The world has a love-hate relationship with sovereign wealth funds (SWFs), set up by countries that have large foreign exchange reserves and want to earn better returns on them.

The love swells up as these funds sit on a corpus of around $3 trillion (Rs133 trillion) and have, of late, been used to keep several Western banks solvent. But it’s only a drop in a $100 trillion global financial ocean. The fear is that authoritarian countries such as Russia and China could use their stash to buy firms in strategic areas and further their political power.

So, the new preliminary pact for transparency in investments and accounting, cobbled by the world’s largest SWFs under the watchful eye of the International Monetary Fund, is welcome. There are two advantages here. One, India has its own SWF concerns and the move will hopefully reduce some of those. Two, we hope this model serves as a starting point for a similar deal with another secretive pool of capital—hedge funds.