The Sovereign Wealth Fund Response

The International Forum of Sovereign Wealth Funds (IFSWF) is a voluntary organisation of sovereign wealth funds. It is committed to working together and strengthening its activities through dialogue, research and self-assessment.

IFSWF was formed in 2009 by

a

group of state-owned

international investors from around the world. The Forum’s aim is to maintain an open and stable investment climate by setting and following a set of principles and practices, known as the Santiago Principles, which address issues around institutional governance and risk management. Today, helping members implement the Santiago Principles remains the foundation of the IFSWF’s activity.

IFSWF represents sovereign wealth funds from all corners of the globe, with a variety of mandates and at various stages of development. As a result, the Forum’s focus has evolved. In addition to encouraging ongoing commitment to the Santiago Principles, the Forum undertakes research, peer assistance and holds workshops and seminars to help members enhance their investment capabilities.

MEMBERS

Angola

Fundo Soberano de Angola

Australia

Future Fund

Azerbaijan

State Oil Fund of the Republic of Azerbaijan

Botswana

The Pula Fund

Canada

Alberta Heritage Savings
Trust Fund

Chile

Economic and Social Stabilization, and Pension Reserve Funds

China

Iran

National Development Fund of Iran

Ireland

Ireland Strategic Investment
Fund
China Investment Corporation

Italy

CDP Equity SpA

Kazakhstan

JSC Samruk-Kazyna

Kazakhstan

JSC National Investment
Corporation of the National Bank of Kazakhstan

Korea

Kuwait

Kuwait Investment Authority

Libya

Korea Investment Corporation

Libyan Investment Authority

Malaysia

Khazanah Nasional Berhad

Mexico

Budgetary Income Stabilization Fund

Morocco

Ithmar Capital

New Zealand

New Zealand
Superannuation Fund

Nigeria

Nigeria Sovereign Investment
Authority

Oman

State General Reserve Fund

Palestine

Palestine Investment Fund

Qatar

Russia

Qatar Investment Authority

Russian Direct Investment Fund

Rwanda

Agaciro Development Fund

Singapore

GIC Private Limited

Timor-Leste

Timor-Leste Petroleum Fund

Trinidad and Tabago

Heritage and Stabilization Fund

United Arab Emirates

Abu Dhabi Investment Authority

United States of America

Alaska Permanent Fund Corporation

FOREWORD FROM THE MAYOR OF AUCKLAND

On behalf of Auckland, it is my pleasure to welcome you to our city for the annual meeting of the International Forum of Sovereign Wealth Funds. It is exciting to host such a distinguished group of people to New Zealand.

Auckland is a diverse and rapidly growing city. It is the home of New Zealand’s ﬁnancial sector,

and it has long been the commercial heart of New Zealand. Auckland has 35 percent of New Zealand’s population, 32 percent of our production and more than half of this country’s growth. Auckland is New Zealand’s international city. By attracting and retaining the talent and enterprise that New Zealand needs to progress, it serves New Zealand as a whole.

I had the privilege of serving as an Auckland Member of Parliament

for thirty-ﬁve years, before being elected Mayor of Auckland in

October. The new council is committed to creating a welcoming environment for business, as well as making the city a great place to live.

Auckland has a stunning environment. It has a richness of cultural diversity. It offers the people who live in our city choice and opportunity.

However, as we grow we are faced with challenges. Everywhere you will see signs of major investment in infrastructure and commercial development, some of it

assisted by ﬁnance from international organisations such

as those you represent. A major city rail project is under way, urban redevelopment is expanding in the Viaduct Harbour and nearby Wynyard Quarter, new hotels and a major commercial centre are all under development in the area immediately around your conference venue.

Like all cities, we face challenges. Trafﬁc congestion and housing affordability are

major issues ahead. But the Auckland Council is determined to make our city a place where talent and enterprise want to live, a place that is a centre of learning and innovation, and a city that is an exciting place for people to live and to visit.

We want our city to become one of the best performing cities in the world.

