Santiago Principles Self-Assessment

Fondo de Ahorro de Panamá

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  • Pillar 1: Legal
  • Pillar 2: Institutional
  • Pillar 3: Investment
Principle 1

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

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

LEGAL FRAMEWORK

LAWS (published by the National Assembly/Congress & the Executive Branch

 – President). Law 38 of June 5, 2012, modified through Law 51 of October 10, 2018 (“the Law”)– is the law that creates the FAP, enacted by the National Assembly of Panama. The Law establishes that the governing bodies of the FAP are:

The National Assembly – legislative authority.

The Ministry of Economy and Finance (“MEF”) –Trustor (asset owner), representative of the Executive Branch of the Rep. of Panama.

The Board of Directors of the FAP – main decision-making body of the Fund;

The Secretariat – provides executive, technical, and financial leadership to the Board of Directors;

Banco Nacional de Panamá (“BNP” or “The Trustee”) 

The Supervisory Commission – reviews the Board of Director’s actions; represents the civil society; and

The General Comptroller of Panama –internal auditor of the FAP.

EXECUTIVE DECREE (published by the Executive Branch, through the MEF)

Executive Decree No. 1068 of Sept. 6, 2012 (“the Executive Decree”) – that regulates The Law, published by the MEF.

INVESTMENT DIRECTIVES (published by the MEF)

Investment Directives, issued by the MEF (2012, 2014 and 2016), sets forth the general investment guidelines to be followed by the Board of Directors of the FAP; allows for the Board to modify such Directives subject to approval from the MEF.

INTERNAL DIRECTIVES OF THE BOARD (published by the Board of Directors of the FAP)

The Agreement establishes the Internal Directives of the Board of Directors of the FAP which describes the composition, functions, and responsibilities of: The Chairman of the Board, Directors, the Trustee, MEF, and Secretariat.

INVESTMENT POLICIES & STANDARDS (published by the Board of Directors of the FAP)

Investment Policies and Standards;

Annual Investment Plan & Strategic Asset Allocation

BIDDING PROCESS AND CUSTODY DIRECTIVES (published by the Board of Directors of the FAP)

The Bidding Process Directives, Agreement No. 11 of August 31, 2015, establishes the general guidelines for contracting banks, custodians, asset managers, consultants, or any other financial intermediary

Custody Services Directives, Agreement No. 16 of June 29, 2017, establishes the procedures that the custodian must follow.

Principle 6

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.

The Agreement of the Board of Directors of the FAP, based on the Law, Article 11, establishes the Internal Directives of the Board of Directors of the FAP which describes the composition, functions, and responsibilities of: The Chairman of the Board, Directors of the Board, the “Trustee, MEF, and Secretariat.

Please refer to Principle 1.

Principle 18

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 body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

The Law, Chapter IV, Article 7, describes the general Investments Directives of the FAP.

The Investment Directives establishes the investment policy of the FAP’s assets and sets out risk tolerance limits through benchmarks and corresponding tracking error.

The FAP’s Investment policies and standards establish the principles, parameters, and directives for the administration and management of the Fund, which at the same time, regulates the strategies in strict compliance of the Trustee, the custodian and the asset manager, as well as to follow the Santiago Principles.

Also in section 15 of the Investment Policies and Standards, risk management is based mainly on the use of tracking error for each portfolio managed, asset class, and corresponding benchmark. Other methods may be used, such as Montecarlo simulation, sharpe ratio, treynor index, information ratio, beta, convexity, etc.

A description of the investment policies and Directives can be found on our website.