## Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trusts’ Assets — ppea2022006

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**Canonical URL:** [Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trusts’ Assets — ppea2022006](https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022006.pdf)

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### General provisions and governance
- Investment Assets of the PRG Trust, RS Trust, PRG-HIPC Trust, and CCR Trust that are available for investment are subject to these Guidelines.
- Managing Director responsibilities:
  - Implement the investment policies set out in these Guidelines.
  - Establish effective decision-making and oversight arrangements.
  - Adopt measures, policies and procedures to avoid actual or perceived conflicts of interest.
  - Adopt responsible investing principles that incorporate environmental, social, and governance (ESG) considerations to support the investment objectives of the Trust Assets and to uphold the Fund’s reputation.
  - Establish specific risk control measures and mechanisms to monitor observance by asset managers.
  - Consult with the Executive Board regarding key conflicts of interest policies and arrangements and responsible investment principles and arrangements.
  - Provide annual reports to the Executive Board on the investment activities of the Trusts; prepare ad hoc reports as warranted.
- External asset managers:
  - Investment Assets shall be managed by external managers, except the Managing Director may directly manage: (a) investments in obligations of the Bank for International Settlements (BIS) and central bank deposits; and (b) other Investment Assets on an interim basis following termination of an external asset manager and pending transfer to another external asset manager.
  - External asset managers must be of the highest professional standards with suitable track records.
- Custody and audit:
  - Managing Director shall establish measures for safekeeping and custody of Investment Assets.
  - Investment Assets shall be audited by the Fund’s external auditors and included in the annual financial statements of the Fund.
- Review cycle:
  - The Executive Board shall review these Guidelines and the Fund’s relevant conflict of interest policies at least every five years.

### Investment of PRG Trust assets — objectives and targets
- Investment objectives:
  - (a) generate income to support the self-sustaining operations of the PRG Trust;
  - (b) provide security to lenders to the PRG Trust;
  - (c) provide adequate liquidity for operational needs.
- Return target:
  - Generate a margin of 90 basis points above the three-month SDR rate, over a long-term investment horizon of at least 10 years.
- Target asset allocation (as a percent of the Investment Assets of the PRG Trust):
  - 60 percent in liquidity and short duration fixed-income components (specific split to be established by the Managing Director).
  - 15 percent in a component of corporate bonds.
  - 5 percent in a component of emerging market government bonds.
  - 20 percent in a component of global equities.
- Eligible investments — liquidity:
  - Liquidity component limited to BIS deposits and central bank deposits, with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Eligible investments — short duration fixed-income (paragraph 16 structure):
  - Overall maximum average duration of 3 years.
  - Two tranches: Tranche 1 (shorter-duration, actively managed) and Tranche 2 (longer-duration, buy-and-hold).
  - Tranche 1 eligible asset classes: Group 1 and Group 2.
  - Tranche 2 eligible asset classes: Group 1 only.
  - Group 1 asset classes limited to:
    - debt obligations issued by national governments of members or their central banks;
    - debt obligations issued by national agencies of members;
    - debt obligations issued by supranational institutions;
    - obligations issued by the BIS, including deposits with the BIS and MTIs;
    - all denominated in SDR or the currencies included in the SDR basket.
  - Group 2 asset classes limited to:
    - debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization, by external managers (currency selection based on ex-ante criteria determined by the Managing Director);
    - debt obligations denominated in SDR or the currencies included in the SDR basket comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds;
    - cash-equivalent investments with maturities of one year or less, denominated in SDR or currencies included in the SDR basket.
  - Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach requires prompt action to restore limit.
- Corporate bond, emerging market government bond and global equity components:
  - Managing Director to establish parameters for eligible assets, duration and currency requirements.
  - On an exceptional basis, debt obligations issued by national governments of members or their central banks may be included in the corporate bond component.
- Residual cash:
  - May be held temporarily uninvested or in short-term instruments sponsored by the custodian(s) or an affiliate.
- Investment management style:
  - Liquidity component: managed to meet operational needs.
  - Short duration fixed-income: managed as per paragraph 16.
  - Corporate bonds, emerging market government bonds, global equities: managed passively, except emerging markets equities may be managed actively.
- Rebalancing:
  - Allocation shall be rebalanced at least annually to minimize deviation from allocation targets or more frequently if significant deviation occurs.
- Minimum credit ratings (based on Standard & Poor’s long-term rating scale at time of acquisition):
  - Except for obligations of the BIS, central bank deposits, uninvested cash balances and equities, all assets must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets.
  - Managing Director may establish higher credit ratings for eligible individual asset classes.
  - For assets not directly rated, Managing Director may infer a credit rating consistent with market practice.
- Divestment:
  - Investments that cease to meet rating thresholds or otherwise become ineligible after acquisition shall be divested within three months, except corporate bonds failing rating thresholds may be divested or retained per modalities established by the Managing Director.
- Limits on activities and derivatives:
  - Managing Director shall establish safeguards against short selling and financial leverage.
  - Derivatives may be used for managing interest rate risk, currency hedging, or reducing costs in portfolio balancing, benchmark replication and market access.
  - Currency composition of liquidity, short duration fixed-income, and corporate bond components shall be aligned with, or hedged to, the SDR basket composition.

