International Forum of Sovereign Wealth Funds

As per law 47, Article 2:

“The objective of the Authority is to undertake, in the name and for the account of the State of Kuwait, the management of the General Reserve Fund, the monies allocated for the Future Generations Fund, as well as such other monies that the Minister of Finance may entrust the Authority with its management.” 

KIA aims to achieve a rate of return on its investment that, on a three-year rolling average, exceeds its composite benchmarks.

KIA plays a pivotal role in the local economy. It directs and manages the State’s contributions and shares in various major economic entities.

KIA maintains an active involvement with economic and financial developments in Kuwait. It promotes and supports the institutionalization of the market through setting up funds and companies to promote and finance local business, and participates in the launching of local investments that have feasible economic returns.

KIA’s role in the local economy is disclosed on its website.

KIA helps develop the role of local financial companies by giving them the opportunity to manage some of its investments locally and abroad. The private sector’s regeneration is maintained through privatization programs that KIA is committed to undertaking. KIA has set up several companies in the last few years as a requirement by a statute enacted by Kuwait’s National Assembly (Parliament), primarily to promote investment in Kuwait.

The GRF is the main treasurer for the Government and receives all revenues (including all oil revenues) from which all State budgetary expenditures are paid. Since the GRF is the repository of all income of the State of Kuwait, all State budget expenditures are paid out of the GRF and sanctioned by law.

The FGF was established in 1976 with 50% of the GRF Balance. It receives a minimum of 10% of all

State revenues as well as 10% of the net income of GRF on an annual basis. No assets can be withdrawn from the FGF unless sanctioned by law. All investment income is reinvested as required by Law No. 106 of 1976. The process of funding and withdrawals is outlined by law and publicly disclosed on KIA’s website.

KIA’s investments are completely transparent to the State of Kuwait, which is responsible for protecting the interests of KIA’s beneficiaries – the citizens of Kuwait.

Senior representatives of KIA report periodically to the National Assembly’s various committees (including the Finance and Economic Committee; Budgetary and Closing Accounts Committee; and Public Funds Protection Committee) to discuss any issues raised by the State Audit Bureau.

KIA also provides regular and frequent reports to the following concerned parties:

• The Minister of Finance
• The Council of Ministers
• KIA’s Board of Directors
• The Chairman and the Executive Committee of KIA’s Board of Directors
• The Independent State Audit Bureau (whose on-site personnel also provides ongoing monitoring)

As the owner, State of Kuwait set the objective of KIA as per law 47, Article 2:

“The objective of the Authority is to undertake, in the name and for the account of the State of Kuwait, the management of the General Reserve Fund, the monies allocated for the Future Generations Fund, as well as such other monies that the Minister of Finance may entrust the Authority with its management.”

KIA aims to achieve a rate of return on its investment that, on a three-year rolling average, exceeds its composite benchmarks by designing and maintaining an asset allocation consistent with its mandated return and risk objectives, selecting investments and investment managers with the ability to outperform the respective index for each asset class and making tactical changes to the asset allocation without adversely altering the aggregate so as to benefit from emerging economic and market trends.

KIA endeavours to be a world-class investment management organization committed to continuous improvement in the way it conducts business by contributing to the formation of human capital in Kuwait by attracting talented and ambitious young Kuwaitis, participating in the growth of the investment sector in Kuwait and reinforcing sound corporate governance, transparency in all operations, and fair business dealings in Kuwait by holding our business associates and portfolio companies to the highest ethical standards.

KIA is an independent public authority managed by its Board of Directors. The Board has complete independence in its decision-making process. The Board selects a Managing Director and appoints the Executive Committee. The Executive Committee is chaired by the Managing Director and is responsible for assisting the Board of Directors to set strategic goals and objectives for KIA.

The Managing Director, with the assistance of the Executive Committee, implements the strategy set by the Board of Directors. The execution of the strategy is delegated to the various sectors within the KIA by the Managing Director and overseen by him.

The managing Director delegates the execution of the strategy to various sectors within KIA and monitors ongoing activities through ongoing engagement with the stakeholders and regular reporting provided on a monthly basis. The regular reports track the implementation of the investment decision and outcomes of these decisions. These findings are presented to the Board of Directors by the Managing Director on a regular basis.

KIA’s Operations Departments prepares annual financial statements following the conclusion of each fiscal year. In addition, investment performance and risk is reported on a quarterly basis by the Risk Management and Performance Measurement Unit. These reports reflect KIA’s investments accurately and are audited regularly.

KIA is audited regularly by the following: 

• External Audit: KIA’s managed accounts are jointly audited annually by two of the “Big Four” independent audit firms. The External Auditor reports directly to the Board of Director of KIA.
• Board Audit Committee: There is a Board Audit Committee comprising of two private sector Board members.  The Board Audit Committee is chaired by the Under Secretary of the Ministry of Finance.  The Managing Director is invited to attend the Board Audit Committee meetings as an observer. 
• Internal Audit: In addition to the external auditors, KIA has an Internal Audit Office that reports directly to the Chairman of the Board of Directors. Internal Audit Department conducts regular audits for all KIA departments.
• Civil Service Commission: The Civil Service Commission assigns on-site personnel to ensure KIA’s compliance with all administrative and human resources requirements as a public sector entity.
• Ministry of Finance: The Ministry of Finance assigns on-site Controllers to ensure that all administrative expenditures are in compliance with internal rules and regulations and is within approved guidelines.

