What is the Timor-Leste Petroleum Fund

The Petroleum Fund of Timor-Leste, a nation in Southeast Asia, launched in August 2005 to contribute to the management of its petroleum resources for the benefit of its current and future generations. The nation's Banking and Payments Authority commenced fund operations in September 2005 with an opening balance of $205 million transferred to it by the government.

BREAKING DOWN Timor-Leste Petroleum Fund

The Petroleum Fund of Timor-Leste was established under the provisions of the Petroleum Fund Law of 2005. In 2011, the Petroleum Fund Law was amended to provides ways for Timor-Leste to sustainably manage its petroleum revenue. Among other provisions included are asset allocation and risk limits, the collection and management of receipts associated with petroleum wealth, state budget transfers, government accountability and oversight. The Petroleum Fund Law stipulates that all petroleum revenues are transferred to the fund and invested in financial assets abroad. The fund’s only outgoings are transfers back to the central government budget, pursuant to parliamentary approval.

From 2005 to June 2009 the Central Bank of Timor-Leste, formerly the Banking and Payments Authority served as the sole manager of` the fund, which was invested exclusively in U.S. government bonds. In June 2009, the Bank for International Settlements (BIS) became the fund’s first external manager, responsible for 20 percent of the total fund. It helped the fund invest in a broader range of government and supranational bonds. In October 2010, Schroder Investment Management was brought in to manage the fund’s global equity mandate, totaling approximately 4 percent of the fund’s total assets.

Timor-Leste Petroleum Fund Governance

Governance of the Timor-Leste Petroleum Fund focuses on transparency and disclosure of pertinent information that can foster public support for the sustainable management of the nation’s petroleum revenues. It also focuses on strategies to reduce the risk of poor governance and to continually assess the fund’s methodologies.

Ministry of Finance is responsible for overall management of the fund; it is the ministry’s responsibility to act on behalf of the people of Timor-Leste. Various reporting requirements outlined under the Petroleum Fund Law make the government accountable to parliament. Operational management is the responsibility of the Central Bank of Timor-Leste, which invests the fund’s capital according to guidelines established by the Ministry of Finance and mandates developed by the Investment Advisory Board. The Ministry of Finance must consult with the Investment Advisory Board before making decisions on any matter relating to the investment strategy or fund management.