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| Strategic Investment Funds
In addition, the SIF’s double bottom line mandate requires that the fund disclose information on its economic performance. ISIF’s economic impact is reported on a semiannual basis,33 and includes items such as employment creation and contribution to economic growth nationally and by region, as well as sector-specific metrics, such as megawatts of energy installed by ISIF’s renewable energy investee companies. The NTMA Annual Report 2019, for instance, reports that ISIF supported over 32,000 jobs up to the end of June 2019 (NTMA 2020). SIF performance reporting should be accompanied by unequivocal communication emphasizing the long-term investment horizon of the fund so that attention does not focus on short-term performance (see Al-Hassan et al. 2013). Frequent reporting could undermine the long-term investment horizon of the SIF if such reporting is not accompanied by unambiguous messaging around the long-term investment nature of the fund, because short-term volatility in the SIF’s performance may be misread by those who do not fully understand the long-term mandate of the fund, or by players seeking to undermine the fund for political reasons (Rose 2015). SIFs may be pushed into “a public demonstration of short-term performance,” deviating from their long-term mandate (Dixon and Monk 2012). In such cases, transparency may undermine rather than aid the SIF, leading to transparency and disclosure standards that often focus more on annual, rather than quarterly, statements (De Belis 2011; Dixon and Monk 2012). As stewards of public capital, SIFs would generally do well to focus on higher public disclosure obligations and mitigate the risk of short-term orientation through the safeguards of explicit communication and emphasis on long-term returns.
KEY TAKEAWAYS • Transparency and disclosure are twin guiding principles that allow the SIF and its governing bodies to be held to account as the fund invests public wealth in pursuit of a stated mandate. The transparency and disclosure framework is embedded in the governance architecture of the SIF and enshrined in its establishment law, regulations, and policies. • Transparency and disclosure requirements have increased globally over the past decade for all forms of investment funds and sovereign agencies. SIFs, as holders of public capital, are expected to conform to high public disclosure standards. • A SIF’s transparency and disclosure framework emanates chiefly from the specific legal framework within which the fund is created and managed, leading to a variety of disclosure standards among global SIFs. The transparency and disclosure framework of a SIF must be carefully constructed because the fund may sit at the intersection of several, and sometimes conflicting, legal and regulatory requirements. • Broadly, a SIF’s reporting framework provides public disclosure of (1) key features of the fund, including clarity on the mandate, ownership structure, legal basis, governance architecture, and policies adopted by the SIF, including the remuneration structure of its governing bodies; (2) investments and fund performance with respect to both financial and economic returns; and (3) audited financial statements for the fund.
