Sovereign Wealth Funds – upcoming clash of cultures
I have been following the sovereign wealth funds debate very closely. During my central banker times I met many of them and discussed asset management styles, practices. In every case I found a very high level of professionalism, in-depth market knowledge, we often talked about very advanced asset management concepts.
The West, and US in particular, is now embarking on a journey which is aimed at “forcing” SWFs to disclose more information. There are several approaches:
high level officials or well know professors make statements that SWF have to obey western rules (of transparency or else …). See Larry Summers speech in Davos.
there are rankings produced which show that many SWFs from the East are scoring very poorly according to WESTERN corporate governance rules. See Truman ranking and Breakingviews ranking .
(My deep thans to Piotr Skolimowski for sending me link to one ranking I did not know it existed).
When one thinks in Western culture standards, these transparency postulates are obvious and logical. But there are other cultures in the world, and should understand that forcing our own norms upon others may not be the most appropriate way to move forward. Some SWFs in the Gulf area have been established 50 years ago, and have long track record of successful investing. Therefore it is unlikely, that this style of discussion imposed by US officials will lead anywhere. I do not know how to handle this discussion process properly, but I know who knows. We should ask highly reputed professors specializing in the history and culture of the East to sit together with finance people and develop the proper framework. Empathy, mutual understanding, respect and trust is needed to achieve progress. It can be done, I believe. But it requires that politicians from the West stop telling investors from the East how to manage their funds. After all it is US banks asking for help from the East and not the other way around. West should change its attitude or otherwise the upcoming clash of cultures will lead to inferior equilibrium.