Extent of Official Data from SWF Countries and Others on SWF Sizes and Investments Varies

Information about SWFs publicly reported by SWFs, the governments that  control them, international organizations, and private researchers provides  a limited picture of their size, investments, and other descriptive factors. Some SWFs have existed for many years, but recently a number of new  funds have been created. Based on these reviews, we found that 29 of  48 funds publicly disclosed the value of assets since the beginning of 2007. Thirty funds reported at least some information on their investment  activities. We found that about 77 percent of the 48 SWFs publicly reported the  purpose of their funds, with 13 of the largest 20 funds doing so. While some SWFs disclose holdings information, officials of other SWFs  expressed concerns that disclosures could be used by other investors in  ways that could reduce the funds’ investment earnings. The extent of the information on  SWFs publicly reported from the Article IV consultations varied, with  some documents only noting that the country had such a fund and others  providing the current level of assets in the SWF and country officials’  expectations for growth of the SWF through revenues or fiscal transfer. IMF expects to implement new reporting guidance in 2009  that would call for countries to separately report their SWF holdings on a  voluntary basis. While this is a positive development that could further  expand the official information available, its success depends on the  degree to which countries participate. These data, however, do not  specifically identify SWFs. Private Researchers Have Collected Some Information on SWFs

Because not all SWFs disclose their activities publicly, information about  the size of some SWFs comes from estimates published by private  researchers, including investment bank researchers and nonprofit  research and policy institutions. By analyzing the information reported by individual SWFs, IMF data, and  private researchers’ estimates, we found the total assets held by the 48  SWFs we identified are estimated to be from $2.7 trillion to $3.2 trillion  (see app. SWF assets are expected to grow significantly in the future. Public Information from the U.S. Government and Others on SWF Investments in U.S. Assets Is Limited

BEA and Treasury are charged with collecting and reporting information  on foreign investment in the United States, but the extent to which SWFs  have invested in U.S. assets is not readily identifiable from such data. Only  a few SWFs reported specific information on their U.S. investments. Some  individual SWF investments in U.S. assets can be identified from reports  filed by investors and issuers as required by U.S. securities laws, but these  filings would not necessarily reflect all such investments during any given  time period. Treasury collects the data through surveys of U.S. financial institutions  and others. Data Collected by U.S. To  the extent that SWFs are invested in U.S. government securities, those  holdings are included in the “U.S. liabilities reported by U.S. banks”  under “Foreign official assets in the United States.”

			BEA and Treasury Data Show That Investment from Countries with SWFs and from Official Institutions Is Increasing

While BEA and Treasury data cannot be used to identify the total extent of  SWF investment, these data show that the United States has been  receiving more investment over time from countries with SWFs and from  foreign official institutions. 8.) Some of the U.S. companies that recently received SWF  investments also included information about these transactions in their  annual reports. Roughly $43 billion of this value reflects  investment since 2007, largely consisting of deals involving financial sector  entities. Appendix I: Objectives, Scope, and Methodology

Our objectives in this report were to examine (1) the availability of data on  the size of sovereign wealth funds (SWF) and their holdings internationally  that have been publicly reported by SWFs, their governments,  international organizations, or private organizations, and (2) the  availability of reported data by the U.S. government and other sources on  SWF investments in the United States. As a result,  we chose to include in our analysis those funds that (1) were government  chartered or sponsored investment vehicles; (2) invested, in other than  sovereign debt, some or all of their assets outside the country that  established them; (3) were funded through transfers from their  governments of funds arising primarily from sovereign budget surpluses,  trade surpluses, central bank currency reserves, or revenues from the  commodity wealth of the countries, and (4) were not currently functioning  as pension funds receiving contributions from and making payments to  individuals. To determine the availability of data on SWF investments in the United  States reported by the U.S. government and others, we reviewed the extent  to which federal data collection efforts of the Departments of the Treasury  (Treasury) and Commerce (Commerce) and the Securities and Exchange  Commission (SEC) were able to report on SWF activities. Because acquisitions resulting in total beneficial ownership of 5  percent or less of a voting class of a Section 12 registered equity security  will not be reported to SEC, these data sources capture only a proportion  of the total U.S. SWF investments.
Why GAO Did This Study

