy brief updates the scoreboard this year. Ted, first of all, tell us what are sovereign wealth funds and why are they such a big deal.
Ted Truman: Sovereign wealth funds are government-owned investment vehicles that invest, to a large extent, outside their countries and therefore they have some impact on the international financial system. The total assets under management are around $6 trillion these days and four of them are more than $500 billion in size.
Steve Weisman: So they’re big players. How many countries did you study?
Ted Truman: We have 60 funds this time in 43 countries. There are some countries like the United States that actually has seven funds at the state level.
Steve Weisman: Now, you’ve been tracking their accountability and transparency. Why are those issues important?
Ted Truman: Well, my view is that they are very important because these are funds, which are run by governments on behalf of the citizens of the country, and they impact those countries and impact the citizens of the world. And so, both the citizens and associated governments want to know how these funds are run and more about them, how big they are, what the returns are, where they invest their money, and what kind of rules they use to invest their funds.
Steve Weisman: So, you’ve set up criteria for your scoreboard. How many criteria did you establish?
Ted Truman: So we have 33 elements. This time, we actually expanded two elements to look a little more deeply, but basically we have 33 elements.
Steve Weisman: And how have they done over time in achieving the goals of transparency?
Ted Truman: Well, they have improved. The core funds that we had -- when we first did this, scored about 50% on a scale of 100, and they moved up to almost 70%. So there’s been a big adjustment, and almost all the funds have improved, increased their transparency and therefore accountability over this period.
Steve Weisman: I would say in part because of the studies like yours --
Ted Truman: Well, of course.
Steve Weisman: There’s no pressure on them, right?
Ted Truman: We take credit for that, and the initial 2007 scoreboard helped to motivate the establishment of what’s called the Santiago Principles, which are a group of principles that a subset of these funds, about half of them, say they adhere to and are associated with the International Forum of Sovereign Wealth Funds.
Steve Weisman: So, let’s look at some cases. If they’ve improved on average over time, who has done the best in that regard?
Ted Truman: Well, the improvements are very interesting., Some have them have been scoring very well all along like Norway’s or New Zealand’s fund at the top and Alaska’s fund. One of the surprising funds even from the start was the fund of Azerbaijan.
Steve Weisman: Surprising because?
Ted Truman: Well, I don’t think we associated Azerbaijan and that part of the world with a high degree of transparency.
Steve Weisman: I see.
Ted Truman: And, one of the interesting ones is that the Nigeria fund, which has moved from essentially low single digits, 12% the first time I scored it, up into 76. So that is a tremendous improvement. Think about it. So it went from a failing grade, whatever failing is. And certainly, 12 qualifies right to 76, which as you know might be a good Yale C. [The Mubadala Development Company in the United Arab Emirates went from 26 to 68%.]
Steve Weisman: You’re not grading on a curve.
Ted Truman: No, I don’t grade on a curve. This is it.
Steve Weisman: So, what about the big funds that we think of?
Ted Truman: They’re a little more disappointing. So the four biggest funds, the ones that have more than $500 billion in estimated assets score only 74% relative to an average of 62 for every fund. And the one that really pulls up the average is Norway, which is the biggest fund.
Steve Weisman: What about the Gulf funds?.
Ted Truman: There were those that do so well, the United Arab Emirates’ Abu Dhabi Investment Authority (ADIA) scores at 58, so it’s below the average, even though its score has improved from the beginning from 205 to 58. So they are a little disappointing.
Steve Weisman: What are the biggest disappointments?
Ted Truman: Well, the biggest disappointments in that sense there are funds like ADIA and even funds in Singapore, which was a big mover and shaker in this area, its GIC Private, it used to be Government Investment Corporation, scores just at the average. So you would think that Singapore would do much better. Another fund in Singapore does a little better -- Temasek, which actually pulled out of the Forum. It doesn’t really consider itself a sovereign wealth fund, but we score it anyway. It’s sort of a government holding company and it scores more highly at 76, so it’s a mixed bag.
Steve Weisman: So your conclusion in this policy brief is that most if not all can do a better job and also policing or setting best practices.
Ted Truman: Yeah, I think so. There’s been uneven progress. That’s what Sarah and I use in our title, "Uneven Progress." The good news is there’s been progress and the bad news is it’s uneven, and it’s important for international public opinion and domestic public opinion led by the International Forum of Sovereign Wealth Funds to promote this kind of activity.
Steve Weisman: So Ted Truman, thanks very much and for viewers and listeners out there, come to our website and look at the full policy brief and the scoreboard, so you can rate or see how your favorite sovereign wealth fund fits into this scoreboard prepared by Sarah Stone and Ted Truman. Thanks very much.