UPDATE 1-Canada's Dodge says funds should not report to IMF

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By Louise Egan

WASHINGTON, Oct 20 (Reuters) - The International Monetary Fund has no role to play in monitoring large state-owned investment funds, Bank of Canada Governor David Dodge said on Saturday, suggesting that countries simply require disclosure by all foreign investors.

When asked if the IMF should be tasked with drawing up guidelines or monitoring these investment vehicles known as sovereign wealth funds, Dodge said, "No, no. Big mistake here."

"The whole idea on these funds is that they be transparent," he said. "... It's not that you report somehow in secret to some little group here at the IMF," he told a small group of reporters in Washington.

Dodge's remarks came after U.S. Treasury Secretary Henry Paulson said on Saturday the IMF is best positioned to identify model behavior for large state-owned investment vehicles known as sovereign wealth funds.

There has been growing unease among the Group of Seven nations over the plethora of state-owned investment funds in countries like Russia, United Arab Emirates and China.

With more than $2 trillion in assets, these funds play an increasingly powerful role in global financial markets but sometimes have carefully guarded investment strategies.

Dodge said rather than trying to draw up some internationally accepted set of guidelines for these funds, it was up to those receiving investment to demand full transparency by foreign investors, whether they be state-owned or not.