Sovereign wealth funds need transparency -experts

WASHINGTON May 21 (Reuters) - Sovereign wealth funds need to make clear their objectives to ensure that they are not using investments in the United States to advance a political agenda, experts told the U.S. Congress on Wednesday.

"There needs to be more clarity, more transparency," said Gerard Lyons, chief economist with Standard Chartered Bank.

Lyons told the House Committee on Foreign Affairs that there should be annual reports and that the public should be able to see the funds' values.

"Greater transparency will ease fears of what the funds are up to," he said. "As long as investments by sovereign wealth funds are made for commercial reasons and not for political purposes then these funds should be accepted."

U.S. lawmakers have been debating the role of sovereign wealth funds, or large pools of capital controlled by a government and invested in private markets abroad, after a number of the funds invested billions of dollars in some of the nation's largest financial institutions, such as Citigroup Inc (C.N).

The investments raised concerns that foreign governments, such as China and Russia, would use their stakes in companies for political as opposed to financial gain .

"If Russia's fund decided to invest in energy assets in the United States, would they be able to use it to their political advantage as they have done in Europe?" said committee chairman Howard Berman, a Democrat from California.

A number of House and Senate committees have held hearings to examine sovereign wealth funds, but no legislation has been introduced.

Gal Luft, executive director for the Institute for the Analysis of Global Security, suggested restricting the presence of foreign governments in corporate board rooms.

"I don't think those funds should have voting rights in the board rooms of major entities, major corporations," Luft told the House committee at a hearing to study the funds' impact on U.S. foreign policy and economic interests. "It allows them to invest but not to control," he said.

The sovereign wealth funds have had a long history of being passive investors, but the growth of the funds in size and number has spooked lawmakers.

The funds, many of which are in emerging market countries in the Middle East as well as China and Russia, currently manage an estimated $2 trillion and are expected to grow to $15 trillion by 2016, experts have said.

Similar concerns over national security were raised when state-controlled Dubai Ports World bought a company that operated U.S. ports. That deal was later withdrawn after congressional objections.

Edwin Truman, former assistant secretary of the U.S. Treasury for international affairs, warned against protectionist attitudes.

"Sovereign wealth funds do not pose a significant new threat to U.S. security or economic interests," he said. "We have adequate mechanisms to manage any potential threats they pose."

In April, the U.S. Treasury Department released rules aimed at clarifying how the government will vet acquisitions involving foreign buyers for national security risks.

The U.S. Securities and Exchange Commission requires investors to make certain disclosures about their activities if they own more than 5 percent of a publicly traded company. The Federal Reserve automatically reviews investments in U.S. banks or bank holding companies if it is larger than 10 percent. (Editing by Leslie Adler)