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The Bank's Investment Policy provides the strategic and operational framework and defines the criteria and objectives for the management of reserves. The management of reserves is guided by the risk tolerance of the Bank and implemented through the Strategic Asset Allocation (SAA).
The SAA encapsulates the strategic benchmarks for the management of the reserves and specifies the target duration for the reserves. The investment objectives in order of priority are:
- Capital preservation
Safety of principal is the foremost investment objective. Investments shall be undertaken in a manner that seeks to preserve the capital of the overall portfolio over the investment horizon subject to the appropriate risk constraints;
- Liquidity
Investment management shall seek to ensure that adequate reserves are available to meet obligations as they fall due. In order to maintain sufficient liquidity, reserves shall be invested largely in securities with an active secondary market; and
- Returns
Subject to the capital preservation and liquidity constraints stated above, the reserves shall be invested with the objective of achieving a competitive market rate of return on the reserves consistent with the investment objectives and risk constraints.
Each of these objectives has specific liquidity requirements and investment horizons. Consequently the reserves are segregated operationally into sub-portfolios, known as tranches, for investment management purposes.