Both funds have different and specific objectives. On one hand, the purpose of the PRF is to complement the financing of fiscal obligations derived from the Universal Guaranteed Pension, the basic solidarity disability pension and the solidarity disability pension contribution.

On the other hand, the Economic and Social Stability Fund (ESSF) should supplement the tax revenues needed to finance authorized public spending in the event of fiscal deficits. The most important withdrawals are expected to be when “macro” tail risks occur that produce significant and infrequent fiscal deficits.

Both funds were created through the Fiscal Responsibility Law of 2006, which established the regulations and institutional framework for the accumulation, management and operation of the fiscal savings generated from the application of the structural balance rule.

The PRF received its first contribution of US$ 604.5 million on December 28, 2006. The ESSF was initially funded on March 6, 2007 with US$ 2.580 million, of which US$ 2.563 million came from the Copper Revenue Compensation Fund.

Based on the Fiscal Responsibility Law, the PRF must receive an annual contribution equivalent to the effective surplus with a ceiling of 0.5% of the previous year's Gross Domestic Product (GDP). Notwithstanding the above, the PRF may be funded from other Treasury’s assets or from the ESSF itself.

The ESSF could receive deposits each year where there is a fiscal surplus. It receives the resulting positive balance from the difference between the fiscal surplus and the contributions to the PRF. Also, the ESSF could receive contributions that come from sovereign debt, previews, or others authorized by law.

Each year, the PRF must receive a contribution equivalent to the effective surplus with a ceiling of 0.5% of the previous year's GDP. Yearly deposits into the fund should only be made until the fund’s size reaches 900 UF (inflation adjusted currency units). The law also includes the possibility of making extraordinary deposits from the ESSF.

The ESSF receives each year the remainder of the effective fiscal surplus after payment to the PRF. Repayments of public debt (including recognition bonds) and advanced payments to the ESSF during the previous year may, however, be subtracted from this contribution.

Payments to the PRF must be made during the first half of the year. Payments to the ESSF must be made before the end of the year. Notwithstanding the above, payments to the ESSF may be made in advance, anticipating future required contributions.

In accordance with decrees in force, the Minister of Finance can commend the management of the funds to the Central Bank of Chile, as well as External Managers, in compliance with investment guidelines established by the Ministry of Finance.

Currently, the Central Bank of Chile manages the part of the funds that is invested in sovereign fixed income and the rest of the resources are managed by private institutions.

Each asset class in which the funds are externally managed is entrusted to two different asset managers. This is done with a view to diversifying and being able to compare between them. In the case of U.S. Agency MBS, it is managed solely by BNP Paribas Asset Management, following the exit of Western Asset Management Company in September 2024. High Yield Bonds are managed by Black Rock Institutional Trust Company and Nomura Asset Management. The Corporate Bonds are managed by UBS Asset Management Inc. and BlackRock Institutional Trust Company. Finally, the equity portfolio is managed by UBS Asset Management Inc. and Mellon Investments Corporation.

The funds are invested according to different guidelines compatible with each fund specific objectives.

The ESSF investment policy considers a strategic asset composition of 81% in sovereign bills and bonds, 4% in inflation-linked sovereign bonds and 15% in U.S. Agency MBS. The portfolio has a currency composition of 69% in USD, 19% in EUR, 9% in JPY and 3% in CNY, expressed as a percentage of the total portfolio.

The composition of the PRF corresponds to 31% in equities, 34% in sovereign bonds and other related assets, 13% in corporate bonds, 8% in high yield bonds, 6% in U.S. Agency MBS, and 8% in inflation-linked sovereign bonds. It should be noted that unlike the ESSF, in which there is a fixed allocation to the currencies invested in, in the case of the PRF the currency composition is the result of the participation of each currency in the benchmark comparators.

The ESSF resources can be used at any time with a view to supplement the funds necessary to finance the public expenditure in case of fiscal deficit. In addition, it could be used for the amortization, regular or extraordinary, of public debt and also for funding the PRF when the Minister of Finance decides so.

In August 2024, Law N°21.683 modified the PRF withdrawal rule established in the Fiscal Responsibility Law. Thus, as from 2025, the amount of PRF resources that may be used annually will be determined on the basis of a withdrawal rule, defined by the Minister of Finance, which must meet two objectives: i) that the annual amount of withdrawals from the Reserve Fund is stable and predictable, and ii) that the value of the Fund and of the contributions is maintained in the long term, discounting inflation.

Withdrawals and contributions from the ESSF and the PRF are formalized by Ministry of finance decrees.

The Financial Committee (FC) is an external independent body. Its purpose is to advise the Minister of Finance at his request in all matters related to the investment of both the PRF and the ESSF.

Article 13 of the Fiscal Responsibility Law provides for the existence of a Financial Committee to advise the Minister of Finance when deciding how fiscal assets are invested.