OPEN FOR BUSINESS

Aotearoa New Zealand is a country shaped by the land and sea. Geologically, it is a young country,

known for its rugged and varied landscape. Surrounded by the Paciﬁc Ocean, New Zealand’s small

population and distance from the rest of the world has made its people resourceful, independent and friendly, with a relaxed way of life.

Auckland is one of the few cities on the planet to have two harbours on different oceans. The central urban area occupies a narrow isthmus between the Manukau Harbour on the Tasman Sea and the

Waitemata Harbour on the Pacific Ocean. Its landscape features beautiful beaches, more than fifty islands, fifty-three dormant volcanoes and hills of unique native forest.

The region was first settled by Māori at least eight hundred years ago, after long and difficult voyages across the Pacific. Its fertile land and abundant marine life attracted a number of tribes to the area, including Ngāti Whātua. Auckland was known as the Tāmaki Makaurau, or

the “land of a thousand lovers”. Auckland was established in 1841 as New Zealand’s capital - an honour it retained until 1865 - and it rapidly became the commercial heart of the country and centre of trade, a position it retains today.

With 1.5 million people, Auckland is the largest city in New Zealand. It is culturally diverse: 23 percent of its

population is Asian, 15 percent is Paciﬁc Island and 11 percent is Māori. Forty percent of its population

was born overseas. It has the largest Polynesian population of any city in the world, and the second most spoken language is Samoan.

Auckland ranks third out of 230 cities in the Mercer Quality of Living Survey and eighth out of 140 cities in the Economist Intelligence Unit global liveability study.

WELCOME FROM ADRIAN ORR, CHAIR

The Guardians of New Zealand Superannuation is delighted to host the 2016 meeting of the International Forum of Sovereign Wealth Funds.

We are proud of our country and pleased to have the opportunity to showcase our way of life, our economy and our business settings. I am also very proud of what the staff of the New Zealand Superannuation Fund has been able to achieve since the Fund started thirteen years ago, particularly given the challenging investment environment since the Global Financial Crisis.

As an organisation, we are committed to the International Forum of Sovereign Wealth Funds because we believe strongly in sharing ideas and learning from those tasked with achieving the same goals for their citizens: the well-being of current and future generations.

The Forum also has an important role in the global economy: promoting good governance, sound investment practice, transparency and accountability, as well as spreading understanding about sovereign wealth funds. Sovereign wealth funds have increased in number, scale and size over the past

decade. Their global signiﬁcance and economic impact has expanded

considerably. In many ways, sovereign wealth funds are similar to other longterm investors. We can ride out short-term volatility and invest in counter-cyclical ways. But as funds that are owned by governments, we have some distinguishing features. Our sovereign status makes us welcome investment partners around the world, bringing both responsibility and privilege.

These meetings are an important opportunity for us to reﬂect on these

issues and to equip ourselves towards becoming better investor - ones that are patient, resilient and accountable to those who place their trust in us. This meeting in Auckland will cover both the big issues - the low-growth economic context and the effect of climate policy on investment - as well as technical and operational issues.

The Guardians of New Zealand Superannuation thanks the commercial partners who have joined us to support the open conference sessions of this meeting. They are BlackRock, BNP Paribas, BNZ, Commonwealth Bank of Australia, Deloitte, Goldman Sachs Asset Management, Investec Asset Management, JP Morgan, KPMG, Morgan Stanley, Northern Trust, PwC, State Street and Westpac.

We hope you enjoy this opportunity to get to know Auckland and New Zealand.

