HSBC Reserve Management Trends 2020
First published:
ISBN: 978 1 78272 985 3
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Appendix 1: Survey questionnaire
Appendix 1: Survey questionnaire
Executive summary
Trends in reserve management: 2020 survey results
Interview: Ma. Ramona Santiago
Scoring climate risks: which countries are the most resilient?
A hundred ways to skin a cat – or some practical thoughts on benchmark replication
Developing a sovereign ALM framework: a case study of Mauritius
Developing an integrated information system for reserve management: the experience of Peru
Appendix 1: Survey questionnaire
Appendix 2: Survey responses and comments
Appendix 3: Reserve statistics
CONFIDENTIALITY GUARANTEE
Answers given will be used to draft a report, which will be circulated to respondents, but neither names of respondents nor central banks will be mentioned in the report.
Survey of Official Reserve Management - February 2020
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Which in your view are the most significant risks facing reserve managers in 2020? (Please rank the following 1–5 with 1 being the most significant risk)
Geopolitics, notably China-US tensions ❏ Chinese economic downturn and contagion ❏ Continuing low-yield environment ❏ Overvalued asset markets ❏ Reduced market liquidity ❏ Please comment:
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The euro celebrated its 20th anniversary in 2019 and, according to the most recent data, accounts for 20% of allocated official sector reserves. How would you characterise its performance, versus its potential, as a reserve currency over the past two decades? (Please check one box)
Outperformance ❏ Underperformance ❏ Please comment:
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What in your view would make the biggest difference to the attractiveness of the euro as a reserve currency? (Please rank 1–5 with 1 having the most impact)
Higher, positive yields (interest rates) ❏ Deeper, more liquid markets ❏ Centralised “European” benchmark issuances ❏ Banking union ❏ Closer political union ❏ Please comment:
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Has the low-yield environment, notably in major reserve currencies, changed reserve management policy and practices at your central bank?
Yes ❏ No ❏ Please give details, in particular has it led to changes in:
Reduced Increased Asset classes invested in ❏ ❏ Markets/geographies invested in ❏ ❏ Currencies exposed to ❏ ❏ Minimum credit rating accepted ❏ ❏ Yes No Active/passive approach ❏ ❏ Use of external managers ❏ ❏ Use of collateral management ❏ ❏ Please comment:
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Have you added (removed) any asset class or currency to (from) your portfolio in the past 12–18 months?
Asset Currency Added ❏ ❏ Removed ❏ ❏ Please comment:
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In light of the continuing low-yield environment are you considering investing in less liquid investments in order to generate extra yield?
Yes ❏ No ❏ Please comment:
Are you able to purchase private placements?
Yes ❏ No ❏ If yes, please say if you are restricted to a certain percentage of the issue:
Please comment:
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Do you apply any form of tranching in the management of your central bank’s reserves?
Yes ❏ No ❏ If yes, please give details:
Tranche Name or function % of reserves 1 ❏ ❏ 2 ❏ ❏ 3 ❏ ❏ 4 ❏ ❏ 5 ❏ ❏ Has this changed in the past year?
Yes ❏ No ❏ Please comment:
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Does your central bank use a quantitative model for strategic asset allocation (SAA) in its reserve management?
Yes ❏ No ❏ Please comment:
If yes, is the model: (Please check one)
Built in house ❏ Built by a commercial provider ❏ Built by another third party ❏ If yes, does the model contain dynamic elements?
Yes ❏ No ❏ Please comment:
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How often does your central bank review its:
Monthly Quarterly Twice a year Annually Other Strategic asset allocation ❏ ❏ ❏ ❏ ❏ Strategic asset allocation ❏ ❏ ❏ ❏ ❏ model/process ❏ ❏ ❏ ❏ ❏ Please comment:
Have these changed in the past 2 years?
Strategic asset allocation Strategic asset allocation model/process Yes ❏ ❏ No ❏ ❏ Please comment:
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Which factors are most important to your central bank in counterparty selection: (Please rank 1–8 with 1 being most important)
Credit rating ❏ Existing relationship and performance ❏ Pricing ❏ Advisory/research ❏ Training and seminars ❏ Breath of markets covered ❏ Degree of specialisation in a particular market ❏ ESG credentials ❏ Please comment:
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Do you apply any new technologies, such as advanced learning algorithms or artificial intelligence, to portfolio construction or risk management?
Yes ❏ No ❏ Please comment:
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How many custodians do you use?
1 ❏ 2 ❏ 3 ❏ 4 ❏ 5+ ❏ Of these, how many are private sector/commercial organisations?
1 ❏ 2 ❏ 3 ❏ 4 ❏ 5 ❏ Other ❏ Has this changed in the past 2–3 years?
Yes ❏ No ❏ Please comment:
Which factors are most important to your central bank in custodian selection: (Please rank 1–7 with 1 being most important)
Pricing ❏ Accounting and reporting ❏ Track record with other central banks ❏ Technology ❏ Direct market access ❏ Securities lending proposition ❏ Safety of assets ❏ Please comment:
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Does your central bank engage in securities lending?
Yes ❏ No ❏ Please comment:
If yes, is this managed
In house ❏ By a third party provider ❏ Please comment:
Do you allow collateral in:
Yes No Cash ❏ ❏ Government bonds ❏ ❏ Investment grade bonds ❏ ❏ Equities ❏ ❏ Please comment:
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Do you make use of derivatives in your reserve management?
Yes ❏ No ❏ Please comment:
If yes, which derivatives do you use?
