Page Content
Reserves are segregated operationally into sub-portfolios, known as tranches, for investment management purposes.
The Liquidity Tranche is funded to meet operational and possible short term payment obligations while the objective of the Buffer Tranche is for funds to be available to meet unexpected drawdowns and to replenish the Liquidity Tranche as and when necessary. The Investment Tranche is invested to enhance the returns on the reserves portfolio as well as to cover longer term contingencies consistent with the country’s overall macro-economic and financial stability.
The Investment Tranche is sub-divided into a portion that is managed by a number of external fund managers and a portion that is managed internally by staff of the Reserve Management Unit. The Bank employs the services of external fund managers in order to enhance its internal investment capabilities and to benefit from their skills, knowledge and technology transfer. By diversifying its reserves management activities, the Bank also limits the probability of negative returns.
To ensure that the Bank’s funds remain relatively safe during the external fund management tenure, a rigorous legal process is followed in the drafting of the Investment Management Agreements (IMAs) and the Investment Guidelines. These two documents set the parameters for the Bank’s, risk / return appetite.