Sovereign wealth funds (SWF) are government-controlled funds that seek to invest in other countries. With new funds being created and many growing rapidly, some see these funds providing valuable capital to world markets, but others are concerned that the funds are not transparent and could be used to further national goals and potentially harm the countries where they invest. GAO plans to issue a series of reports on various aspects of SWFs. This first report analyzed (1) the availability of publicly reported data from SWFs and others on their sizes and holdings internationally, and (2) the availability of publicly reported data from the U.S. government and other sources on SWFs' U.S. investments. GAO reviewed foreign government disclosures, Department of the Treasury (Treasury) and Department of Commerce (Commerce) reporting, and private researcher data to identify SWFs and their activities. GAO also analyzed information from international organizations and securities filings. Treasury and Commerce commented that GAO's report provides timely and useful contributions to the SWF debate; SEC noted that U.S. securities requirements apply to all large investors, including SWFs. Future GAO reports will address laws affecting SWF investments, SWF governance practices, and the potential impact of SWFs and U.S. options for addressing them.

What GAO Found

Limited information is publicly available from official government sources for some SWFs. While some have existed for decades, 28 of the 48 SWFs that GAO identified have been created since 2000, primarily in countries whose foreign exchange reserves are growing through oil revenues or trade export surpluses. GAO analysis showed that about 60 percent of these 48 SWFs publicly disclosed information about the size of their assets since the beginning of 2007, but only about 4 funds published detailed information about all their investments--and some countries specifically prohibit any disclosure of their SWF activities. Although the International Monetary Fund (IMF) currently collects data on countries' international financial flows, GAO found that only 13 countries separately reported their SWF holdings in public IMF documents. IMF plans to issue new reporting guidance in 2009 that asks countries to voluntarily report the size of their SWF holdings in their international statistics. While this could increase the transparency of SWFs, its success depends on the extent to which countries participate. In the absence of official national or international public reporting, much of the available information about the value of holdings for many SWFs is from estimates by private researchers who project funds sizes by adjusting any reported amounts to reflect likely reserve growth and asset market returns. For the funds GAO identified, officially reported data and researcher estimates indicated that the size of these 48 funds' total assets was from $2.7 trillion to $3.2 trillion. Some researchers expect these assets to continue to grow significantly. U.S. government agencies and others collect and publicly report information on foreign investments in the United States, but these sources have limitations and the overall level of U.S. investments by SWFs cannot be specially identified. From surveys of U.S. financial institutions and others, Treasury and Commerce reported that foreign investors, including governments, private entities, and individuals, owned over $20 trillion of U.S. assets in 2007, but the amounts held by SWFs cannot be specifically identified from the reported data because either the agencies do not obtain specific investor identities or the agencies are precluded from disclosing individual investor information. GAO found that as many as 16 of the 48 SWFs reported some information on their U. S. investments. One reported all U.S. holdings, but others only identified a few specific investments or indicated that some of their total assets were invested in the United States. Some SWF investments can be identified in U.S. securities filings, under a requirement for disclosure of investments that result in aggregate beneficial ownership of greater than 5 percent of a voting class of certain equity securities. At least 8 SWFs have disclosed such investments since 1990. GAO analysis of a private financial research database identified SWF investments in U.S. companies totaling over $43 billion from January 2007 through June 2008, including SWF investments in U.S. financial institutions needing capital as a result of the 2007 subprime mortgage crisis. Additional U.S. reporting requirements would yield additional information for monitoring the U.S. activities of SWFs, although some U.S. officials have expressed concerns that they could also increase compliance costs for U.S. financial institutions and agencies and could potentially discourage SWFs from making investments in U.S. assets.