During the April 2006 reorganization of KIA, the Consultants also established a Code of Conduct for each staff member at KIA. This is a comprehensive manual that each staff member, especially in managerial positions, has to agree to in writing. The Code of Conduct is maintained under the supervision of the Director for Legal and Compliance (KIA's General Counsel).

KIA is a performance-oriented, government-owned institution committed to delivering international standard investment returns and excellence in the way it does business. It is by this standard, and those listed below, that KIA is to be judged: 

• Integrity
• Social Responsibility
• Rules and Procedures
• Empowerment and Accountability
• Communication and Team Work
• Knowledge
• Due Diligence
• Decision Making
• Leadership
• Guidance

For more information please visit:

https://kia.gov.kw/about-kia/

Any third party relationships are established based on economic and financial grounds. Appointment is conducted through a formal shortlisting and RFP process based on predetermined criteria. Once established, any third-party relationships are governed by the service level agreements, investment management agreements and contracts signed.

KIA conducts its investment activities in compliance with all applicable host country rules and regulations as well as bilateral agreements between Kuwait and the respective host countries.

KIA’s Legal and Compliance Department oversees this principle; safeguarding KIA as a legal entity pursuant to applicable laws whilst ensuring compliance with host country rules.

KIA’s governance framework and objective are publicly disclosed and freely available on KIA’s website.

For more information please visit:

http://www.kia.gov.kw

KIA’s investments are completely transparent to the State of Kuwait, which is responsible for protecting the interests of KIA’s beneficiaries – the citizens of Kuwait.

Senior representatives of KIA report periodically to the National Assembly’s various committees (including the Finance and Economic Committee; Budgetary and Closing Accounts Committee; and Public Funds Protection Committee) to discuss any issues raised by the State Audit Bureau.

KIA also provides regular and frequent reports to the following concerned parties:

• The Minister of Finance
• The Council of Ministers
• KIA’s Board of Directors
• The Chairman and the Executive Committee of KIA’s Board of Directors
• The Independent State Audit Bureau (whose on-site personnel also provides ongoing monitoring)

KIA has clear guidelines and a strategy in terms of asset allocation (both regional and asset class), that are regularly reviewed and updated.

FGF consists of investments outside Kuwait based on an approved Strategic Asset Allocation in various asset classes. KIA’s asset allocation process is based on World GDP contributions and Market Capitalizations. Exceptions to this rule are those countries where the weighting was skewed due to core holdings such as BP and Daimler. FGF aims to achieve a rate of return on its investment that, on a three-year rolling average, exceeds its composite benchmarks by:

• Designing and maintaining an asset allocation consistent with its mandated return and risk objectives.
• Selecting investments and investment managers with the ability to outperform the respective index for each asset class.
• Making tactical changes to the asset allocation without adversely altering the aggregate so as to benefit from emerging economic and market trends.

GRF, on the other hand, is the main treasurer for the Government and receives all revenues (including all oil revenues) from which all State budgetary expenditures are paid. The GRF also holds all government assets, including Kuwait’s participation in public enterprises as well as Kuwait’s participation in multilateral and international organizations. GRF focuses its investment in the MENA region. In addition to the goal of achieving a rate of return that exceeds its benchmark, GRF plays a pivotal role in the local economy as documented in its investment policy and guidelines and disclosed on the KIA website:

• KIA, through GRF, directs and manages the State’s contributions and shares in various major economic entities.
• GRF maintains an active involvement with economic and financial developments in Kuwait. It promotes and supports the institutionalization of the market through setting up funds and companies to promote and finance local business, and participates in the launching of local investments that have feasible economic returns.
• GRF helps develop the role of local financial companies by giving them the opportunity to manage some of its investments locally and abroad. The private sector’s regeneration will be maintained through privatization programs that KIA is committed to undertaking.
• GRF provides liquidity to the State's Treasury when needed.

KIA, as the world’s oldest SWF, has maintained its extremely high ethical, legal, and compliance standards over the past 66 years and will continue to do so in the future.  

Therefore, KIA does not nor will it ever seek or take advantage of privileged information or inappropriate influence by the government.

KIA does not seek to purchase majority or controlling interests in the companies in which it invests, other than shares in real estate investment entities and in investment holding companies that it establishes for particular transactions.

KIA exercises its voting rights in the manner that it believes will protect the financial interests of KIA, and to the extent KIA votes for the election of any Board members of a portfolio company, such Board members will be subject to all the obligations of Board members under applicable laws.

The Board, Executive Committee of the Board and Senior Management are provided comprehensive regular reports that asses KIA’s investment performance and risk exposures against preset targets in the strategy. The regular investment performance and risk reports are submitted and presented to the State of Kuwait as the beneficial owner of the funds. Also, the elected representatives of the National Assembly are regularly informed, at least annually, of KIA’s investments and investment performance.

The regular reports include quarterly basis performance and risk reports of the total FGF and GRF as well as various composites and mandates based on Global Investment Performance Standards (GIPS). Also, on a monthly basis, the RPU collates and ranks all of the external fund managers (including the KIO) based on the relative performance for both the FGF and the GRF.

KIA strongly advocates for the voluntary application of the Santiago Principles and will continue to review the implementation of the GAPP within the institution.