Strategic Investment Funds

Page 58

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| Strategic Investment Funds

BOX 2.4

Santiago Principles and macroeconomic implications of SWFs The Santiago Principles include the following generally accepted principles and practices (GAPPs) related to sovereign wealth funds (SWFs):a GAPP 3. Principle 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. Principle 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 4.1. Subprinciple. The source of SWF funding should be publicly disclosed. GAPP 4.2. Subprinciple. The general approach to withdrawals from the SWF and spending on behalf of the government should be publicly disclosed.

Source: IWG 2008. a. These principles apply also to public capital strategic investment funds.

representatives from domestic fiscal and ­monetary ­authorities, who can ensure alignment with Nigeria’s macroeconomic ­policies. If the SIF is part of an economic union and the sovereign does not set m ­ onetary ­policy, the coherence of SIF activities focuses on the fiscal. For instance, Senegal’s FONSIS is part of the West African Economic and Monetary Union and does not set monetary policies.33 Fiscal integration of the public capital SIF is important because of the link between contributions into and withdrawals from the SIF and the government’s overall budget surplus and deficit. Public capital SIFs, like SWFs, are part of the overall balance sheet of the government, so their activities must maintain coherence with the overall fiscal policy of the government (Al-Hassan et al. 2018). The fiscal interdependence between a sovereign’s balance sheet and a proposed SIF is the reason why sovereigns with high levels of debt and costly debt repayment must consider the opportunity cost of setting up a SIF versus paying down debt. For instance, under Article 40.2(b) of the NTMA Act 2014, ISIF must “ensure that investments do not have a negative impact on the net borrowing of the general government of the State for any year.” The conditions under which funds can be transferred to the SIF must be made clear ex ante so that all potential co-investors have a clear picture of what funds will be used to capitalize the SIF and under what conditions they can be withdrawn. For instance, the government of Ireland cannot make withdrawals from ISIF until 2025.34 Clear-cut and publicly disclosed fiscal rules must ideally allow for contribution into the fund during times of surplus and withdrawal from the fund during times of deficit. The Nigeria Sovereign Investment Authority (Establishment, etc.) Act, 2011, or NSIA Act 2011, for instance, clearly specifies that NSIA can be funded only with hydrocarbon revenues that are in excess of Nigeria’s budgetary requirements, and that the only form of payout from NSIA is through dividends to stakeholders after five years of consistent profitability in all three NSIA funds (see the NSIANIF case study in appendix A). Sovereigns also sometimes provide tax exemption to SIFs established by ad hoc law and must carefully consider whether such tax exemption is justified.35


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References

17min
pages 296-303

Notes

2min
page 295

Staffing and recruitment

2min
page 292

Investment strategy

2min
page 284

Portfolio and track record

2min
page 285

13.2 NSIA-NIF core governance bodies

6min
pages 289-290

Mandate for investment

2min
page 283

12.2 Summary of NIIF Limited’s governance bodies

3min
page 277

Legal structure

2min
page 282

Background and mission

1min
page 281

Governance

2min
page 275

Additionality and multiplier considerations

2min
page 274

12.2 NIIF’s Master Fund structure

4min
pages 272-273

12.3 NIIF’s governance structure

2min
page 276

12.1 NIIF’s anticipated fund size and investors at time of writing

5min
pages 270-271

12.1 NIIF structure

4min
pages 268-269

11.1 Key features of the Luxembourg SCSp

2min
page 264

11.4 Marguerite’s ESG assessment throughout the investment process

4min
pages 265-267

11.3 Summary of Marguerite II’s core bodies and functions

2min
page 263

impact report

4min
pages 246-247

10.6 ISIF Irish Portfolio risk categories

11min
pages 248-252

11.1 Marguerite II’s eligible sectors

6min
pages 257-259

10.4 ISIF investment decision process

1min
page 245

10.4 Summary of ISIF’s governance bodies

2min
page 244

10.1 Structure of NTMA and ISIF

4min
pages 236-237

December 31, 2018

7min
pages 238-240

writing

4min
pages 227-228

9.2 Summary of FONSIS governance bodies

3min
page 229

9.4 FONSIS organizational structure

12min
pages 230-235

9.1 FONSIS’s solar investments

2min
page 223

8.3 Summary of ACP’s governance bodies

2min
page 214

References

6min
pages 202-206

8.1 Breakdown of ACP’s committed capital, by source

1min
page 208

Notes

2min
page 201

7.1 Financial reporting standards of select SIFs B7.7.1 Comprehensive sample of metrics disclosed in ISIF’s economic

2min
page 197

7.6 Core components of disclosure for a strategic investment fund

1min
page 196

mechanisms of disclosure

2min
page 195

Unique features of the transparency and disclosure framework for SIFs

2min
page 198

Legal and regulatory context

2min
page 192

Linaburg-Maduell Transparency Index for SWFs

2min
page 191

guidelines

2min
page 190

Key takeaways

2min
page 200

Introduction

1min
page 185

Global transparency and disclosure requirements

2min
page 186

principles for SWFs

5min
pages 187-188

Investment Fund Managers

2min
page 189

References

2min
pages 182-184

6.7 Investment exit: The case of Marguerite

2min
page 180

The NSIA-NIF example

2min
page 172

6.2 FONSIS: Originating investment opportunities as a project developer

2min
page 173

6.6 Exercising active ownership

2min
page 178

Investment exit

2min
page 179

6.2 NSIA-NIF investment evaluation process and responsibilities

2min
page 175

Investment origination

2min
page 171

6.1 Phases of the SIF’s investment process

1min
page 170

References

3min
pages 167-168

Introduction

1min
page 169

Notes

9min
pages 164-166

Risk management framework: Key concepts Components of the risk management framework

5min
pages 157-158

and key actors

7min
pages 160-162

Key takeaways

2min
page 163

5.4 Investor protection provisions in shareholder agreements

8min
pages 154-156

infrastructure SIFs

7min
pages 150-152

5.1 Investment policy–related guidance within the Santiago Principles

5min
pages 142-143

Components of the investment policy

10min
pages 145-148

Key actors in the investment management framework

2min
page 144

References

3min
pages 138-140

4.7 Typical terms of a limited partnership agreement

6min
pages 133-134

4.5 Indicative RFP content for external manager selection

2min
page 131

4.7 Recruiting an external manager for a SIF: PINAI

5min
pages 129-130

4.6 Staffing the NIIF

2min
page 128

equivalent structure

10min
pages 124-127

4.4 SIF board functions

11min
pages 120-123

Key decision-making bodies and their functions

5min
pages 108-109

Authority

5min
pages 111-112

4.2 Public sponsor ownership functions in a SIF

8min
pages 113-115

4.3 Definition of an independent board member

2min
page 116

4.4 Safeguards for government representatives on SIF boards

2min
page 117

Introduction

1min
page 105

References

5min
pages 101-104

Notes

6min
pages 99-100

Private agreements in setting up a SIF Applicability of other domestic, supranational, and

2min
page 90

3.7 National security legislation: The US example

3min
page 97

3.9 Other laws affecting SIF cross-border activities

3min
page 96

3.6 Legal structure and domicile for a variety of SIFs

2min
page 88

3.5 Most popular domiciles

2min
page 89

3.5 Examples of legal structures used by global SIFs

2min
page 86

3.4 SIFs formed entirely under commercial law

5min
pages 84-85

3.3 Common features of primary SIF legislation: Operational elements

7min
pages 81-83

3.3 Specifying the transfer of state assets into a SIF with the SIF law

2min
page 78

FONSIS

5min
pages 76-77

References

5min
pages 68-70

Notes

6min
pages 66-67

Introduction

1min
page 71

3.1 Santiago Principles: Key legal principles for SWFs

2min
page 72

2.6 Preliminary study for the Green Investment Bank, United Kingdom

3min
page 64

Preparatory studies to establish a SIF

2min
page 63

Limitations of a SIF

2min
page 59

Macrofiscal implications of a SIF

2min
page 57

2.4 Santiago Principles and macroeconomic implications of SWFs

2min
page 58

Challenges to establishing a SIF

2min
page 60

managers

2min
page 56

Issues to consider before establishing a SIF

2min
page 62

2.7 Illustrative list of strategic alliances between global SIFs and SWFs

2min
page 53

funds

2min
page 61

Double bottom line mandate

2min
page 45

2.4 SIF mandates, examples from case studies

2min
page 46

SIF ownership and management models

2min
page 42

2.5 Managing the DBL

2min
page 47

2.6 The additional value of SIFs: Case study examples

5min
pages 50-51

Structure

2min
page 34

2.2 Palestine Investment Fund

2min
page 52

Context

1min
page 27
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