The Santiago Principles or formally the Sovereign Wealth Funds: Generally Accepted Principles and Practices (GAPP) [1] are designed as a common global set of 24 voluntary guidelines that assign best practices for the operations of Sovereign Wealth Funds (SWFs). [2] [3] [4] [5] [6] They are a consequence of the concern of investors and regulators to establish management principles addressing the inadequate transparency, independence, and governance in the industry. They are guidelines to be followed by sovereign wealth fund management to maintain a stable global financial system, proper controls around risk, regulation and a sound governance structure. [7]
As of 2016 30 [8] funds have formally signed up to the Principles and joined the IFSWF representing collectively 80% of assets managed by sovereign funds globally or US$5.5 trillion. [9]
The principles are maintained and promoted by the International Forum of Sovereign Wealth Funds (IFSWF) [10] [1] and whose membership have to either have implemented or aspire to implement the principles. [11]
In 2008, there was growing concern by investors and regulators about SWFs, partially about their visibility, accountability, and governance structure. To address these concerns, a joint effort between the International Monetary Fund (IMF) and the "International Working Group of Sovereign Wealth Funds" (IWG-SWF) which represented the coming together of 14 principle funds including some of the largest, [8] such as GIC Private Limited and Abu Dhabi Investment Authority. [12] The IWG-SWF then drafted the 24 Santiago Principles, to set out common international standards regarding transparency, independence, and governance which SWFs might follow. These were made public after being presented to the IMF International Monetary Financial Committee on 11 October 2008. [2]
The working group was then replaced by a permanent body on the 6 April 2009, the "International Forum of Sovereign Wealth Funds" to maintain and promote the new standards going forward and encourage other sovereign wealth fund to sign up. [10] [13]
According to the IFSWF, the creation of the Santiago Principles was driven by the following goals for SWFs: [7] [13] [11]
The Santiago Principles state that SWFs need to have the following: [1] [2] [3]
The Government Pension Fund of Norway is composed of two entirely separate sovereign wealth funds owned by the government of Norway.
Foreign exchange reserves are cash and other reserve assets such as gold and silver held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
The Abu Dhabi Investment Authority is a sovereign wealth fund owned by the Emirate of Abu Dhabi in the United Arab Emirates, founded to invest funds on behalf of the Government of Abu Dhabi. It manages the emirate's excess oil reserves and is estimated to manage $968 billion. ADIA is one of the largest sovereign wealth funds in the world.
GIC Private Limited is a Singaporean sovereign wealth fund that manages the country's foreign reserves. Established by the Government of Singapore in 1981 as the Government of Singapore Investment Corporation, of which "GIC" is derived from as an acronym, its mission is to preserve and enhance the international purchasing power of the reserves, with the aim to achieve good long-term returns above global inflation over the investment time horizon of 20 years.
The Future Fund is an independently managed sovereign wealth fund established in 2006 to strengthen the Australian Government's long-term financial position by making provision for unfunded superannuation liabilities for politicians and other public servants that will become payable during a period when an ageing population is likely to place significant pressure on the Commonwealth's finances. As of December 31 2023, the fund has $272.3 billion in assets under management.
A sovereign wealth fund (SWF), or sovereign investment fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank.
China Investment Corporation is a sovereign wealth fund that manages part of China's foreign exchange reserves. China's largest sovereign fund, CIC was established in 2007 with about US$200 billion of assets under management, a number that grew to US$1,200 billion in 2021 and US$1,350 billion in 2023.
The Financial Stability Forum (FSF) was a group consisting of major national financial authorities such as finance ministries, central bankers, and international financial bodies. It was first convened in April 1999 in Washington. At the 2009 G20 London summit, the G20 nations established a successor to the FSF, called the Financial Stability Board with an expanded membership and broadened mandate.
The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established in the 2009 G20 Pittsburgh Summit as a successor to the Financial Stability Forum (FSF). The Board includes all G20 major economies, FSF members, and the European Commission. Hosted and funded by the Bank for International Settlements, the board is based in Basel, Switzerland, and is established as a not-for-profit association under Swiss law.
