Key messages

• A clear division of responsibilities—for example, between the legislature, president or prime minister, fund manager, operational manager and external managers—can help funds meet their objectives and prevent corruption.
• Putting day-to-day management in the hands of a capable and politically independent body with strong internal controls can help meet investment targets and prevent mismanagement. The choice of where to house this day-to-day operational manager—whether as a unit within the central bank, a unit in the ministry of finance, as a separate entity or at a custodial institution—is context-specific.
• Formal advisory bodies, drawn from the academic and policymaking communities, have made significant contributions to improving fund governance at the national level in countries like Chile, Ghana, Norway and Timor-Leste and at the subnational level in the United States.
• Codes of conduct and monitoring systems to prevent misconduct by the fund’s executive, staff and external managers are useful tools for preventing patronage, nepotism and corruption. In order to be effective, such mechanisms must be vigorously enforced.
• Good fund governance requires that appropriate organization, staffing policies and internal controls be complemented by transparency, independent oversight and the political will to follow the rules.