International Working Group of Sovereign Wealth Funds Presents the "Santiago Principles" to the International Monetary and Financial Committee

Promotes operational independence in investment decisions, transparency, and accountability

Press Release No. 08/06
October 11, 2008

Download The "Santiago Principles"

The International Working Group of Sovereign Wealth Funds (IWG) today presented the Santiago Principles to the International Monetary Fund’s (IMF) policy-guiding International Monetary and Financial Committee (IMFC), which met in Washington D.C. to consult about global economic developments and to take stock of the working group’s efforts. Finance Ministers, IWG representatives, the Organization for Economic Cooperation and Development and the European Commission, also took the opportunity to discuss the Principles and SWF issues in a separate meeting.

The IWG has made public the set of 24 voluntary Principles and related explanatory material at www.iwg-swf.org, and announced it has established a Formation Committee to explore the creation of a permanent international Sovereign Wealth Fund (SWF) body.

In presenting the Santiago Principles to the IMFC members, Mr. Hamad Al Suwaidi, Undersecretary of the Abu Dhabi Department of Finance and a Director of the Abu Dhabi Investment Authority, said, "We believe that this document will in both home and recipient countries improve the understanding of the objectives, structures, and governance arrangements of SWFs; enhance the understanding of SWFs as economically and financially oriented entities; and help maintain an open and stable investment climate. Through the implementation of the Santiago Principles, we seek to ensure that the international investment environment will remain open."

"This is a very significant achievement given the diversity of the institutions involved, complexity of the subject matter, comprehensiveness of the document and the short time taken to reach an agreement".

"Moreover, in the Santiago Principles, there are provisions confirming the IWG’s expectations that recipient countries will not subject the SWFs to discriminatory measures to which other foreign or domestic investors in similar circumstances are not subjected. We trust the recipient countries will support these provisions", added Mr. Al Suwaidi.

Mr. Al Suwaidi thanked the governments of the IWG member countries for their full support of the process, the recipient countries for their participation and interest, Jaime Caruana, Director, Monetary and Capital Markets Department of the IMF for his role as the IWG co-chair, David Murray—the Chairman of the Australian Future Fund, for his leadership and perseverance as Chair of the IWG Drafting Group—and the IMF for facilitating and coordinating the work.1

The IMFC communiqué stated:

"The Committee welcomes the development of the Santiago Principles by the International Working Group of Sovereign Wealth Funds (SWFs). The Principles represent a collaborative effort by SWFs from across advanced, emerging, and developing country economies to set out a comprehensive framework, providing a clearer understanding of the operations of SWFs. Their adoption on a voluntary basis signals strong commitment to the Principles and their implementation should further enhance the stabilizing role played by SWFs in the financial markets, and help maintain the free flow of cross-border investment. The Committee welcomes the intention of the International Working Group to consider establishing a Standing Group to keep the Principles under review and explore the scope for collecting and disseminating aggregated information on SWF operations. It emphasizes that continued Fund support, if requested, should be consistent with budgetary constraints. The Committee also stresses the importance of clear and nondiscriminatory policies by recipient countries toward SWF investments. It looks forward to the completion of the work of the OECD in this area, and encourages continued dialogue and coordination between the OECD and SWFs."

High-Level Ministerial Meeting

A high-level ministerial meeting of countries with SWFs and recipients of SWF flows, hosted by the IMF Managing Director Dominique Strauss-Kahn and attended by the OECD Secretary-General Angel Gurría and Mr. Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs of the European Commission, took place after the IMFC meeting. Mr. Strauss-Kahn noted that the development of the Santiago Principles by the IWG was an important achievement, and one that has been completed very quickly. Mr. Gurría and Mr. Almunia also commended the IWG for completing and agreeing on the Santiago Principles, and Mr. Gurría updated the Ministers on the OECD’s work on guidance for recipient countries.

The Santiago Principles

The Santiago Principles represent generally accepted principles and practices that properly reflect SWFs investment practices and objectives. The Principles are voluntary, which the members of the IWG support, and which they either have implemented or aspire to implement.

The following key areas are covered in the Principles: (i) legal framework, objectives, and coordination with macroeconomic policies; (ii) institutional framework and governance structure; and (iii) investment and risk management framework.

The guiding purpose of these Principles is to:

1. have in place a transparent and sound governance structure that provides for adequate operational controls, risk management and accountability;

2. ensure compliance with applicable regulatory and disclosure requirements in the countries in which SWFs invest;

3. ensure SWFs invest on the basis of economic and financial risk and return-related considerations; and

4. help maintain a stable global financial system and free flow of capital and investment.

A Standing Group for SWFs

The work relating to the Principles has highlighted the importance for the group to remain together to keep the Santiago Principles under review and examination, including how they are being implemented, and to facilitate discussion with recipient countries, multilateral institutions, the private sector and others. Mr. Al Suwaidi also noted that: "Going forward, the IWG members recognize that several aspects of the Santiago Principles could benefit from further study and work, such as those relating to the provision of information about past, present and future activities of the SWFs, and the potential risks to investment operations and their balance sheets."

Consequently, the IWG has decided to explore the creation of a Standing Group for SWFs. A Formation Committee composed of 10 IWG members2 has been established to examine the Standing Group's constitution and terms of reference, and is expected to present a proposal by year-end.

Sovereign Wealth Funds – Definition

SWFs are defined as special purpose investment funds or arrangements, owned by the general government. Created by the general government for macroeconomic purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets. The SWFs are commonly established out of balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, fiscal surpluses, and/or receipts resulting from commodity exports.

Foreign currency reserve assets held by monetary authorities for the traditional balance of payments or monetary policy purposes, operations of state-owned enterprises in the traditional sense, government-employee pension funds, or assets managed for the benefit of individuals, are not deemed to be Sovereign Wealth Funds.


The IWG was established on May 1, 2008 to draft a common set of voluntary principles that would promote a clearer understanding of the institutional framework, governance, and investment operations of Sovereign Wealth Funds and would support the maintenance of an open and stable investment climate globally. The IWG met in working sessions in Washington D.C., Singapore and Santiago, Chile, where it reached a preliminary agreement on the Principles on September 2, 2008 (see Press Release No. 08/04).

The IWG member countries are: 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. The IMF helped to facilitate and coordinate the work of the IWG by providing a secretariat for the IWG.

For additional information see: http://www.iwg-swf.org/index.htm

1Mr. Al Suwaidi’s statement to the IMFC is available at www.iwg-swf.org.

2The Formation Committee is comprised of Australia, Botswana, Chile, China, Kuwait, Qatar, Singapore, Trinidad and Tobago, the United Arab Emirates, and the United States.