The Financial Committee currently is composed of a team of professionals with extensive experience in the areas of finance and economics:

JUAN ANDRÉS FONTAINE TALAVERA
PRESIDENT

JENNIFER SOTO URRA
VICE-PRESIDENT

MARCO MORALES SEPÚLVEDA
COUNSELOR

MARCELA VALENZUELA BRAVO
COUNSELOR

NICOLÁS EYZAGUIRRE GUZMÁN
COUNSELOR

PABLO GARCÍA SILVA
COUNSELOR
 

Committee meetings are held regularly and constitute the primary opportunity for the Committee to discuss and analyze its recommendations to the Finance Minister. Before each session, the FC’s Technical Secretariat sends to the Committee’s Chair and Vice Chair a proposal of the main topics that will be discussed in the next meeting. The agenda is defined based on the feedback received. The Technical Secretariat is responsible for presenting each point of the agenda and third parties may be invited if a more specialized opinion is needed. The presentation and any background information is provided in advance of each meeting. The results and main positioning of the sovereign funds’ portfolios are reviewed in each session. In addition, other topics may be discussed such as possible modifications to the investment policies or implementation status of these policies. Also, the Committee meets with each of the asset managers responsible for investing the sovereign wealth funds at least once a year. Once the session is over, the President approves the press release that contains a summary of the meeting. This press release is published in the Ministry of Finance’s website.

Notwithstanding the above, Committee members remain in contact between meetings, and may exchange information and points of view by email. In addition, the Committee has invited experts and financial institutions in order for them to share their point of views and experience.

The decree law creating the Committee establishes a formal requirement for the committee to gather at least once every semester. However, in past years, the committee has been in session more than the minimum required, in order to be able to fully carry out its mission.

The International Finance Coordinator is the Financial Committee’s counterpart and liaison with the Finance Ministry, and also supervises the Sovereign Wealth Funds unit which operates as FC’s Technical Secretariat.

The Minister of Finance established the Sovereign Wealth Funds Unit by resolution in July, 2009. This Unit was set up to support him in the activities related to the investment and management of the funds. This Unit is responsible for supervising the asset managers of the different asset classes, acts as the Technical Secretariat of the Financial Committee, and prepare the monthly, quarterly and annual reports of the Sovereign Wealth funds that inform about the status of the funds to the National Congress and the general public.

The primary functions of the Financial Committee are to provide advice in relation to the long-term investment of the funds, such as defining strategic asset allocation, reviewing the inclusion of new investments, determining adequate benchmarks for the funds, defining allowable limits for active risk, and placing limitations on the types of possible investments; to make specific recommendations to the Finance Minister in relation to: investments, custody, structure and content of reports, bid processes and selection of external managers; and to assist in all areas related to the investment of the funds as requested by the Finance Minister.

The sovereign wealth funds are property of all Chileans. They are a national asset that provides stability in social spending and public investment. Because of this, management of the assets must meet the most rigorous standards for transparency. To guarantee public access to information on the sovereign wealth funds, the Finance Ministry has created this website exclusively for that purpose. This page contains monthly, quarterly and annual reports on the status of the funds, recommendations of the Financial Committee and its annual report, related legislation, and all updated, pertinent information regarding the funds.

Our funds are regarded as one of the most transparent sovereign wealth funds in the world given the high transparency standards that result from our information disclosure policy.  In particular, our funds rank at the highest level of transparency in the “Linaburg-Maduell” index since 2009. This index is prepared by the Sovereign Wealth Fund Institute. Likewise, the Chilean sovereign wealth funds are considered among the most transparent funds in the world by the Peterson Institute for International Economics. In its report entitled "Uneven Progress on Sovereign Wealth Fund Transparency and Accountability", published in October 2016, a new version of the "SWF Scoreboard" was included, which measures the transparency and accountability of the sovereign wealth funds analyzed. On that occasion, the ESSF and the PRF were ranked sixth and seventh out of a total of sixty sovereign wealth funds evaluated, with 91 and 88 points respectively.

The International Working Group (IWG) of the sovereign wealth funds was established to demonstrate to the countries which receive the investments, that these are carried out under strictly economic and financial criteria. That is why, during 2008, the IWG worked on the development of a voluntary set of Generally Accepted Principles and Practices (GAPP) that are based on the following guiding objectives:

Help to maintain the stability of the global financial system, the free movement of capital and investment; comply with all regulations and disclosure requirements in the countries in which they invest; invest on the basis of the economic and financial criteria and under risk and return considerations; and have a transparent corporate governance that provides adequate operational controls, risk management and accountability. The IWG reached an agreement on GAPP’s in Santiago of Chile, September 22th 2008 - called the "Santiago Principles" - and presented them to the International Monetary and Financial Committee (IMFC), the IMF's policy advisory body; in October 2008 in Washington DC.