GLOBAL - The OECD has apparently softened its stance on sovereign wealth funds (SWFs), welcoming their "constructive contribution" to economic development and lauding them as "a force for global financial stability".
However, a statement issued after the OECD ministerial council meeting in Paris last week hinted at a protectionist backlash if they failed to demonstrate caution in their investments in strategic sectors.
The statement "recognised that if SWF investments were motivated by political rather than commercial objectives, they could be a source of concern, and that legitimate national security concerns could arise".
Merrill Lynch said it expects SWFs to double or triple their share of alternative assets by 2010.
But the somewhat belated statement from ministers at the OECD's 33 member countries could find some national governments - concerned at SWFs' apparent appetite for overseas "strategic" infrastructure assets - difficult to convince.
The New Zealand government recently scuppered a bid by the C$119.4bn (€73.5bn) Canada Pension Plan Investment Board (CPPIB) for a stake in Auckland International Airport pension scheme by passing legislation to pre-empt overseas acquisitions by SWFs.
Several public pension funds - including Canada's CPPIB and the Irish Pension Reserve Fund - have sought to distance themselves from sovereign wealth funds.
However, Juan Yermo, an OECD specialist in SWFs, told IPE
Real Estate earlier this year: "There is no internationally agreed definition of SWF. For many it includes any government-controlled fund used for national objectives, including pensions. So, many include some public pension reserve funds as SWFs."
This latest OECD statement suggested continued international discussions, with strengthened transparency and governance, could help avert protectionist responses.
Singapore's GIC - one of the most aggressive SWF investors in real estate - has already indicated its support for greater transparency among SWFs.