IFSWF Santiago Principles

Santiago Principles Self-Assessment

HSF 2019

    Institutional Framework and Governance Structure.
    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.

    In accordance with the HSF Act, the Board of Governors comprises five members.  The responsibility for the management of the Fund was delegated to the Central Bank of Trinidad and Tobago, which acts as agent for and on behalf of the Heritage and Stabilisation Fund. The role of the Central Bank of Trinidad and Tobago is further detailed in the HSF Act and an Instrument of Delegation.

    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.

    The objectives of the Fund are set out in the HSF Act, which also outlines the process for the appointment of the Board of Governors for the Fund.

    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.

    Section 9 of the HSF Act gives the Board of Governors the authority to determine the governance structure and the operational and investment guidelines of the Fund. It also entrusts the Board with the responsibility for the management of the Fund in addition to requiring that the Board perform the requisite duties to carry out the purposes of the Fund. The HSF Act also requires that the Board be comprised of persons with proved competence in specific areas of expertise.

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

    In accordance with the Act, the Central Bank of Trinidad and Tobago has been delegated the responsibility to manage the HSF by the Board of Governors. The Bank has outsourced the investment management of the Fund to external asset managers. The responsibilities of all parties are clearly defined in Investment Management Agreements as well as the Instrument of Delegation.

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

    The accountability framework for the HSF is clearly defined in the HSF Act, the Instrument of Delegation, the Operational and Investment Policy and Investment Management Agreements.

    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.

    As required by the HSF Act, the Central Bank of Trinidad and Tobago prepares and submits to the Board of Governors, an annual report and the financial statements of the HSF, two months after the end of the financial year.  These are prepared in accordance with recognized accounting standards.

    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.

    The HSF’s financial statements are audited annually by the Auditor General of Trinidad and Tobago.

    13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.

    Professional and ethical standards of conduct for employees of the Central Bank, which has responsibility for the day to day management of the Fund, are formally defined in the Bank’s internal policies. 

    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.

    Third party arrangements are generally contracted by the Central Bank and as such are subject to the Bank’s procurement policies and procedures.

    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.

    The HSF through its external manager programme invests in countries outside of Trinidad and Tobago, some of which include the United States, Europe and Japan. The agreements between external asset managers and the HSF place a requirement on the managers to comply will all legal and regulatory requirements applicable to the conduct of business on behalf of the HSF.

    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.

    The governance framework and objectives of the HSF are documented in the enabling legislation; The operational independence of the management of the Fund by the Central Bank is documented in the Instrument of Delegation; both documents are publicly available

    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.

    The overall size of the HSF, its absolute and relative returns and the asset class mix are disclosed via publicly available quarterly reports. The Fund’s annual reports which are also made public, contain further information about the accounting of the HSF.

    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.

    While the overall investment objective of the Fund is publicly stated, the investment policy of the HSF is not publicly disclosed.

    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.

    19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.

    19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

    The investment guidelines of the HSF, stipulates return objective over a specific period. A risk budget is included in the guidelines, which speaks to targeted tracking errors for each asset class mandate. Investment decisions are based solely on economic and financial grounds and on a day to day basis are made by external investment managers. These managers are subject to regulatory scrutiny in the markets in which they operate and as such employ sound asset management principles.

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

    The Fund does not compete with local private entities as it invests strictly in the international financial markets.

    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.

    The HSF’s policies prohibit having a material interest in any single legal entity.

    The HSF’s policy for casting votes in ownership and/or proxy ballots is not publicly disclosed, but is guided by the objective to ensure the best interest of the Fund.

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

    22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.

    22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.

    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.

    Reports on the assets and investment performance of the Fund are provided on a regular basis to the Board of Governors.


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

    The HSF currently does not have a formalized process to review the implementation of the GAPP but will work towards developing a procedure to regularly review the framework.