Adrian Orr Chief Executive, Guardians of New Zealand Superannuation Chair, International Forum of Sovereign Wealth Funds

IFSWF BOARD MEMBERS

MAJED AL ROMAITHI

IFSWF Deputy Chair

Chairman of the Management Committee, Executive Director, Abu Dhabi Investment Authority

LI KEPING

IFSWF Board Member

Vice Chairman, President and

Chief Investment Ofﬁcer, China

Investment Corporation

DEANNA ONG

Company Secretary and Managing Director, GIC Private Limited

H.E. SHEIKH ABDULLA BIN MOHAMMED BIN

SAUD AL-THANI

Chief Executive Ofﬁcer, Qatar Investment Authority, Chairman and Chief Executive Ofﬁcer, Qatar Holding,

Member of the Supreme Council for Economic Affairs and Investment

VENUE AND TRANSPORT SUMMARY

DATE

TIME

LOCATION

ACTIVITY

INVITEES

Tuesday,

Members

and ofﬁcial

observers

Soﬁtel, Auckland

Viaduct

8th

All day

Technical workshops

November

Members

and ofﬁcial

observers

Soﬁtel, Auckland

Evening Morning
Workshop dinner
Viaduct

Wednesday, 9th November
Members

and ofﬁcial

observers
Viaduct Events Centre
IFSWF Annual Meeting
Afternoon (including lunch)
Open conference sessions
All delegates All delegates

Evening

Conference dinner

Thursday, 10th November
Open conference sessions

All day

All delegates

Soﬁtel

Coach transfers from hotels to the Auckland War Memorial
Hilton Hotel Mercure
6.10 pm Evening
Museum
Auckland War Memorial Museum

Gala dinner

All delegates

All delegates
Coach transfers from

museum to Soﬁtel,

Hilton Hotel and Mercure
Auckland War Memorial Museum

Friday, 11th November
Members and invited guests

9am to 4 pm

Waiheke Island

Networking excursion

INVESTING IN A TIME OF UNCERTAINTY:

THE SOVEREIGN WEALTH FUND RESPONSE

The current investment environment is unprecedented. Inﬂation and growth are low,

and central banks continue to ease monetary policies in conventional and novel ways. Bond yields are lower than ever before and asset class valuations are stretched by both historical and prospective measures. These trends are happening in a context of a potential structural decline in labour productivity, low wage growth and rising inequality. The resulting frustration and disparity is driving local and international politics. How this plays out has yet to be fully appreciated, but the consequences for societies and markets will be far reaching.

At the same time, climate change has become the

deﬁning social, economic and ecological challenge

of our time. The Paris Agreement on Climate Change shifted attention from debate on the science to concrete targets and actions. Proposed or agreed government actions mean that investment portfolios face new classes of risk that are poorly understood.

Sovereign wealth funds must contend

with each of these risks and ﬁnd new

investment opportunities to suit their status as long-term, state-owned, commercial investors.

TECHNICAL WORKSHOPS TUESDAY 8^THNOVEMBER

Venue: Soﬁtel

Members and observers

Participation in the technical workshops is open to all IFSWF members and observers. The workshops are intended to address topics in detail. At the start of each workshop, co-chairs will highlight the features of the problem, the decision variables and the solution options. It is then expected that members will share their experiences, contribute questions and comment as appropriate to a closed forum of peers.

WORKSHOP 1 - SOVEREIGN DEVELOPMENT FUNDS

TIME: 9:00am - 10:20am

Overview: Several IFSWF members have mandates that include economic development or strategic investment. Member funds will discuss investment models, paying particular attention to benchmarking and economic impact evaluation, governance for domestic investments and applying the Santiago Principles.

Discussion led by:

••
Shanthi Divakaran, World Bank Patrick Schena, The Fletcher School, Tufts University

With:

•

Eugene O’Callaghan, Ireland Strategic Investment Fund

10:20am - 10:45am

Coffee

WORKSHOP 2 - PERFORMANCE MEASUREMENT AND BENCHMARKS

TIME: 10:45am - 12:00pm

Overview: Investors commonly use performance measurement and benchmarks to measure the success of their strategies. What type of expected qualitative performance metrics should be set ahead of time? How do these differ in the short and long terms? What are the characteristics of a good benchmark for a long-term investor? How are benchmarks best used at the strategy level, the portfolio level, and at the level of monitoring individual asset manager performance? What fee and incentive structures are consistent with this approach for external and internal investment management?

