The Abu Dhabi Investment Authority (ADIA) rose to the middle of the list from last place in a new ranking of sovereign wealth fund transparency and accountability. The higher ranking follows efforts to address growing concern about the power state-owned funds wield on the international stage. After sovereign funds formulated a set of voluntary guiding principles in 2008, ADIA made unprecedented disclosures in its first annual review in March this year.
It revealed average annual returns of 8 per cent over the 30 years to the end of last year and described in finer detail how it invested the emirate's excess oil revenues. Those disclosures helped ADIA, by some estimates the world's largest state-owned investment fund, raise its score from 11 points in 2008 to 58 out of 100 possible points on a scale developed by Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington.
"Its overall score increased … essentially matching the mean for all [sovereign wealth funds] that we scored," Mr Truman wrote in a forthcoming study called Sovereign Wealth Funds: Threat or Salvation? "The increase of 51 points from the ADIA's score on the 2007 [sovereign wealth fund] scoreboard is comparable with the largest change for any fund," Mr Truman wrote. Meanwhile, the Kuwait Investment Authority received a score of 63 and Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, received a score of 59.
The lowest Gulf fund in the rankings was Istithmar World, a private equity fund owned by Dubai World, with a score of 15. ADIA representatives declined to comment. In his analysis, Mr Truman compiled scores in 33 areas from publicly available information addressing funds' structure, governance, transparency and behaviour. He looked at 53 sovereign funds in 37 countries. The average overall score was 59.
"I think what they're disclosing is not enough, but they have made progress," said Sven Behrendt, the managing director of Geoeconomica, a political risk management company based in Geneva. "There is movement on a positive side and now it is for the international community and, in particular, the OECD [Organisation for Economic Co-operation and Development] to monitor the improvement and clarify their positions on how sovereign wealth funds are doing."
Once seen with suspicion as a means for resource-rich countries to exert political sway through investments in strategic assets in developed countries, sovereign wealth funds came to be viewed during the economic crisis as potential saviours of the western financial system through big investments in banks. With the growing recognition of sovereign funds' power - they were estimated to control about US$3 trillion (Dh11.01tn) of assets in 2007 - the funds themselves wanted to clarify their purposes and processes. That led to the adoption of the voluntary Santiago Principles a year later. Funds including ADIA agreed to formalise their governance structures and outline in greater detail how they invest.