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Chile’s Sovereign Wealth Funds Embody Transparency and Sound Investment Practices
Introduction
The Government of Chile has taken significant steps to ensure the transparency and soundness of its sovereign wealth funds (SWFs), adhering to international best practices. In this report, we will explore how Chile’s SWFs demonstrate transparency and sound investment practices.
Transparency in Financial Information
According to a report released by the Library of Congress, the SWFs’ investment policies and financial information are publicly disclosed, contributing to stability in international financial markets and enhancing trust in recipient countries. The size of the funds, their absolute returns, and the countries where assets are invested are reported monthly, while a quarterly performance report is published. The annual report contains additional financial information and is available on the funds’ website at www.hacienda.cl/fondos-soberanos/legislacion.html.
Investment Policies
The report evaluates the investment policies of the SWFs, emphasizing that they should be:
- Clear
- Consistent with defined objectives, risk tolerance, and investment strategy
- Based on sound portfolio management principles
The Chilean government has implemented a thorough process for selecting external managers, ensuring that they are subject to rigorous monitoring by the custodian bank, CBC, and the Finance Ministry.
Financial Risks
The report notes that the financial risks to which each fund is exposed are determined by its investment policy, primarily depending on its strategic portfolios and benchmarks. The funds’ operational management is mainly in the hands of the CBC and supervised by the custodian bank and the Finance Ministry.
Transparency in Investment Decisions
The report highlights the importance of transparency in investment decisions, emphasizing that they should aim to:
- Maximize risk-adjusted financial returns in a manner consistent with the investment policy
- Be based on economic and financial grounds
The funds’ operational management is delegated to the CBC and external managers, which implement investment decisions autonomously based only on economic and financial grounds.
Conclusion
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Chile’s SWFs embody transparency and sound investment practices, adhering to international best practices and contributing to stability in international financial markets. For more information, please visit www.hacienda.cl/fondos-soberanos/legislacion.html.