Our global Sovereign Wealth Funds Group consists of specialist attorneys in Europe, the United States, the Middle East and Asia. We develop strong relationships with our sovereign clients and appreciate the importance of understanding their specific objectives. In particular we understand that each sovereign wealth fund is unique and needs to be served in a way appropriate to its objectives and distinct cultural and jurisdictional features.
Our Sovereign Wealth Funds Expertise
- We act for some of the largest sovereign wealth funds in the world, including the China Investment Corporation and a major Middle East-based sovereign wealth fund, in connection with corporate governance, tax and investment matters.
- Our lawyers have assisted sovereign wealth funds and similar institutional investors around the world on over US$30 billion of investments.
- As one of the largest law firms in the world, our global platform enables us to cater for the diverse needs of our sovereign client base. We are the only international law firm with top 20 practices in the Middle East, Europe, the USA and Asia, enabling us to deliver high quality advice and service on a global basis.
- Our team includes acknowledged experts in the field of sovereign wealth funds and has written the Sovereign Wealth Funds chapter of Investment Management: Law and Practice (Oxford University Press, 2010).
Sovereign Wealth Funds - Our Observations
Sovereign wealth funds (SWFs) are estimated to control foreign assets of over US$2-3 trillion, and rising. While the increasing size and public profile of SWFs in recent years has attracted extensive (and sometimes unwelcome) publicity, the work of the IMF's International Working Group of Sovereign Wealth Funds and subsequently the International Forum of Sovereign Wealth Funds - including laying down generally accepted principles and practices for SWFs known as the Santiago Principles - has started to deliver greater transparency and a recognition of the need for more overt accountability and governance.
Although no two SWFs are alike, we consider the following factors to be of significant importance for sovereign wealth funds:
- Legal Structure: It is generally advisable that SWFs are established by statute in order to benefit from generous tax and sovereign immunity treatment available to governments. This also frees them from the potential restrictions of corporate or partnership law that would apply if they were established as simple business entities.
- Objectives: It is of the upmost importance that a SWF has clearly defined objectives and an institutional structure which is able to achieve those goals and measure its performance in a meaningful way.
- Corporate Governance: In this new era of public scrutiny, SWFs should have in place strong governance structures, internal controls and operational and risk management systems. In particular, decision-making processes and allocations of responsibility need to be clear, and designed to avoid conflicts of interest.
- Investments: In addition to general corporate governance issues, the process for making, managing and realising investments needs to be clearly set out and linked to the objectives of the SWF. The structure of the investment team (or teams) needs to be considered, together with the approval process for the different types of investments that may be made. There should be a clear demarcation between the investment team and any 'political' figures involved in a policy-setting, corporate governance or supervisory capacity.
- Code of Conduct: It is important that SWFs are seen to operate in a responsible way. A number of robust policies need to be in place, including those relating to the prevention of bribery and money laundering, confidentiality, conflicts of interests and press announcements.
- Transparency and Public Relations: Given that SWFs are likely to be under increasing levels of scrutiny, it is important that each SWF has a clear engagement policy that enables it to communicate its objectives, deal with potential conflicts of interest and ensure ‘public buy-in' to its mission. The Santiago Principles assist in this regard, but there should also be in place detailed policies relating to the publication of data regarding its holdings and activities.
Our lawyers have the experience and expertise to help you with these issues.