International Working Group of Sovereign Wealth Funds Publishes a Survey of Institutional and Operational Practices
Press Release No. 08/05
September 15, 2008
As indicated in their Press Release No. 08/04 (http://www.iwg-swf.org/pr/swfpr0804.htm) issued on September 2, 2008, the International Working Group of Sovereign Wealth Funds (IWG) today published a summary of the first-ever survey of their institutional and operational practices. The survey, which formed part of the IWG’s work to draft a set of Generally Accepted Practices and Principles (GAPP), is available at http://iwg-swf.org/pubs/eng/swfsurvey.pdf (PDF file).
The survey was undertaken as a voluntary exercise by the IWG members and carried out by the IWG Secretariat. The IWG used the survey responses as background information and input in the preparation of the GAPP.
The survey is based on responses provided by 20 IWG members1 . The respondents constitute a diverse group representing countries from four continents, have a range of annual per capita incomes, and have operated for various lengths of time. A majority of the respondents are SWFs funded out of mineral royalties, principally oil.
The survey covers three broad areas: (i) the legal framework, objectives and macroeconomic linkages; (ii) the institutional framework and governance structure; and, (iii) investment policies and risk management framework. Some of the findings of the survey conducted by the IWG are:
- On the legal framework, objectives and macroeconomic linkages of SWFs: Half of the respondents are established as legal entities separate from the state or central bank, whereas the other half are established as a pool of assets not legally separate from the state. Typically, their constitutive legislation is publicly available. Their policy objectives are partly tied to the nature of their liabilities and the majority aim to provide savings for future generations or fiscal stabilization.
- On the institutional framework and governance structure of SWFs: The institutional framework of many SWFs aims to provide it with operational independence, while ensuring its accountability to the government and the public. All respondents prepare and present their financial statements according to a prescribed set of accounting standards. Legislation governing SWFs usually requires public disclosure of information about their institutional structure and operations.
- On investment policies and risk management frameworks: A majority of SWFs have specific investment objectives, with half of them indicating that they disclose them publicly. Their investment strategies vary from traditional to more advanced, with risk objectives typically determined by the owner or the governing body of the fund. SWFs generally observe constraints on investment classes and instruments. Most funds noted that they were not allowed to borrow or use leverage, while many funds indicated that they have established limits on stakes that they can hold on companies, the types of investments they can hold, and/or on other characteristics of their portfolio.
The IWG reached a preliminary agreement on the GAPP in Santiago, Chile, on September 2, 2008 and expects to present the final GAPP to the IMF’s policy-guiding International Monetary and Financial Committee (IMFC) at its October 11 meeting in Washington D.C. It also intends to publish the GAPP after the IMFC meeting.
For additional information see: http://www.iwg-swf.org/index.htm
1The IWG has 23 members: Australia, Azerbaijan, Bahrain, Botswana, Canada, Chile, China, Equatorial Guinea, Iran, Ireland, South Korea, Kuwait, Libya, Mexico, New Zealand, Norway, Qatar, Russia, Singapore, Timor-Leste, Trinidad & Tobago, the United Arab Emirates, and the United States. Oman, Saudi Arabia, Vietnam, the OECD, and the World Bank, participate as permanent observers.