•

Bernardo Bortolotti, Sovereign Investor Lab, Bocconi University

With:

••
Kyle Delaney, Bridgewater Associates Will Kinlaw, State Street

12:00pm - 1:30pm

Lunch and break (including Sub-Committee meetings from 12:30pm to 1:30pm)

WORKSHOP 3 - INFRASTRUCTURE SHOWCASE

TIME: 1:30pm - 2:45pm

Overview: Estimates of global infrastructure requirements are increasing each year. Governments at all levels are facing massive shortfalls in their ability to fund these requirements. Old, publicly funded,

pay-as-you-go infrastructure ﬁnancing has reached limits in the age of austerity. New privately funded or partnership models for infrastructure ﬁnance have faced many problems. At the same time,

huge sources of long-term capital are ‘locked out’ from participating in infrastructure investment. What explains the ‘infrastructure wedge’? Where are the most compelling opportunities - in which geographies and sectors? How have members approached infrastructure investments?

•

Richard Abadie, PwC

With:

•

Rajiv Sharma, Global Projects Center, Stanford University

2:45pm - 3:10pm

Coffee

WORKSHOP 4 - DIVESTMENT: A SPOTLIGHT ON TOBACCO

TIME: 3:10pm - 4:30pm

Overview: How do institutions think about divestment? How is divestment balanced against engagement and other approaches to responsible investment? What are the obligations of sovereign wealth funds under the United Nations Tobacco Treaty? Are SWFs meeting those obligations? What has the experience of SWFs been in tobacco-free investment?

Introduction:

Martin Skancke, Principles for Responsible Investment

•

Clare Payne, Tobacco Free Portfolios

With:

••
Bronwyn King, Tobacco Free Portfolios Mats Andersson, former Chief Executive AP4

WORKSHOP 5 - INSOURCING INVESTMENT ACTIVITY

TIME: 4:30pm - 5:30pm

Overview: A marked trend in recent years within large public institutional investors and SWFs has been the insourcing of investment activity. Why are SWFs bringing activity in-house? What has been the experience so far? What activities should and should not be insourced? What are the implications

for stafﬁng and other resource requirements? How should success be evaluated?

•

Daniel Adamson, Wafra Investment Advisory Group

5:30pm - 8:30pm

Drinks and Dinner - Workshop participants

WEDNESDAY 9^THNOVEMBER

ANNUAL MEETING

Members and observers

Venue: Viaduct Events Centre

8:00am onwards

Light breakfast available

ANNUAL MEETING

9:00am - 11:30am

At the eighth annual meeting of IFSWF, the Forum’s activities

and accounts for the past ﬁnancial year will be presented to

the members.

Sub-Committee presentations and case studies

(Includes coffee break and group photo)

11:30am - 12:00pm

KEYNOTE - GLENN STEVENS, AC

12:00pm - 1:00pm

Lunch

OPEN CONFERENCE SESSIONS

All delegates

Venue: Viaduct Events Centre

WELCOME ADDRESS - ADRIAN ORR

Chair, IFSWF, and CEO, New Zealand Superannuation Fund

1:00pm - 2:00pm

OPENING REMARKS - DUNCAN BONFIELD

Chief Executive, IFSWF

KEYNOTE - JOHN LIPSKY

Distinguished Scholar, Johns Hopkins University

PANEL 1 - INVESTMENT RISK AND RETURNS IN THE CURRENT ENVIRONMENT

2:00pm - 3:15pm

Overview: Today’s investment environment is characterised by low growth and low returns. In a world awash with liquidity, yields have slumped to all-time lows and valuations across many different asset classes appear stretched on many alternative measures. Commodity price declines have led

to reduced inﬂows to some SWFs and in some cases to higher withdrawals as governments seek to stabilise their ﬁscal positions. What does a good strategic response look like? What opportunities are

SWFs uniquely positioned to pursue? How should SWFs react to short-term market volatilities and be better positioned for structural, long-term macro themes?

Chair:

•

Uche Orji, Nigeria Sovereign Investment Authority

Panellists: