Last week's IMF announcement stating that it is developing best practice guidelines for sovereign wealth funds has received a muted response.
"The current economic climate is a perfect storm for political discussion to happen in public. The IMF is a voice in the discussion, but a relatively small voice," said John Douglas, regulatory partner at Paul Hastings Janofsky & Walker.
"I'm not belittling it, but the IMF proposals will have a modest impact. [The US] political process is full of people who think they are kings and queens in their own right."
On March 21, the IMF executive board approved further analysis on how sovereign wealth fits into the global economy. More importantly, it agreed that IMF staff should work with sovereign wealth funds to develop best practice. The board also established an international working group of sovereign wealth funds to aid discussions and begin drafting proposals next month.
The main issues the IMF will look to develop best practice on are public governance, transparency and accountability. It will also coordinate its work with that of the OECD.
But it is hard to see why the IMF is investing time in this area. The European Council recently met to approve the European Commission's plans for a voluntary code of conduct.
Douglas felt that the US Congress would make its own mind up, even if an IMF voluntary code was established:
"For instance, you'd think the relatively small sovereign wealth investment in Blackstone wouldn't create much fuss. And it almost certainly would have complied with any proposed code of conduct. But if Blackstone were then to invest in the defence industry, the issues would rush to the fore," he said.
Even with the IMF guidelines, it is hard to see the US government relying on them if sovereign wealth remains political. The Committee on Foreign Investment in the United States (Cfius) would probably be tightened and the US Treasury would likely come up with its own code of conduct.