Samruk-Kazyna, officially known as the National Welfare Fund "Samruk-Kazyna", is a sovereign wealth fund and joint stock company in Kazakhstan which owns, either in whole or in part, a number of major companies in the country. This includes the national rail and postal service, the state oil and gas company KazMunayGas, the state uranium company Kazatomprom, the Kazakhstani flag carrier Air Astana, and others. The state is the sole shareholder of the fund.
The National Development Fund of Iran is Iran's sovereign wealth fund. It was founded in 2011 to supplement the Oil Stabilization Fund. NDFI is independent of the government's budget. Based on Article 84 of the Fifth Five-year Socio-Economic Development Plan (2010–2015), the National Development Fund was established to transform oil and gas revenues to productive investment for future generation. It is a member of the International Forum of Sovereign Wealth Funds and therefore is signed up to the Santiago Principles on best practice in managing sovereign wealth funds. Withdrawing any money from this fund requires Khamenei's permission.
The Sovereign Wealth Fund Institute is an American corporation analyzing public asset owners such as sovereign wealth funds and other long-term governmental investors. Initially, the Sovereign Wealth Fund Institute focused solely on sovereign wealth funds. It has branched out to cover all types of public institutional investors. The institute sells its subscription and API/datafeed services as a financial data vendor but provides information to the media as well.
Cassa Depositi e Prestiti Equity S.p.A. also known as CDP Equity S.p.A., is a majority state-owned Italian sovereign wealth fund established in 2011. Its purpose is to invest in strategic Italian companies to help them to compete globally.
The Nigeria Sovereign Investment Authority is a Nigerian establishment which manages the Nigeria sovereign wealth fund, into which the surplus income produced from Nigeria's excess oil reserves is deposited. This sovereign wealth fund was founded for the purpose of managing and investing these funds on behalf of the government of Nigeria. The fund was established by the Nigeria Sovereign Investment Authority Act 2011, signed in May 2011, and commenced operations in October 2012. It is intended to invest the savings gained on the difference between the budgeted and actual market prices for oil to earn returns that would benefit future generations of Nigerians. The fund was allocated an initial US$1 billion in seed capital, and, an additional $0.60billion has been contributed to date by the current administration. In October 2023, the fund has US$2.3 billion in assets under management.
The Fundo Soberano de Angola is the sovereign wealth fund of Angola. It is a member of the International Forum of Sovereign Wealth Funds, and therefore has signed up to the Santiago Principles on best practice in managing sovereign wealth funds. The FSDEA is meant to play an important role in promoting Angola’s social and economic development and generating wealth for its people. The fund was rated by the SWFI in February 2015 with a ranking of 8 out of 10.
The Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo is a state-owned sovereign wealth fund of Mexico's government created to manage the wealth from revenue stream on its oil industry. The inception of the fund was designed by the Ministry of Finance and Public Credit while Banco de Mexico manages the fund. The fund begun existence on 30 September 2014 but actual operation of the fund started on 1 January 2015 to become the newest addition in global sovereign wealth fund. The establishment of the fund forms part of the energy reform in Mexico following the declining production of oil that has affected the budget of the national government. The fund is a member of the International Forum of Sovereign Wealth Funds and are signed up to the 24 Santiago Principles which are a voluntary standard of best practice endorsed by the members for the management of the Sovereign Wealth Funds.
National Investment Corporation of the National Bank of Kazakhstan (NIC) was established in October 2012 to preserve and enhance the long-term purchasing power of Kazakhstan’s foreign exchange reserves and of the National Fund through investments in less liquid high yielding asset classes. NIC manages assets entrusted by the National Bank of Kazakhstan. NIC invests in private equity, hedge funds, real estate and infrastructure through external managers and has signed up to the Santiago Principles on best practice in managing sovereign wealth funds.
The International Forum of Sovereign Wealth Funds (IFSWF) is a nonprofit international group of sovereign wealth funds managers which was established in 2009. It is based in London, England.
The Standards Board for Alternative Investments (SBAI), formerly known as the Hedge Fund Standards Board, is an international standard-setting body for the alternative investment industry and sets the voluntary standard of best practices and practices endorsed by its members. Its primary role is to be the custodian of the Alternative Investment Standards, which are designed to create a "framework of transparency, integrity and good governance" in the way the hedge fund industry operates.