Upon seeing the title of this post, all the SWF employees that read this blog collectively groaned and grimaced. Trust me, bringing up the issue of SWFs’ compliance with GAPP around employees of these funds is akin to putting your elbows on the dinner table while dining with the Queen. It’s just not polite.
After all, as the funds will quickly tell you, the Generally Accepted Principles and Practices, also known as the Santiago Principles, weren’t designed for these sorts of compliance assessments. It’s a voluntary code that is as much about “aspiration to implement” as it is “implementation”. Moreover, implementation of each principle is subject to applicable home country laws, which makes benchmarking inappropriate.
But, much to the chagrin of some funds, that doesn’t stop people from doing it. And, I have to admit, by creating “a framework of generally accepted principles and practices that properly reflect appropriate governance and accountability arrangements”, the IWG did make it relatively easy for analysts to evaluate implementation and compare performance across funds.
And that is exactly what Sven Behrendt has done. Timed to coincide with the International Forum of Sovereign Wealth Funds meeting in a few weeks time, Sven has released the second edition of his “Santiago Compliance Index” for 2011. And this year’s edition is definitely a provocative read. For example, it shows that some of the SWF signatories still have not managed to implement any of the Santiago Principles (i.e., zero percent compliance). That dubious honor is shared by Iran’s Oil Stabilization Fund and Equatorial Guinea’s Fund for Future Generations.
Feel free to use that factoid — or the topic of GAPP compliance more generally — next time you find yourself talking to a particularly boring SWF employee at a cocktail party. It’s the perfect conversation stopper.
Dear Dr. Monk,
First of all, congratulations for your outstanding blog and research. I have been following for a while now, and I find most of the articles very compelling. Sovereign Wealth Funds, as specific as they seem, mirror the nation economies and can be used to analyze worldwide trends.
Regarding the GAPP compliance, I wanted to ask whether you are aware of any SWF being currently audited? If I am not wrong, principle 12 of Santiago Principles asks for an audited annual report, and I have not seen any yet. Is it your vision that they will eventually come to Big 4s for such task, or will they try to keep it cheaper and somehow simpler with smaller auditors?
Thanks & Regards,
Diego
Hi Diego. Thanks for the comment. As per GAPP 12, I see this task falling on the state’s internal audit functions. For example, NZSF does this. See here. Cheers!