The Santiago Principles Explained

Last updated: 24 May 2026

The Santiago Principles are a set of 24 voluntary standards for how sovereign wealth funds should be governed, disclosed and invested. Formally titled the Generally Accepted Principles and Practices, they were drafted by an IMF-convened group of sovereign funds and launched in October 2008. Their purpose is to demonstrate that sovereign wealth funds invest on a commercial rather than a political basis, and so to support the open, stable flow of capital across borders. They are now maintained by the International Forum of Sovereign Wealth Funds.

At a glance

Definition. The 24 Generally Accepted Principles and Practices for sovereign wealth funds, covering legal framework, governance, and investment and risk management.

Why it matters. They are the closest thing the sovereign fund world has to a common standard, and a practical lens on whether a fund is well governed. See sovereign wealth fund governance.

Who uses the term. Sovereign funds, the IMF, the IFSWF, recipient-country regulators, and analysts assessing fund credibility.

Related terms. GAPP, IFSWF, International Working Group of Sovereign Wealth Funds, operational independence, transparency.

Common misunderstanding. That they are binding rules. They are voluntary standards with no enforcement mechanism.

On this page

• What the Santiago Principles are
• Why they were created
• The three pillars
• Who maintains them
• Strengths and criticisms
• Why this matters for universal owners
• For investment committees
• Common misconceptions
• Frequently asked questions

What the Santiago Principles are

The Santiago Principles are 24 principles, usually written GAPP 1 through GAPP 24, that describe good practice for sovereign wealth funds. They are principles rather than rules: each sets out an expectation, and funds apply them in the way that suits their legal and institutional context. The framework is voluntary, and the standards are deliberately broad enough to fit funds with very different mandates, from commodity stabilisation to long-horizon saving.

The name comes from Santiago, Chile, where the drafting group held a key meeting. The formal title, the Generally Accepted Principles and Practices, signals the intent: to codify what the funds themselves regarded as accepted good practice rather than to impose external regulation.

Why they were created

The principles were a response to a specific anxiety. In the mid-2000s, sovereign wealth funds were growing quickly and making high-profile investments in banks and strategic companies in Europe and the United States. Recipient countries worried that state-owned investors might pursue political or strategic objectives rather than commercial returns, and there was a real risk of protectionist barriers being raised against them.

The funds had an interest in defusing that fear. By committing publicly to common standards of governance, transparency and commercial investment, they could reassure host governments and keep markets open to their capital. The IMF convened the International Working Group of Sovereign Wealth Funds, which drafted the principles and launched them on 11 October 2008, at the height of the global financial crisis.

The three pillars

The 24 principles are organised into three broad areas.

• Legal framework, objectives and coordination with macroeconomic policy. The fund's legal basis, objectives and relationship to the state's wider fiscal and monetary policy should be clear and publicly disclosed.
• Institutional framework and governance. There should be a clear division of roles between the owner, the governing body and management, with operational independence so that investment decisions are insulated from short-term political interference.
• Investment and risk management. The fund should invest on the basis of economic and financial risk and return, manage risk soundly, and exercise ownership rights in a way consistent with its investment policy.

Together these cover the questions an outside observer most wants answered: why the fund exists, who controls it, and on what basis it invests.

Who maintains them

The drafting body, the International Working Group, was a temporary group. After a 2009 meeting in Kuwait City the funds established a permanent, voluntary body to carry the work forward: the International Forum of Sovereign Wealth Funds, or IFSWF. Its members agree to uphold the Santiago Principles in all material respects and to share their implementation experience through self-assessments and case studies. Over time a large share of the world's sovereign fund assets has been represented within the IFSWF, which is why the principles function as a de facto industry standard even without legal force.

Strengths and criticisms

The principles' main strength is also their main weakness: they are voluntary. That flexibility allowed funds with very different systems to sign up, and it created a shared vocabulary for governance and disclosure where none existed. But because there is no enforcement and no single compliance scorecard, the depth of implementation varies widely, and a fund can claim adherence while disclosing little. More than fifteen years after they were written, some analysts have argued that the principles should be reformulated and strengthened, particularly on transparency and on newer issues such as climate and domestic strategic investment that the 2008 text did not anticipate.

Why this matters for universal owners

For the largest sovereign funds, which are also universal owners, the Santiago Principles are part of the social licence that lets state capital invest freely across borders. A fund that is visibly well governed and commercially motivated faces fewer political barriers and can act as a long-term, stabilising shareholder. The principles also matter to the wider ecosystem: counterparties, co-investors and the companies these funds own all rely, implicitly, on the assurance that the fund is acting as a commercial owner rather than an arm of foreign policy.

For investment committees

If you assess or partner with a sovereign wealth fund, the Santiago Principles offer a ready-made checklist. Is there a clear, published legal framework and objective? Is there genuine operational independence between the political owner and the investment organisation, with a transparent rule for withdrawals? Does the fund invest on economic grounds and disclose enough for an outsider to verify that? A fund that can answer these convincingly is usually better governed than its peers, regardless of its size on the league table.

Common misconceptions

"The Santiago Principles are law." They are voluntary standards with no enforcement mechanism.

"Signing up guarantees transparency." Adherence is self-assessed and implementation varies. Membership signals intent, not a uniform level of disclosure.

"They were imposed on the funds." They were drafted by the funds themselves, convened by the IMF, precisely so that the standards would reflect accepted practice rather than external regulation.

In plain English

The Santiago Principles are 24 voluntary good-practice standards that sovereign wealth funds agreed in 2008 to show the world they invest for commercial returns, not political ends. They cover how a fund is set up, how it is governed and how it invests and manages risk. They are not enforceable, and how seriously funds apply them differs, but they remain the main benchmark for judging whether a sovereign fund is well run.

Key takeaways

• The Santiago Principles are 24 voluntary standards, the Generally Accepted Principles and Practices, launched in October 2008.
• They were created to show sovereign funds invest commercially and to keep cross-border markets open to them.
• They cover legal framework, governance, and investment and risk management.
• They are maintained by the IFSWF, whose members commit to uphold them.
• They are voluntary and unenforced, so implementation varies, and some argue they need updating.

Frequently asked questions

What are the Santiago Principles? Twenty-four voluntary standards, formally the Generally Accepted Principles and Practices, setting out good practice for sovereign wealth funds in governance, transparency, accountability and investment. They aim to show that sovereign funds invest commercially and to support stable cross-border capital flows.

When and why were they created? They were launched on 11 October 2008 by the IMF-convened International Working Group, to address fears that state-owned funds might invest for political rather than commercial reasons and to head off protectionist barriers.

How many are there and what do they cover? Twenty-four, grouped into legal framework and objectives; institutional framework and governance; and investment and risk management.

Are they binding? No. They are voluntary. IFSWF members commit to apply them in all material respects, but there is no legal enforcement, so practice varies.

Related UAO research

Continue with what a sovereign wealth fund is, sovereign wealth fund governance, the world's largest sovereign wealth funds, reserve funds versus sovereign wealth funds, and strategic investment funds. For definitions, see the glossary of asset-owner terms.

Sources and further reading

• IFSWF, Santiago Principles — ifswf.org/santiago-principles
• Generally Accepted Principles and Practices, full text — ifswf.org
• Financial Stability Board, 2008 notice — fsb.org

Universal Asset Owners is a media and research platform. This explainer is for information only and is not investment advice.