Essay: Sovereign Wealth Fund

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The Sovereign Wealth Fund is a state-owned investment fund. The past of Sovereign Wealth Funds dates back to 1950s. They have been becoming more and more popular in recent years. These funds pertaining to governments are large-scaled worldwide. Besides all these, there is a dispute whether it threats countries which is invested by SWFs or not. On the contrary, these funds may have an important role in financial crisis in terms of countries possessing SWFs. In the World, there are many academic studies about SWFs recently.

In the beginning, SWFs were established to utilize revenues of exporting of natural resources, for example, gulf countries. After that, kinds of SWFs were established in varied objectives and funded by different resources e.g. surplus of current account of balance and foreign currency policies like China, Singapore. In the paper, varied SWFs from the World have been demonstrated in tables comparatively in the sense of ranking of them, auditing, governance, investment mandates and aims.

According to the IMF, there five types of SWFs: stabilization funds, savings funds, development funds, pension funds and reserve investment funds. Their explanations and governance models of SWFs are stated with tables in the study. While varied SWFs prefer to invest in domestic, some of them foreign. These kind of investment policies of SWFs show an alteration based on the global financial events like global financial crisis in 2008, European debt crisis in 2009 etc. These funds also helped big banks’does not matter whether banks are from the same country possessing helper SWF’in the World. Some of them with their these kind of investments made loss up to 90%. However, they implemented this policy because of having big investments in that countries having big banks which were going to bankruptcy. Despite making a loss, their other big investments were protected in this way.

Turkey Wealth Fund were established in 2016 and funded in 2017. Because of being a new one in Turkey, it has not started its operations clearly yet. So, in the literature, there is not sufficient academic research. After all headlines, only general informations and objectives about it are given.


Sovereign Wealth Funds are described as investment funds representing a large pool of savings. These funds are set up by governments of sovereign states for macroeconomic reasons in the global market. According to the International Monetary Fund, SWFs are government-owned investment funds, set up for a variety of macroeconomic purposes.

First Spring and Evolution of SWFs

In the literature, it is accepted that Kuwait Investment Authority established as a first Sovereign Wealth Fund in 1953 in London by sheikh Abdullah Al-Salem Al-Sabah in order to manage surpluses of oil revenues, eventhough it is seen that first spring of Sovereign Wealth Funds took shape with the Permanent School Fund in the USA-Texas in 1854, and establishing of Permanent University Fund in 1876 in the USA followed this. (Table 4) Primarily, SWFs are established by state governments exporting their natural resources to other countries to manage and utilize oil exporting revenues. Then, some SWFs were established as non-commodity. Another milestone in the development of sovereign funds, the Ministry of Economy of Singapore set up the Temasek Holdings fund in 1974. (Ander & Teply, 2014)

The number of SWFs has been growing rapidly. As shown in Figure 1, based upon the data of SWFI, SWF AUM rised before the financial crisis occured between 2008 and 2009. Following this, AUM declined, then, experienced a new first peak in December 2013 and the second peak in March 2015.

Figure 1. SWF assets under management (AUM), September 2007 to June 2016

Source: (Sovereign Wealth Fund Institute, 2017)

According to 2016 Preqin Sovereign Wealth Fund Review, SWFs continue to capture attention as a result of their growing assets under management (AUM) and corresponding influence on global financial markets. Today, the total assets of sovereign wealth funds top $6.51 trillion (Figure 2), more than double the capital these entities represented in 2008, the year Preqin launched its first Sovereign Wealth Fund Review.

Figure 2. Aggregate Sovereign Wealth Fund Assets Under Management ($tn), December 2008 – March 2016

Source: (Preqin, 2016)

Because of that Preqin does not accept some of funds as a SWF, numbers in Figure 2 may appear like contradictive with Figure 1. So, it should be evaluated looking to weight of type of SWFs like Commodity, Non-Commodity, etc.

Characteristics of Sovereign Wealth Funds

Increasing of SWFs in the global market triggered describing and classifying of SWFs differently. SWFs might be classified in terms of sources of finance, investment strategies, governmental policies, etc.

Related to the origin of the wealth accumulation, there are two types

of SWFs: (Ander & Teply, 2014)

‘ commodity: foreign currency sources from large volumes of oil export and

from other non-renewable resources (eg. Norway, Russia, Middle East); (Ander & Teply, 2014)

‘ non-commodity: foreign currency reserves from a large surplus of current

account of balance of trade and foreign currency policy (eg. China, Singapore). (Ander & Teply, 2014)

Box 1. A Case of Commodity SWFs ‘ Hotelling Rule

Economic theory offers useful insights into the optimal management of natural resources. One strand of literature focuses on arbitrage arguments and the Hotelling Rule. A country exporting oil or any other exhaustible commodity should be indifferent to whether it keeps the oil under the ground, in which case the return is the expected rise in future oil prices, and getting a market rate of return on its sale (Hotelling Rule for efficient depletion). If the market return of reinvesting the proceeds of extracted oil is depressed, the oil exporter will either consume the proceeds ‘ rather than invest them ‘ or leave the oil under the ground. As capital protectionism, such as restrictions imposed on SWFs from oil-rich countries, will tend to reduce the risk-adjusted return for oil exporters, it may well contribute to higher oil prices as oil supply is withheld.

Source: (Kern, Commodity and Non-Commodity Sovereign Wealth Funds, July 2008)

Based on IMF and GAPP, there are five types of SWFs as follows:

Stabilization funds (Figure 3) are established so as to help the government protect the budget and economy from commodity price volatility and external shocks (e.g., Chile, Iran, and Russia). Their investment scope and liquidity aims have resemblance to central banks reserve managers’, in consideration of their role in countercyclical fiscal policies to smooth boom and bust cycles. They are in tendency to invest largely in highly liquid portfolio of assets by allocating over 80% of their assets to fixed income securities, with government securities including around 70% of total assets. (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

Savings funds (Figure 3) are set up to convert exporting revenues of natural resources, minerals. By doing so, they also balance of intergenerational differences in the country (e.g., UAE-Abu Dhabi, Libya, Russia). Their investment mandate emphasizes high risk-return profile, thereby, allocating high portfolio shares to equities and other investments. (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

Development funds (Figure 3) are established to finance infrastructural investments, socio-economic projects, and support industrial policies in the country (e.g, UAE-Abu Dhabi, Iran, Malaysia, Mongolia (Table 1)).

Pension funds (Figure 3) are set up to meet identifies outflows hereinafter with respect to pension-related contingent-type liabilities on the government’s balance sheet (e.g., Australia, Ireland, and New Zealand). (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

Reserve investment funds (Figure 3) are established in order to manage surpluses of foreign exchange reserves. To get high revenue from their own investments, they invest in risky and high-yield instruments -equities- like stocks, etc. When there is a necessary, these kind of SWFs can be used for supporting foreign Exchange policies of the government possessing SWF (e.g., China, South Korea, Singapore)

Figure 3. Characteristics of SWFs

Source: (International Monetary Fund, April 2012)

Table 1. Selected Sovereign Wealth Funds

Fund Name


Fiscal Stabilization


Pension Review

Reserve Investment

Australian Future Fund


State Oil Fund


Future Generations Reserve Fund


Economic and Social Stabilization Fund


China Investment Corporation


Oil Stabilization Fund


Kazakhstan National Fund*


Kuwait Investment Authority


Fiscal Stability Fund*


Government Pension Fund-Global


National Welfare Fund


Oil Stabilization Fund


Abu Dhabi Investment Authority


Source: (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

* SWFs also having development funds

Functions of Sovereign Wealth Funds

Table 2. Functions for Sovereign Wealth Funds


Investment Objectives

Strategic Asset Allocation


Inter-generational equity, national endowment, meeting particular long-term liabilities or contingent liabilities (pensions)

Long term investment horizon, diversification with moderate to high risk tolerance, and low liquidity requirement in short-medium run


Stabilize spending in the face of short-term and medium-term volatility in resource income

Liquidity, safety (capital preservation), short to medium term investment horizon


Hold committed funds to pace disbursements in line with absorptive capacity constraints

Safety (capital preservation), liquidity, short to medium term investment horizon

Source: (Gelb, Tordo, Halland, Arfaa, & Smith, February 2014)

Sources of Capital for Sovereign Wealth Funds

They are commonly funded by the transfer of foreign exchange assets that are invested long term, overseas. Generally, countries establishing SWFs possess natural resources like petroleum, natural gas, copper, diamond, phospate, etc. (Table 3) Besides, there are also other countries managing non-commodity SWFs getting funded by privatizations, saving funds, foreign exchange reserves, current-account surplus, etc. (Table 3)

Table 3. Resources of Sovereign Wealth Funds

Total value of funds (trillion dollars)


Funds funded by petroleum/natural gas (trillion dollars)


Non-commodity funds (trillion dollars)


Funds funded by petroleum/natural gas (percentage)


Non-commodity funds (percentage)


Source: (Sovereign Wealth Fund Institute, 2017)

Different Aims of Sovereign Wealth Funds

Sovereign wealth funds are established for different reasons and objectives. While SWFs funded by commodity exports provide their own countries stability in the economy when the economic troubles have showed themselves, SWFs financed by natural resource exports prefer maximizing returns on the export income and also keeping the national economy more reliance on one income resource. Within this direction, countries having SWFs imply that they have invested these all incomes for next generations of them. For instance, Venezuela’s National Development Fund was established by Hugo Chavez in 2005 in order to benefit and improve the social and economic conditions for Venezuelans, including financing in sectors such as education, healthcare and agriculture. (Preqin, June 2015) Accordingly, so as to reach their own aims, the funds belonging to the nation of any country are managed by qualified investment managers.

In the World, there are roughly 80 wealth funds in more than 40 countries. Norwegian Government Pension Fund-Global is on the top of the Sovereign Wealth Fund Ranking List (Table 4) with $ 922 billion as a commodity SWF financed by petroleum. Abu Dhabi Investment Authority in the United Arab Emirates, which is also financed by oil like Norway, is ranked at the second of the list with $ 828 billion. Besides that, China Investment Corporation, a non-commodity SWF ranked at the third, is managing 813 billion dollars.

Table 4. Sovereign Wealth Fund Ranking List


SWF Name

Assets USD-Billion


Source (Origin)



Linaburg- Maduell Transparency Index (LMTI)

Democracy Index*

Freedom Ratings**


Government Pension Fund-Global







UAE-Abu Dhabi

Abu Dhabi Investment Authority








China Investment Corporation








Kuwait Investment Authority








Government of Singapore Investment Corporation








Qatar Investment Authority



Oil & Gas





National Social Security Fund








Australian Future Fund








National Welfare Fund








Libyan Investment Authority








National Development Fund of Iran



Oil & Gas





Texas Permanent School Fund



Oil & Others





Khazanah Nasional








Alberta’s Heritage Fund








Russian Direct Investment Fund








Pension Reserve Fund








Ireland Strategic Investment Fund








Pula Fund



Diamonds & Minerals





Fondo de Ahorro de Panama








Fiscal Stability Fund








Turkey Wealth Fund

31.3*** (apx)






Source: (Sovereign Wealth Fund Institute, 2017)

* Source: (The Economist Intelligence Unit, 2017)

** Source: (Freedom House, 2017)

*** Source: (Karanfil, Boyac”o”lu, & Alp, 2017)

The Linaburg-Maduell Transparency Index (LMTI) was developed at the Sovereign Wealth Fund Institute (SWFI) by Carl Linaburg and Michael Maduell in 2008. This index is used by SWFs so as to benchmark other SWFs each other from the viewpoint of transparency worldwide. In its principles (Table 5), for each principle (one point each), if it is seen clearly for a SWF, these principles’ points sum up. Looking to the result, sense of transparency of any SWF might be inferred easily (Table 4). Not only LMTI but also Democracy Index and Freedom Ratings (Table 4) may give clues about governance, transparency, audit of that SWFs and also notion of work of governmental bodies. Democracy index range from 1 (strongly autocratic) to 10 (strongly democratic). Freedom Ratings range from 1 (most free) to 7 (least free).

Table 5. Linaburg-Maduell Index of Transparency Index (LMTI) Principles (Table 4)


LMTI Principles


Fund provides history including reason for creation, origins of wealth, and government ownership structure


Fund provides up-to-date independently audited annual reports


Fund provides ownership percentage of company holdings, and geographic locations of holdings


Fund provides total portfolio market value, returns, and management compensation


Fund provides guidelines in reference to ethical standards, investment policies, and enforcer of guidelines


Fund provides clear strategies and objectives


If applicable, the fund clearly identifies subsidiaries and contact information


If applicable, the fund identifies external managers


Fund manages its own web-site


Fund provides main office location address and contact information such as telephone and fax

Source: (Sovereign Wealth Fund Institute, 2017)

Governance of Sovereign Wealth Funds

There are two different dominant governance models of SWFs. One of them is ”manager model” and the other one is ”investment company model”.

In the manager model, the owner of the pool of assets constituting the SWF (usually the ministry of finance) gives an investment mandate to an asset manager. Within this model, there are three main sub-categories: (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

a. The central bank manages the assets under a mandate given by the ministry of finance (e.g., Norwegian Government Pension Fund Global, Botswana, and Chile). (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

b. A separate fund management entity, owned by the government, is set up to manage assets under a mandate given by the ministry of finance, such as the Government Investment Corporation (GIC) of Singapore. In this case, the manager may also have other asset management mandates from the public sector. (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

c. The ministry of finance commands SWF managers. This model is generally not recommended, because awarding contracts to external fund managers is in itself an investment decision that should be carried out at arm’s length from a political body, and the evaluation, monitoring and termination of management contracts requires specialized skills more likely to be found in a dedicated investment organization. (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013)

In the investment company model, the government as an owner establishes an investment company that in turn owns the assets of the fund. This model is frequently used when the investment strategy implies concentrated investments and active ownership in individual companies (e.g., Temasek, Singapore). (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013) Besides these, the fund may have a development objective as well as its financial gaining objective (Table 1).

The elements of the governance of SWF scoreboard are grouped in three categories:

(1) structure of the fund, including its objectives, links to the government’s fiscal policy, and whether or not the fund is independent from the countries’ international reserves;

(2) governance of the fund, (Table 6) including the roles of the government, of the board of the fund and of its managers, and whether the fund follows guidelines for corporate responsibility;

(3) accountability and transparency of the fund in its investment strategy, investment activities, reporting and audits.

There is a scoreboard about the governance of SWFs and Pension Funds hereinbelow. Some resources as stated above prefer to specify funds differently. Table 6 below has been given for making inferences about governance of SWFs. For instance, while role of government affects nonpension funds hugely, ethical investment guidelines mandate these funds slightly. However, all funds are affected by role of governing body. As it can be inferred from the table that government pension funds are mandated by elements (role of government, role of governing body, etc.) on the table.

Table 6. Governance (2015 Scoreboard Elements) (out of 100)


Nonpension SWFs

Government Pension Funds

All Funds

Role of government




Role of governing body




Role of managers




Decisions made by managers




Internal ethical standards




Guidelines for corporate responsibility




Ethical investment guidelines








Source: (Stone & Truman, October 2016)

Santiago Principles

The document of the International Working Group of Sovereign Wealth Funds indicates aims of Generally Accepted Principles and Practises (GAPP) as follows. (See also Appendix)

I. To help maintain a stable global financial system and free flow of capital and investment;

II. To comply with all applicable regulatory and disclosure requirements in the countries in which they invest;

III. To invest on the basis of economic and financial risk and return-related considerations; and IV. To have in place a transparent and sound governance structure that provides for adequate operational controls, risk management, and accountability.

Disclosure and Transparency of Sovereign Wealth Funds

Internal auditing processes and its standards, and independent external auditing are core components in the sense of management and transparency of sovereign wealth funds. Building trust in decisions and policies related to public’s wealth in funds is also crucial. To do this, transparency should be achieved immediately and improved regularly whereby the funds are being managed by fund managers. Accountability should be declared to the public in transparent form of cyclical reports corresponding with their own activities, and also included independent auditing reports about funds’ governance and investments. SWFs’ transparency should be conducted with timely information reporting size of funds, broad strategy of management and investment objectives. (Kern, Sovereign Wealth Funds-State Investments on the Rise, September 2007) In order to establish a reputation, being transparent as a fund on the whole and communicating with stakeholders and government’s other institutions which leave a positive impression on the public should be considered in this way. While external reports support transparency to sustain fund’s legitimacy, internal reporting is an inseperable part of the management structure. (Al-Hassan, Papaioannou, Skancke, & Chih Sung, November 2013) Table 7 demonstrates a snap of the available auditing data for selected SWFs. Employing an audit committee is preferred by funds, and all funds disclose their auditing annual reports to the public. While some funds prefer big fours (e.g., New Zealand Superannuation Fund, Korean Investment Corporation, Temasek Holdings), other funds are audited directly government bodies (e.g., Australia Future Fund, HK Monetary Authority Investment Portfolio) for external auditing.

Table 7. Auditing of Selected SWFs


Internal Audit

External Audit

Audit / Annual Report

Accounting Standard

Audit Committee

Audit Department

Australia Future Fund

Australian National Audit Office

Australian Accounting Standards & Accounting Interpretations issued by the Australian Accounting Board (AASB)

New Zealand Superannuation Fund

Internal Audit (reports to Audit Committee)

Ernst & Young

Generally Accepted Auditing Practice in New Zealand (NZ GAAP)

Hong Kong Monetary Authority Investment Portfolio

Audit Commission, Government of the HK SAR

Hong Kong Financial Reporting Standards

Korean Investment Corporation


Accounting principles generally accepted in the Republic of Korea

Temasek Holdings


Singapore Standards on Auditing (SSA)

Source: (The World Bank, September 2014)

Investment Policies of Sovereign Wealth Funds

In countries, the owner of the sovereign wealth fund is responsible for managing its investments directly. This may be the ministry of finance of the country having SWF or someone else according to preferred governance structure of the fund. SWFs invest in kinds of financial instruments worldwide. They invest in developed markets, emerging markets, state bonds, loans, hedge funds, real estates, private property, infrastructure etc. The most preferred market is developed markets. Some SWFs purchase stock certificates from big companies like Apple Inc., Microsoft Corp. etc. For instance, Norwegian Government Pension Fund-Global have a large portfolio including Apple Inc., Royal Dutch Shell Plc., Nestle SA, Microsoft Corp., Roche Holding AG, Novartis AG, Samsung Electronics Co. Ltd., P”nar S”t Mam”lleri Sanayi A.”., etc. (Norges Bank, February 2017) While sovereign wealth funds having an aim infrastructural investments etc. generally prefer domestic investments (e.g., Russia), other funds having an aim to make an investment for their next generations prefer foreign investments (e.g., Norway). SWFs making foreign investments are generally financed by natural resources and minerals. Non-commodity SWFs are setting their investment policies domestically. As it can be seen in the Figure 4, SWF investments in foreign markets were $ 82,9 billion for 2008, after the crisis it decreased and for the year of 2009 only $ 53,3 billion were invested in foreign markets. In 2010, $ 40,3 billion were invested in domestic markets, which is the lowest domestic investment looking to previous three years (2007, 2008, 2009), foreign investments were $ 40,3 billion fell by half from 2008 to 2010. Here, also, effects of 2009 European debt crisis showed itself with these kind of declines. In Table 8, SWFs setting the domestic investment policy are demonstrated. Some countries have not only funds making foreign investments but also funds making domestic investments. Funds’ aims are stated by these SWFs in the table.

Some SWFs financially helped key world banks in 2007-2009 in the global financial crisis. It was also concerned as an investment, and also helped the world economy stabilize again. For example, Abu Dhabi Investment Authority helped Citigroup with $ 7,5 billion, then it made loss of $ 6,8 billion, which is equal to roughly 90% loss, in this investment. China Investment Corporation helped Morgan Stanley with $ 5 billion, then it also made loss of $ 2,5 billion, which is equal to 50 % loss, in this investment. (Ander & Teply, 2014)

Figure 4. SWF Investments in Domestic and Foreign Markets, 2006-2015 (US$bn)

Source: (Universita Commerciale Luigi Bocconi, 2016)

Table 8. SWFs with Domestic Investment Mandates




Asset Value $ (billion)

Funding Source

UAE-Abu Dhabi

Abu Dhabi Investment Council

-To assist the government of Abu Dhabi in achieving continuous financial success and wealth protection, while sustaining prosperity for the future.

-To increasingly participate in and support the sustainable growth of the Abu Dhabi economy.




Australian Future Fund

-To strengthen the Australian government’s long-term financial position by making provision for unfunded Commonwealth superannuation liabilities.




Strategic Investment Fund

-To make strategic investments in French firms to prevent them from being bought at discounted prices by foreign investors, through participation and investment in innovative enterprises with a long-term investment horizon.




Khazanah Nasional

-To promote economic growth and make strategic investments on behalf of the government, contributing to nation-building.

-To nurture the development of selected strategic industries in Malaysia with the aim of pursuing the nation’s long-term economic interests.




Russian Direct Investment Fund

-To make equity investments in strategic sectors within the Russian economy on a commercial basis by coinvesting with large international investors in an effort to attract long-term direct investment capital.



South Africa

Public Investment Corporation

-To deliver investment returns in line with client mandates.

-To contribute positively to South Africa’s development.



UAE-Abu Dhabi

Mubadala Investment Company

To facilitate the diversification of Abu Dhabi’s economy, focusing on managing long-term, capital-intensive investments that deliver strong financial returns and tangible social benefits for the Emirate.



Source: (Gelb, Tordo, Halland, Arfaa, & Smith, February 2014)

* Source: (Sovereign Wealth Fund Institute, 2017)

** Source: (Sovereign Wealth Fund Institute, 2017)

*** Source: (Public Investment Corporation, 2017)

Box 2. Turkey Wealth Fund (TWF)

Established in: 2016

Total Assets: $ 31 billion (apx)*

Board of Directors:

Mehmet BOSTAN-Chairman of the Board

Kerem ALK”N-Board Member

Yi”it BULUT-Board Member

Oral ERDO”AN-Board Member

Himmet KARADA”-Board Member


Contributing to economic growth by ensuring value increase of key public assets.

Supporting the development of assets suitable for participation financing.

Actively deepening capital markets by supporting introduction of a variety of products.

Attracting further investments to Turkey and providing capital for new investments.

Establish and manage Turkey Wealth Fund and sub-funds with the aim of further developing strategically important industries and participating in large scale investments.

Portfolio of the TWF

Turkish Airlines

T”rk Telekom



Turkish Petroleum

Petroleum Pipeline Company

Post and Telegraph Organization


Borsa ”stanbul

Milli Piyango (Lottery)

TCDD ”zmir Port

Turkish Maritime Enterprises

Eti Maden

Kayseri ”eker Fabrikas”

”ay ”letmeleri

Jockey Club of Turkey

Various Real Properties

Source: (T”rkiye Varl”k Fonu Y”netimi A.”., 2017)

* Source: (Karanfil, Boyac”o”lu, & Alp, 2017)


Putting emphasis on Sovereign Wealth Funds by governments worldwide affects economy and business world. With this, governments of countries prefer setting up Sovereign Wealth Funds in a growing number in recent years. Wealth funds are important investment funds ‘ the pool of assets ‘ managed by governments’ institutions like ministry of finance, etc. in any country possessing SWFs. These kind of funds’ assets may consist of revenues from natural resources, foreign currency reserves, current-account surpluses, etc. Funds invest their these kind of resources in financial instruments or real estates with differently purposes. SWFs dates back to 1854 with being established of Permanent School Fund in the USA. Then, its importance are still gradually increasing. Government and the governance of SWFs decide their investing characteristics like stabilization, saving, pension review, reserve investment, etc. The one aim of SWFs is also macroeconomic reasons and necessities in the global market. Also, these funds might financially help important institutions in any country where they invest in downturns. Norway, United Arab Emirates, China, Kuwait are possessing biggest sovereign wealth funds. While some countries have only one SWF, some countries have SWFs more than one with different sources, for instance, while one SWF is funded by oil reserves, the other one is funded by non-commodity. In this study, all general issues about SWF are tried to be explained clearly. Using tables and figures have facilitated to understand the main topic in this way. There are informations like rankings, auditing preferences, SWF characteristics and governance impacts etc. Here, literature review was made and various articles belonging to International Monetary Fund, World Bank, books, and a variety of resources were used which are mentioned below in resources part of this study. In the end, to inform readers, general informations of Turkey Wealth Fund like who its directors are and what its objectives are given in the Box 2.

Appendix. Santiago Principles

GAPP 1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

GAPP 2. The policy purpose of the SWF should be clearly defined and publicly disclosed.

GAPP 3. Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.

GAPP 4. There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the SWF’s general approach to funding, withdrawal, and spending operations.

GAPP 5. The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets.

GAPP 6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

GAPP 7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.

GAPP 8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.

GAPP 9. The operational management of the SWF should implement the SWF’s strategies in independent manner and in accordance with clearly defined responsibilities.

GAPP 10. The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.

GAPP 11. An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.

GAPP 12. The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.

GAPP 13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing bodies, management, and staff.

GAPP 14. Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.

GAPP 15. SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.

GAPP 16. The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.

GAPP 17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.

GAPP 18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing bodies, and be based on sound portfolio management principles.

GAPP 19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

GAPP 20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.

GAPP 21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.

GAPP 22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.

GAPP 23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.

GAPP 24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.

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