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Sovereign wealth fund governance Andrew Bauer February 2022 Savings and stabilization funds State-owned holding funds National development bank Strategic investment funds Universe of SWFs Sovereign wealth fund objectives 1. Long-term savings 2. Fiscal stabilization 3. Endowment / earmarking 4. Resource revenue transparency 5. Supporting domestic firms? Five keys to good fund governance 1. Appropriate deposit and withdrawal rules 2. Robust and appropriate investment guidelines 3. Institutional accountability 4. Transparency and external oversight 5. Political consensus Returns for traditional SWFs Pure stabilization funds Dual savings and stabilization funds Endowments Pure savings funds 1.1 0.6 1.5 6.1 3.6 6.0 7.6 9.8 2.2 15.2 8.9 11.1 8.9CHILE (ESSF)PERUKAZAKHSTAN NORWAYTIMOR-LESTETRINIDAD AND TOBAGOWYOMING (USA)ALASKA (USA)CHILE (PRF)NEW ZEALANDTEXAS (USA)ALBERTA (CANADA)QUEBEC (CANADA) AVERAGE ANNUAL NOMINAL RETURN FOR SELECTED SOVEREIGN WEALTH FUNDS (PERCENT IN USD; 2010-18) Returns for strategic investment funds 2019 ESTIMATED RETURNS (PERCENTAGE) SWF Scoreboard (2015) 0 20 40 60 80 100 120 Norway New Zealand Wyoming (USA) Azerbaijan Alberta (Canada) Quebec (Canada) Chile - ESSF Chile - PRF Timor-Leste Alaska (USA) Australia New Mexico (USA) Ireland Alabama (USA) Trinidad and Tobago Korea Nigeria - NSIA Texas - PSF (USA) China Texas - PUF (USA) France - CDC Hong Kong Kuwait Mexico UAE - Mubadala Angola Italy France - BPI North Dakota (USA) Malaysia Singapore - GIC Brazil Botswana Dubai - Dubai Holdings (UAE) Abu Dhabi - ADIA (UAE) Rwanda Dubai - ICD (UAE) UAE - IPIC Bahrain Oman Russia - NWRF Iran Kazakhstan Peru Ghana Venezuela Qatar Vietnam Russia - RDIF Kiribati Abu Dhabi - ADIC (UAE) Brunei Algeria Libya UAE - Istithmar World Equatorial Guinea Transparency tools • SWF financial reports and annual reports • Effective accounting tool, depending on deposit rules (e.g., Ghana, Timor-Leste) • EITI • Comprehensive, multistakeholder, international recognition • Data delayed 1+ years, bureaucratically cumbersome and costly, voluntary, does not include profit and cost data • Mandatory disclosure through securities regulation • Mandatory with clear penalties • Only includes payment information to date • No substitute for independent external cost audits, contract transparency, production transparency, supplier contract transparency Maximizing fiscal revenue – oversight options • Legislative committee to oversee SWFs or conduct royalty review (e.g., Alberta) • Fiscal council / parliamentary budget office mandate • Internal revenue authority audits • Independent assessment of fiscal terms or tax collection (e.g., World Bank, private consultancies) • Civil society-based statutory oversight body (e.g., Ghana / PIAC)