FX Interest rate Cross-currency Swaps ❏ ❏ ❏ FX Interest rate Equity Futures ❏ ❏ ❏ Options ❏ ❏ ❏ Other ❏ ❏ ❏ Please comment:
If you use derivatives please say for what purpose(s):
Trading/positioning ❏ Hedging ❏ Duration adjustment ❏ Overlay strategies ❏ Yield enhancements ❏ Other ❏ Please comment:
Has your use of derivatives changed in the past year?
Increased ❏ Decreased ❏ Please comment:
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Does your central bank incorporate an element of socially responsible investing (SRI) into reserve management?
Yes ❏ No, but considering it ❏ No, and not considering it ❏ If “no but considering it”, what do you see as major obstacles?
Challenge of integrating with central bank mandate ❏ Lack of clear definition of SRI ❏ Lack of/cost of obtaining data ❏ Concerns over liquidity/returns ❏ If “yes”, does this include:
ESG principles ❏ Specific climate focus ❏ Avoidance of potential conflicts of interest ❏ Other11 Here we follow the NGFS categories, which build on those of Eurosif and the PRI. See NGFS pg 12. (please specify) ❏ If “yes”, how do you integrate these into your investment process?
Part of SAA/Investment guidelines ❏ Standalone portfolio mandates ❏ Which strategies do you employ?
Negative screening ❏ Best in class ❏ ESG integration ❏ Impact investing ❏ Voting and engagement ❏ If “yes”, do you use a specialist external data supplier for specific data for this purpose?
Yes ❏ No ❏ Please comment:
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Which of the following best describes your view on signing the “Principles for Responsible Investment”? (Please check one)
Have signed ❏ Considering signing ❏ Not considering signing ❏ Have decided not to sign ❏ Please comment:
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Which best describes your attitude to the following asset classes? (Please check one box per asset class)
Investing in now Considering investing in now Would consider investing in 5–10 years No interest in investing Government bonds (above BBB) ❏ ❏ ❏ Government bonds (below BBB) ❏ ❏ ❏ Corporate bonds (investment grade) ❏ ❏ ❏ Corporate bonds (high yield) ❏ ❏ ❏ Emerging market bonds (above BBB) ❏ ❏ ❏ Emerging market bonds (below BBB) ❏ ❏ ❏ Inflation linked bonds ❏ ❏ ❏ Supranationals ❏ ❏ ❏ US Agency bonds ❏ ❏ ❏ Deposits (with central bank/official sector) ❏ ❏ ❏ Deposits (with commercial banks) ❏ ❏ ❏ ABS/MBS ❏ ❏ ❏ Covered bonds ❏ ❏ ❏ Gold ❏ ❏ ❏ Other commodities ❏ ❏ ❏ Equities ❏ ❏ ❏ Real estate ❏ ❏ ❏ Green bonds ❏ ❏ ❏ Hedge funds ❏ ❏ ❏ Infrastructure ❏ ❏ ❏ Catastrophe bonds ❏ ❏ ❏ Please comment:
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If your central bank is investing in equities, please say how you access this asset class: (Please check as many as relevant)
Portfolio of shares Futures ETF Direct ❏ ❏ External manager ❏ ❏ Please comment, in particular on whether your strategy is active or passive index tracking:
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Which view best describes your attitude to the following currencies? (please check one box per currency)
Investing in now Considering investing in now Would consider investing in 5–10 years No interest in investing Australian dollar ❏ ❏ ❏ ❏ Brazilian real ❏ ❏ ❏ ❏ Canadian dollar ❏ ❏ ❏ ❏ Chinese renminbi ❏ ❏ ❏ ❏ Czech koruna ❏ ❏ ❏ ❏ Danish krone ❏ ❏ ❏ ❏ Indian rupee ❏ ❏ ❏ ❏ Korean won ❏ ❏ ❏ ❏ Malaysian ringgit ❏ ❏ ❏ ❏ Mexican peso ❏ ❏ ❏ ❏ New Zealand dollar ❏ ❏ ❏ ❏ Norwegian krone ❏ ❏ ❏ ❏ Polish zloty ❏ ❏ ❏ ❏ Russian rouble ❏ ❏ ❏ ❏ Singapore dollar ❏ ❏ ❏ ❏ South African rand ❏ ❏ ❏ ❏ Swedish krona ❏ ❏ ❏ ❏ If investing in the renminbi, please give the amount of your portfolio invested: ❏%
Please comment:
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The IMF added the renminbi to the SDR in October 2016 with a weight of just below 11%. What percentage of global reserves do you think will be invested in the renminbi by:
2020 (end of) ❏ 2025 ❏ 2030 ❏ Please comment:
What percentage of your reserves do you think will be invested in this currency by:
2020 (end of) ❏ 2025 ❏ 2030 ❏ Please comment:
Supplementary Survey of Official Reserve Management – April 2020
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Which of the following have you found the most challenging during the curr ent Covid-19 crisis? (Please rank the following 1–5 with 1 being the most challenging:
Reduction in reserve levels ❏ Reduced market liquidity ❏ Credit deterioration ❏ Contingency, staffing and IT limitations ❏ Lack of globally co-ordinated policies ❏ Please comment:
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Do you envisage the Covid-19 crisis impacting reserve management in your central bank in the following areas over the coming 12 months?
Yes No Tactical asset allocation ❏ ❏ Strategic asset allocation ❏ ❏ View on reserve adequacy ❏ ❏ Risk appetite ❏ ❏ Risk framework and measures ❏ ❏ Introduction of new technology ❏ ❏ Introduction of ESG policies ❏ ❏ Please comment:
Survey ends. Thank you very much for your participation.
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