The International Forum of Sovereign Wealth Funds (IFSWF or Forum) met for its fourth annual meeting in Mexico City, Mexico on September 5–7, 2012
Hosted by the Mexican Ministry of Finance and Public Credit, the Forum advanced on its commitments made in Beijing in May 2011 by discussing the IFSWF members application of the Santiago Principles, risk management and the investment environment, commitment to an open investment environment, as well as making progress on its internal governance issues.
The Deputy Minister of Finance, Mr. Gerardo Rodriguez Regordosa addressed the Forum and highlighted the relevance of the role of SWF members as global long term institutional investors. He reaffirmed Mexico´s endorsement and support on the set of good practices for management and sound governance for Sovereign Wealth Funds enlisted in the Santiago Principles. He also expressed gratitude and support of the work that has been undertaken at the Forum to share views and experiences from managers while observing sound investment practices.
It issued the following release ("Mexico City Communiqué").
IFSWF Work Program:
1. Application of the Santiago Principles
We discussed the results of a survey on the experiences of the application of the Santiago Principles. All members remain committed to the application of the Santiago Principles. We reviewed members' approaches to the Santiago Principles, and looked at how a newly established fund had used the Santiago Principles in both their governance and investment frameworks. A number of members reiterated that their adoption of the Santiago Principles was reinforcing their domestic and international standing.
2. Risk management and investment environment
We discussed frameworks that an SWF could employ to define, measure, and manage inflation risk in order to protect the purchasing power of its assets. We explored the asset classes and strategies that are most likely to provide an effective hedge depending upon an SWFs´ goals and objectives. We also discussed using risk rather than asset-class-based approaches to portfolio construction. We reviewed how SWFs could consider hedging currency exposure (i.e., explicit and implicit exchange rate risks) embedded in both financial and non-financial assets.
3. Commitment to an open investment environment
The IFSWF remains committed to cooperating with recipient countries and agreed to encourage them to maintain a fair and open investment environment. Separately, we reviewed the various approaches undertaken by our members to exercising ownership rights. The diversity of approaches reflects the heterogeneity of our membership. We agreed to continue to review the various approaches and exchange perspectives. One of our members presented its experience in developing its own principles for ownership management based on internationally accepted standards, such as the OECD Principles of Corporate Governance and Guidelines for Multinational Enterprises, and the United Nations Global Compact.
IFSWF internal governance arrangements
We reiterated our commitment to the Forum and advanced the discussion on the IFSWF internal governance. We have attended to the IFSWF´s funding arrangements and completed plans for the establishment of a permanent Secretariat. In this context, the Forum commended the facilitation role played, thus far, by the staff of the IMF under the guidance of Mr. Udaibir S. Das. We also discussed the expansion of our membership with other SWFs that share the core values of the Santiago Principles and broader engagement with other institutional investors. We also invited and exchanged views with several non-members as observers. These included Argentina, Colombia, France Germany, Italy, Japan, Indonesia, Oman, Seychelles, and U.K. Keynote speakers Mr. José Viñals, Financial Counselor and Director, Monetary and Capital Markets Department at the International Monetary Fund, provided an overview of economic and financial outlook and risks. Professor Randall Kroszner from the University of Chicago discussed economic and financial challenges and their effects on interest rates, and the implication on the asset allocation of SWFs. Mr. Tidjane Thiam, Group Chief Executive of Prudential and appointed Chair of the G20 high level panel for infrastructure investment (2011), presented the key recommendations of the G20’s infrastructure panel.
Next Meetings
The Forum will meet in Oslo next year. The meeting will be hosted by the Norwegian Ministry of Finance. Note to editors The International Forum of Sovereign Wealth Funds (IFSWF) was established by the International Working Group of Sovereign Wealth Funds (IWG) in Kuwait City on April 5-6, 2009 (see "Kuwait Declaration"). IFSWF is a voluntary group of Sovereign Wealth Funds (SWFs), which will meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities.