The Santiago Principles are a set of 24 voluntary guidelines that assign "best practice

Best practice

A best practice is a method or technique that has consistently shown results superior to those achieved with other means, and that is used as a benchmark...

s" for the operations of Sovereign Wealth Funds

Sovereign wealth fund

A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...

 (SWFs). The principles were proposed in 2008 through a joint effort between the International Monetary Fund

International Monetary Fund

The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (IMF) and the "International Working Group of Sovereign Wealth Funds" (IWG-SWF). The International Working Group has since been replaced by the "International Forum of Sovereign Wealth Funds" (IFSWF). So far 25 nations have signed onto the principles.

Overview

According to the IFSWF, the creation of the Santiago Principles was driven by the following goals for SWFs:

• To help maintain a stable global financial system
  Global financial system
  The global financial system is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level...
  
   and free flow of capital and investment
  Investment
  Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
  
  ;
• To comply with all applicable regulatory and disclosure requirements in the countries in which they invest;
• To invest on the basis of economic and financial risk and return-related considerations; and
• To have in place a transparent and sound governance structure that provides for adequate operational controls, risk management
  Risk management
  Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
  
  , and accountability
  Accountability
  Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...
  
  .

The Santiago Principles contribute to the IFSWF’s objective for SWFs by monitoring three important areas – legal framework, institutional framework and governance framework, and investment policies and risk management.

External links

• Santiago Principles
• International Forum of Sovereign Wealth Funds Official body for sovereign wealth funds