Establishing Trust in Sovereign Wealth Funds: The Purpose and Objectives of the Santiago Principles

Summary: Until recently, few people knew what a Sovereign Wealth Fund (SWF) was, even though some of these funds have been in existence for decades. An SWF certainly doesn't always look or act like other investment vehicles. These special-purpose investment funds are owned by foreign governments whose policies may sometimes differ from the policies of the countries where they invest; thus SWFs sometimes generate controversy. To help ensure an appropriate level of comfort with the activities of SWFs, representatives of 26 countries hammered out a voluntary agreement called the “Generally Accepted Principles and Practices” (“GAPP”) for SWFs, commonly referred to as the “Santiago Principles.” If these principles work as intended, they should go a long way to achieving another important goal of the Santiago meeting — maintaining a stable global financial system and the free flow of capital and investment. Highlights: -The International Working Group of Sovereign Wealth Funds began its work in May 2008, and the Santiago Principles were unveiled in October. What were some of the motivating factors that led to this agreement, and why did the process from inception to final agreement move so rapidly? -Is it possible to distill the 24 Santiago Principles into major themes? -How might these principles help in establishing trust and allaying concerns about political or national security implications? -Given the current volatility of the global financial system, is the impact of SWFs likely to be dimininished, especially since much of their wealth comes from trade surpluses, which are shrinking, and commodities, whose prices have plummeted? Guests: Frank Dubas, partner, Deloitte & Touche LLP Omar Fahoum, chairman and chief executive officer, Deloitte - Middle East Aase-Aamda Lundgaard, partner and audit leader, Deloitte – Norway