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.
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.