Seeing Right Through

Transparency.What a buzz word. As a journalist, Ive heard this word zillions of times from people in my own profession. Just another thing journos have in common with those in the financial industry: We like to use the word transparency and hail it as the ultimate yet elusive goal (thus this blog).

Transparency.

What a buzz word. As a journalist, Ive heard this word zillions of times from people in my own profession. Just another thing journos have in common with those in the financial industry: We like to use the word transparency and hail it as the ultimate yet elusive goal (thus this blog).

Well, whether either profession is really successful at achieving transparency can garner many cynical responses. But lets have a look at how especially popular the word has been in the financial news this week.

Here in London, the Hedge Fund Working Group chaired by Sir Andrew Large published its best practice standards. The HFWG, comprising 14 leading hedge fund managers based mainly in London, was set up last year to address concerns about the growing impact of hedge funds and financial stability. The new standards aim at increasing transparency to investors and other counterparties and hopefully scrub the windows of the hedge fund industry a bit. Whether the voluntary compliance to these standards is successful is yet to be seen.

But hedge funds arent the only funds that seem a little foggy at times. Another vehicle absorbing skepticism is the sovereign wealth fund. These state-owned investment vehicles have been instrumental recently in bailing out western firms hit by the sub-prime mortgage crisis. A survey published by the Financial Times found that this made Americans less trusting of two of the two U.S. banks that accepted investments from these foreign investors.

The survey by Strategy One found that US citizens had less trust in Merrill Lynch and Citigroup, after the two big banks received multi-billion dollar handouts from foreign sovereign wealth funds.

More than half of the people in the market research poll admitted they "trusted Citigroup less" after it received more than $20 billion from investors, including the Abu Dhabi Investment Authority and the Government of Singapore Investment Corporation. Some 45% of people said that they trusted Merrill Lynch less after investors including Singapore's Temasek and the Kuwait Investment Authority invested $12 billion into the bank.

This comes after some politicians have called for more transparency in the role of these funds. Interestingly enough, the cash flowing from SWFs into the U.S. market is not earning good returns, the Wall Street Journal reported earlier today. So perhaps there is a cause for distrust.

But whatever the case, the fact is more cellophane and less foil is what the financial industry suggests as the cure, and citizens demand this. French President Nicolas Sarkozys comments yesterday on the U.S. financial crisis wrap this up nicely: "Facing the crisis, we should ensure transparency in the international financial system."

Ellie Behling, reporter
ebehling@www.globalcustodian.com

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