IFSWF Santiago Principles

Santiago Principles Self-Assessment

APFC 2022

    Institutional Framework and Governance Structure.
    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.

    Alaska Statutes establish APFC as a separate statutory agency to manage and invest the assets of the Permanent Fund. The Board of Trustees is created in state law to manage APFC and oversee the Fund’s investments.

    APFC’s Board of Trustee has established By-Laws, Governance, Investment Policies and Resolutions to provide a sound management structure. 

    7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.

    The objectives of the Permanent Fund are defined in State law, specifically in Alaska Statutes 37.13. State law gives authority to the governor to appoint the members of APFC Board of Trustees, and provides requirements for membership.

    Oversight is also achieved through the requirement that two members of the Board be cabinet officials, and the other four members may not hold any other state or federal office, position or employment, either elective or appointive. The four public members of the board must have recognized competence and wide experience in finance, investments, or other business management-related fields.

    The Legislative Budget and Audit Committee is charged with oversight of the Permanent Fund, and may provide for an annual post audit and evaluation of the Fund’s investments and investment programs.

    In addition, the Corporation’s budget must be submitted to the Legislature through the Governor for approval. 

    8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.

    The purpose of APFC, according to State law, is to manage and invest the assets of the Permanent Fund. State law grants the APFC Board of Trustees the authority, among other things, to hire an executive director and any other necessary staff. Requirements for appointment to the Board are set out in State law, and Board members receive an honorarium for time spent on Board activities. The terms of office and conditions under which a Board member may be removed are clearly defined in State law. 

    9. The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.

    The APFC Board has the full authority to make investment decisions, and the investment goals for the Fund are made clear in State law. Alaska Statutes currently require the APFC Board to make investment decisions to maximize return while minimizing risk. The Board also has the authority, with some limitations, to make operational decisions regarding APFC and hire staff as needed. The Corporation’s budget must be approved by the Governor and Legislature. 

    10. The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.

    Alaska law requires that APFC produce an annual report no later than September 30 of each year for the fiscal year ended on June 30 of the same year. In addition, State law requires that the Permanent Fund’s financial statements be posted in four newspapers around the state.

    APFC is also subject to the provisions of the Alaska Public Records Act, which, with certain exceptions, makes the Corporation’s records publicly available upon request.

    While State law does not set specific performance guidelines, the APFC Board of Trustees sets benchmarks for the Permanent Fund and this performance is posted at www.apfc.org on a monthly and annual basis.

    11. An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.

    Alaska law requires that APFC produce an annual report no later than September 30 of each year for the fiscal year ended on June 30 of the same year. These financial statements are prepared under U.S.

    12. The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.

    Alaska law requires that the Permanent Fund’s financial statements be audited  on an annual basis by an external auditor. These audits are conducted in accordance with U.S. Generally Accepted Auditing Standards, and the auditor’s opinion is included in the annual report. 

    13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.

    The APFC Board and staff fall under the State of Alaska Executive Branch Ethics Act (Ethics Act). The Ethics Act, codified in State law, provides guidelines and regulations that promote ethical behavior by state employees and board members. Each new Board member and employee is briefed on the Ethics Act requirements as part of their orientation, and updates are provided as needed.

    14. Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.

    Alaska law outlines procedures for procuring and managing contracts with non-fiduciary contractors, and APFC complies with these laws within the State Procurement Code.

    Guidance for APFC’s procurement of fiduciary contractors is provided for in the Corporation’s Investment Policy. 

    15. SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.

    APFC invests in markets outside of the U.S. through external investment managers as well as APFC staff working as investment managers (who receive initial and as-needed training on applicable regulatory and disclosure requirements). Contracts require any external managers and the local custodians to be knowledgeable of, and in full compliance with, all applicable laws and regulations.

    16. The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.

    Alaska law clearly places the day-to-day management of the Permanent Fund, which is owned by the State, under the authority of the APFC Board of Trustees. Two of the Trustees are members of the Governor’s cabinet, and the Legislature retains the ability to influence Fund investments through statutory restrictions and approval of APFC’s budgets.

    APFC’s Board grants delegated authority for investment decision-making to APFC’s Executive Director and investment staff, which is subject to specific limits and is reviewed at regularly scheduled, quarterly Board meetings. 

    17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.

    The Permanent Fund’s target asset allocation is posted on www.apfc.org. In addition, the Fund’s benchmarks, actual allocation, and performance are posted on a monthly basis.

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    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.

    The APFC Investment Policy specifically allows for internal management of the Permanent Fund’s fixed income portfolio, selected Exchange-Traded Funds (ETFs), and selected private market investments. All other investments, by default, are managed by external managers. The Policy provides the process for conducting manager searches, monitoring manager performance and, when necessary, terminating managers.

    APFC’s Investment Policy and related Board resolutions are posted at www.apfc.org.


    19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

    19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.

    19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

    APFC’s Board of Trustees authorizes the staff makes investment decisions for the purpose of maximizing the risk-adjusted return. Sharpe Ratios are tracked and monitored as provided for in the Investment Policy. The Board and staff consider input regarding the current and projected market conditions provided by outside advisors and consultants and make decisions regarding asset classes and managers using objective, long-term financial data. 

    Alaska Statutes currently require the APFC Board to authorize investment decisions to maximize return while minimizing risk. State law does require that if two similar investments have the same risk and return profiles, but only one investment is in Alaska, the Board must select the Alaskan investment. 

    Alaska Statutes require that APFC Board apply the standards of the prudent investor rule in making investment decisions, specifically stating that the care applied should be that of “an institutional investor of ordinary prudence.”

    20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.

    The Alaska Permanent Fund is not owned by a sovereign government at the federal level, and as a result, does not have access to federally-privileged information that would give it an inappropriate

    21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.

    APFC’s investment manager agreements impose a proxy vote requirement. External managers vote these shares on behalf of the Fund, to maximize the Fund’s rate of return over the period the manager would likely hold the investment and promote the best financial interest of the Fund.

    22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.

    22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.

    22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.

    23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.

    APFC reports the performance of the Permanent Fund’s investments in relationship to clearly defined benchmarks on a monthly basis and on an annual basis. These reports are posted at www.apfc.org.

    24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.

    APFC, as a founding member of the Santiago Principles and a member of IFSWF, completes the self-assessment review of the implementation of the GAPP (Generally Accepted Principles and Practices).