Key Takeaways
- • Sovereign wealth funds are defined by three characteristics: government ownership (central or sub-national), investments in foreign financial assets, and investment for financial objectives, according to the Santiago Principles definition written by sovereign wealth funds themselves in 2008.
- • The definition excludes public pension funds, which are ultimately owned by policy holders, and central bank reserve assets, which are not invested.
- • The International Forum of Sovereign Wealth Funds (IFSWF) groups sovereign wealth funds from every inhabited continent, with varied economic roles and mandates.
Summary
The Council on Foreign Relations explainer on sovereign wealth funds sets out the working definition used by the industry. Under the Santiago Principles, a sovereign wealth fund is owned by the general government, including both central and sub-national governments, holds investments in foreign financial assets, and invests for financial objectives. The definition was written by sovereign wealth funds themselves in 2008 and appears in Appendix I of the Santiago Principles.
The framework deliberately excludes two categories. Public pension funds are excluded because they are ultimately owned by their underlying policy holders rather than the state. Central bank reserve assets are excluded because they are held for reserve purposes and are not invested.
The International Forum of Sovereign Wealth Funds (IFSWF), described by its own materials as the only organisation established and owned by sovereign wealth funds, comprises a diverse membership drawn from every inhabited continent. Its members hold varied economic roles and mandates, which reflects the range of structures that fall under the sovereign wealth fund label.
Publisher context also describes sovereign wealth funds as state-owned vehicles that are commonly funded by commodity revenues or foreign exchange surpluses and managed separately from official reserves. This framing is consistent with the Santiago Principles definition.
The framework deliberately excludes two categories. Public pension funds are excluded because they are ultimately owned by their underlying policy holders rather than the state. Central bank reserve assets are excluded because they are held for reserve purposes and are not invested.
The International Forum of Sovereign Wealth Funds (IFSWF), described by its own materials as the only organisation established and owned by sovereign wealth funds, comprises a diverse membership drawn from every inhabited continent. Its members hold varied economic roles and mandates, which reflects the range of structures that fall under the sovereign wealth fund label.
Publisher context also describes sovereign wealth funds as state-owned vehicles that are commonly funded by commodity revenues or foreign exchange surpluses and managed separately from official reserves. This framing is consistent with the Santiago Principles definition.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.