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Transparency scores for Chile’s SWF

Ranked as the third best in the world, the country’s sovereign wealth fund has become a model for other Latin American countries to follow, including Colombia, Panama and Brazil.

Chile, which is relatively small, with a population of 17 million and a $282 billion economy, has three SWFs. As well as the $15 billion economic and social stabilization fund (ESSF), there is a $6.4 billion pension reserve fund (PRF) and a $4 billion education fund (EF).

The ESSF was 100% invested in overseas fixed-income assets, but recently shifted some into bank deposits as part of its strategy during the past two years to gradually adjust its asset allocation. Corporate bonds and variable-income investments have been added since 2011. This year the fund changed its asset composition again and now invests 15% in bank deposits, 19% in non-indexed sovereign bills, 55% in non-indexed sovereign bonds, 3.5% in inflation-indexed sovereign bonds and 7.5% in equities.

Chile’s SWF is ranked the third best for transparency and accountability in the world after Norway and New Zealand, according to a scorecard developed by Edwin Truman, a senior fellow at the Peterson Institute for International Economics, a Washington DC-based think-tank. The strengths of the Chilean SWF system make it well placed to serve as a model for many countries.

SWF scorecard for transparency and accountability
Funds first scored in 2007
Change in percentage points
Country Fund 2012 score 2009–12 2007–09 2007–12
Norway Government Pension Fund-Global 98 1 5 6
New Zealand Superannuation Fund (PR) 94 0 2 2
Chile Economic and Social Stabilization Fund 91 9 20 29
United States Alaska Permanent Fund 91 0 19 19
Australia Future Fund (PR) 89 9 12 21
Source: Peterson Institute for International Economics

Peru has already established a $4 billion fiscal stabilization fund; this has invested mostly in domestic assets, but the Peruvian government indicated in August that it might follow Chile’s example and invest more in foreign assets for higher yields.

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