On September 2 the International Working Group of Sovereign Wealth Funds – an entity that gathers the world’s major sovereign funds – instituted a voluntary code of governance, accounting, and investment practices principles. Named the Generally Accepted Principles and Practices for Sovereign Wealth Funds (GAPP), the agreement was signed in a meeting of the group, in Santiago (Chile).

“The GAPP will increase the markets’ trust in this type of investment”, said Hamad al Suwaidi, director of the Abu Dhabi Investment Authority, a Kuwaiti sovereign fund. SWFs took the spotlight on the financial news after acquiring interest in Merrill Lynch, Citigroup, and other American and European financial institutions in deep water due to the subprime crisis. For many, the firepower of these funds – whose assets are estimated at US$ 3 trillion – and the lack of transparency in their investment policies are a threat to the global financial balance. Late last year, the G7 suggested that the International Monetary Fund (IMF) release a code of conduct to discipline the activities of sovereign funds.

Some countries try to set limits of their own accord. The German government proposed a law alteration to keep foreign entities from acquiring large shares of strategic German companies. If approved, the measure will forbid the purchase of more than 25% of stocks from large German companies by anyone who is not in the European Union or the European Free Trade Association.