The United States is to demand stringent rules to control sovereign wealth funds, which it fears could destabilise financial markets. The country will call on G7 leaders and the International Monetary Fund to agree a set of guidelines for better disclosure by the state-backed funds, which hold assets worth $ 2.5 tn.
A meeting of G7 finance ministers and central bankers will discuss the proposal at a meeting in Washington. It will be the first time the funds appear in the closing statement of a G7 meeting.

Western economies fear funds from the UAE, Singapore, Russia and China could be used to mount stealth takeover bids for strategic assets. Gerard Lyonds, chief economist of Standard Chartered, told “There is a serious likelihood of Western governments and sovereign wealth funds clashing over what they can buy and where”.
“We are likely to see Western governments seeking to protect national champions and strategic sectors, as is their right” he continued.The US is expected to demand that funds declare what proportion of their investments is held overseas. The UK has also expressed concerns, with around half the shares in the London Stock Exchange held by Dubai and Qatar and the Sainsbury board expected to back a £ 10.6 bn takeover from Qatar. The French Government is producing its own report on the funds, and Japan is expected to back US calls for greater transparency.
Merrill Lynch predicts the value of assets controlled by the funds will quadruple to $ 8 tn by 2011, and that they could soon exceed the entire hedge fund industry in terms of market influence.

Source: www.arabianbusiness.com