Santiago Principles Self-Assessment

Kuwait Investment Authority

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  • Pillar 1: Legal
  • Pillar 2: Institutional
  • Pillar 3: Investment
Principle 1

1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

KIA traces its roots to the Kuwait Investment Board that was established in 1953, eight years before Kuwait’s Independence. In 1982, KIA was created by Law No. 47 as an autonomous governmental body responsible for the management of the assets of the country.

Law 47, Article 1 states: “An independent public authority shall be established with juridical status to be named the “Kuwait Investment Authority” and be attached to the Minister of Finance. The seat of the authority shall be in the State of Kuwait and it may set up offices outside the State of Kuwait.

 

KIA provides regular and frequent reports to the following concerned parties:

  • The Minister of Finance
  • The Council of Ministers
  • The National Assembly (Parliament)
  • KIA’s Board of Directors
  • The Chairman and the Executive Committee of KIA’s Board of Directors
  • The Independent State Audit Bureau (whose on-site personnel also provides an ongoing monitoring)

Senior representatives of KIA report periodically to the National Assembly’s various committees (including the Finance and Economic Committee; Budgetary and Closing Accounts Committee; and Public Funds Protection Committee) to discuss any issues raised by the State Audit Bureau.

Principle 6

6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

Board of Directors: KIA is an independent public authority managed by its Board of Directors. The Board has complete independence in its decision-making process.

By law, the Board members consists of:

  • The Minister of Finance (Chair) [Ex-officio]
  • The Minister of Oil [Ex-officio]
  • The Governor of the Central Bank of Kuwait [Ex-officio]
  • The Under Secretary of the Ministry of Finance [Ex-officio]
  • And five other Kuwaiti Nationals from the private sector appointed by Amiri Decree

At least three of the private sector appointees may not hold any other public office.

Managing Director and Executive Committee: The Board selects a Managing Director and his deputies, who may not (during their respective terms of office) undertake any work, with or without pay, for any employer other than KIA. The Board also appoints an Executive Committee that is composed of five Board members, of whom at least three are taken from private sector appointees to the Board and that is chaired by the Managing Director. The primary role of the executive committee is to assist the Board of Directors in setting the strategic goals and objectives of KIA.

Principle 18

18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

KIA’s investment policy and guidelines provide the framework around the investment objectives and the implementation process.

As clearly stated in the investment policy and guidelines, KIA is a commercial driven entity, which invests only in the projects which have clearly defined profitability targets. KIA does not invest in sectors where gaming and alcohol-related activities constitute the main source of business.

KIA has a long-term investment horizon and has the ability to bear risk and accommodate short-term volatility. KIA does not borrow for investment purposes as this is prohibited by Kuwait’s Constitution.

KIA’s policy regarding internal/external management is also clearly stated in the investment policy. Accordingly, KIA invests funds through external fund managers out of Kuwait. The Kuwait Investment Office in London, however, trades directly. Also, KIA has created a series of specialised standalone entities to invest in certain asset classes on its behalf. Some of these entities are as follows:

Fosterlane/Breadstreet for real estate investments in the USA. Based in Atlanta, USA.

  • St. Martins for real estate investments in the UK and globally. The company is based in London.
  • Wren House Infrastructure. Based in London.