The Santiago Principles are 24 voluntary standards for the governance, investment and risk management of sovereign wealth funds. Agreed in 2008 and maintained by the International Forum of Sovereign Wealth Funds, they aim to show that such funds invest on commercial, not political, grounds.
When sovereign wealth funds began to grow rapidly in the mid-2000s, they triggered a quiet anxiety in the capitals of the countries they invested in. Here were enormous, state-owned investors — funded by oil revenues, trade surpluses and reserves — buying stakes in banks, companies and real estate across the Western world. Were they ordinary investors seeking returns, or instruments of foreign governments pursuing strategic ends? The Santiago Principles were the sovereign-fund community's answer to that question.
What are the Santiago Principles?
The Santiago Principles are a set of 24 voluntary standards governing how sovereign wealth funds should be structured, governed and run. Their formal name is the Generally Accepted Principles and Practices, usually shortened to GAPP. They cover three broad areas: the legal and institutional framework around a fund and its relationship with its government; the fund's governance and accountability arrangements; and its investment and risk-management practices.
The unifying purpose behind all 24 is to demonstrate that sovereign wealth funds invest on a commercial, economic basis — to earn financial returns — rather than to advance political or strategic objectives on behalf of their governments. By committing to clear governance, professional management and a degree of transparency, funds sought to defuse the protectionist reaction that was building against them and to keep markets open to their capital.
Who created them, and when?
The principles emerged from a specific moment of tension in 2008. The International Working Group of Sovereign Wealth Funds — a group of sovereign funds convened with the support of the International Monetary Fund — drafted the standards and presented them to the IMF's International Monetary and Financial Committee on 11 October 2008. The name comes from Santiago, Chile, associated with the group's work.
The timing was not coincidental. Sovereign funds had taken on a prominent role injecting capital into struggling Western financial institutions during the global financial crisis, which sharpened both their visibility and the political scrutiny they attracted. Agreeing a common code of conduct was a way to convert suspicion into acceptance.
To carry the work forward, the funds established a permanent body in 2009: the International Forum of Sovereign Wealth Funds, or IFSWF. The IFSWF maintains the principles, supports their implementation, and provides a venue for sovereign funds to share practice. Its membership spans many of the world's largest sovereign investors.
Are the Santiago Principles binding?
No — and this is essential to understanding both their value and their limits. The Santiago Principles are a voluntary, non-binding framework. Members of the IFSWF undertake to implement them on a voluntary basis, but there is no legal obligation, no enforcement mechanism, and no penalty for falling short. Disclosure and good governance are articulated and encouraged; nothing is mandated.
This voluntary character is a deliberate design choice. A binding treaty among sovereign states with very different political systems would have been almost impossible to negotiate and harder still to enforce. A voluntary code, by contrast, could be adopted quickly and could build credibility through peer pressure and reputation rather than law. The trade-off is that adherence varies. Some funds, such as Norway's Government Pension Fund Global, are models of transparency; others disclose far less, and the gap between the most and least transparent members remains wide.
How is adherence checked?
The principle that gives the framework its teeth — such as they are — is GAPP 24, the final principle, which calls for a regular process of reviewing and implementing the principles by or on behalf of each fund. Since 2016, GAPP 24 has underpinned a system of triennial self-assessments. IFSWF members evaluate their own adherence to each of the 24 principles, describe how they meet them in practice, and publish these self-assessments on the IFSWF website.
Self-assessment is exactly what its name implies: funds grade themselves, and there is no external auditor verifying the results. That is a genuine limitation. But the requirement to publish creates a meaningful form of accountability. A fund that claims adherence in public exposes itself to scrutiny from peers, researchers, journalists and the governments whose markets it invests in. Over time, the practice has institutionalised a habit of disclosure that did not previously exist, and the broad direction of travel among members has been toward greater, not lesser, transparency.
Why do the Santiago Principles matter to asset owners?
For the wider community of universal asset owners — pension funds, endowments, insurers and the consultants and managers who serve them — the Santiago Principles matter for several reasons beyond the sovereign-fund world itself.
First, they are a benchmark for governance. The 24 principles distil a great deal of hard-won thinking about how a large, long-horizon, publicly accountable investor should separate political ownership from commercial management, structure its board, manage risk and disclose its activities. Any institution that answers to a government, a public or a set of beneficiaries can read them as a governance checklist.
Second, they shape the environment in which cross-border capital flows. By reassuring host countries that sovereign investment is commercial, the principles have helped keep markets open to one of the largest and fastest-growing pools of capital in the world. That openness benefits every participant in global markets, not only the funds themselves.
Third, they are a reference point in debates about state capitalism and stewardship. As sovereign and other large public funds increasingly think of themselves as long-term owners of the whole economy — the essence of fiduciary capitalism — the questions the Santiago Principles raise about accountability, transparency and the boundary between commercial and political objectives only grow more relevant.
Are the Santiago Principles still fit for purpose?
This is now an open question within the industry. The principles were written in 2008 for a world in which sovereign wealth funds were largely passive, diversified investors in public markets. The sovereign funds of today are different animals: far larger, far more active, and increasingly engaged in direct deals, private markets, co-investments and strategic technology investments — including state-backed vehicles created expressly to invest in artificial intelligence and its infrastructure.
Some observers argue the framework has aged. The sovereign-fund data and advisory firm Global SWF, among others, has called for the principles to be reformulated to reflect the scale, geopolitical weight and strategic ambitions of modern sovereign capital. The concern is not that the original principles were wrong, but that they may no longer capture the most important governance and transparency questions raised by funds that now shape entire industries and bilateral relationships.
For now, the Santiago Principles remain the globally recognised standard for sovereign wealth fund conduct — voluntary, imperfect, but genuinely influential. They turned a moment of suspicion into a durable framework of self-governance, and they continue to set the baseline against which the world's largest state investors are judged. Whether that baseline is raised to match the funds' growing power is likely to be one of the defining governance debates of the coming decade.