The swift rise in activity by sovereign wealth funds (SWFs) since the credit crunch has caught the attention of investors, policy-makers and national legislatures. Each is concerned by the opacity of the activities and governance of most SWFs. Little is known about these funds, other than that they have ample capacity to invest. The key to easing concerns is a code of conduct that both funds and their governments buy into. Other solutions will not adequately address concerns about SWF investment.

No longer passive

Sovereign funds won't be passive investors for much longer.

SWF investment to date has generally been in minority shareholdings without board representation. When Singapore's Government Investment Corporation (GIC) invested in UBS, it was even offered the opportunity to nominate a board director. However, it turned down the opportunity to "maintain GIC's passive investment in the bank". Similarly, when the Qatar Investment Authority invested in Credit Suisse,...