### Investment of RS Trust assets — objectives and parameters
- Investment objectives:
  - (a) generate income to support RS Trust operations;
  - (b) provide security for RS Trust loans;
  - (c) provide adequate liquidity for withdrawal needs.
- Asset structure:
  - Invested in liquidity and short duration fixed-income components; specific allocation to be established by the Managing Director.
- Liquidity component:
  - Managed to meet RS Trust operational needs.
  - Limited to BIS deposits and central bank deposits with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Short duration fixed-income component:
  - Maximum average duration of 3 years.
  - Two tranches: Tranche 1 (actively managed) and Tranche 2 (buy-and-hold), with asset class eligibility mirroring the Group 1 and Group 2 definitions used for the PRG Trust.
  - Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach requires prompt action to restore limit.
- Investment objective for short duration fixed-income:
  - Achieve investment returns in SDR terms that exceed the 3-month SDR interest rate by a margin of 50 basis points over time while minimizing frequency and extent of negative returns and underperformance over an investment horizon of three to four years.
- Residual cash:
  - May be held temporarily uninvested or in short-term instruments sponsored by the custodian(s) or an affiliate.
- Minimum credit ratings:
  - Except for obligations of the BIS, central bank deposits, and uninvested cash balances, assets must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets (based on Standard & Poor’s long-term rating scale) at the time of acquisition.
  - Managing Director may establish higher credit ratings and infer ratings for unrated assets consistent with market practice.
- Divestment:
  - Investments that cease to meet rating thresholds or otherwise become ineligible shall be divested within three months, except corporate bonds failing rating thresholds may be divested or retained per modalities established by the Managing Director.
- Limits on activities and derivatives:
  - Managing Director shall establish safeguards against short selling and financial leverage.
  - Derivatives may be used for interest rate risk management, currency hedging, or cost reduction in portfolio balancing, benchmark replication and market access.
  - Currency composition of the liquidity and short duration fixed-income components shall be aligned with, or hedged to, the SDR basket composition.

### Investment of PRG-HIPC and CCR Trust assets — objectives and constraints
- Investment objectives:
  - Invest to enhance returns subject to liquidity requirements while limiting the risk of impairment of capital over an investment horizon of no more than three years.
- Asset components:
  - Each Trust to hold a liquidity component and an investment component; specific allocation determined by the Managing Director.
- Liquidity component:
  - Limited to BIS deposits and central bank deposits with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Investment component eligible instruments:
  - Marketable obligations issued by a member or by a national official financial institution of a member that are denominated in SDR;
  - Marketable obligations issued by a member or national official financial institution of a member whose currency is in the SDR basket and denominated in that member’s currency;
  - Marketable obligations issued by international financial organizations and denominated in SDR or in a currency in the SDR basket;
  - Deposits with a commercial bank, a national financial institution of a member, or an international financial institution denominated in SDR or in a currency in the SDR basket.
- Duration and management:
  - Investment component shall have a maximum average duration of three years.
  - Liquidity component managed to meet operational needs.
  - Investment component shall be managed actively except for BIS obligations and central bank deposits managed by the Managing Director.

### Currency composition (Section 2)
- The currency composition of the Investment Assets of the PRG-HIPC and CCR Trusts shall be rebalanced periodically to the SDR basket composition.

### Minimum Credit Ratings (Section 2)
- Except for obligations of the BIS, central bank deposits and uninvested cash balances, all assets in which the PRG-HIPC Trust and CCR Trust invest must have a credit rating equivalent to at least A (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition. (Paragraph 48)
- In cases where an asset is not directly rated, the Managing Director may determine whether a credit rating may be inferred for such asset in a manner that is consistent with market practice. (Paragraph 49)

### Divestment (Section 2)
- Any eligible investment that ceases to meet the rating threshold in paragraph 48 or otherwise becomes ineligible after acquisition shall be divested within three months. (Paragraph 50)

### Limits on Investment Activities (Section 2)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage. (Paragraph 51)
- Derivatives shall be prohibited except for forwards entered into for purposes of currency hedging with eligible issuers under paragraph 43. (Paragraph 52)

### Use of Currencies (Section 2)
- Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used.
- When an exchange of currencies is involved, investment shall be made with the consent of the issuers of such currencies. (Paragraph 53)

*International Monetary Fund — Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trusts’ Assets (Section 1).*

### Section 1

### Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trusts’ Assets — Section 1

### General provisions and governance
- Investment Assets: Resources of the PRG Trust, RS Trust, PRG-HIPC Trust, and CCR Trust that are available for investment are subject to these Guidelines.
- Managing Director responsibilities:
  - Implement the investment policies set out in these Guidelines.
  - Establish effective decision-making and oversight arrangements.
  - Adopt measures, policies and procedures to avoid actual or perceived conflicts of interest.
  - Adopt responsible investing principles that incorporate environmental, social, and governance (ESG) considerations to support the investment objectives of the Trust Assets and to uphold the Fund’s reputation.
  - Establish specific risk control measures and mechanisms to monitor observance by asset managers.
  - Consult with the Executive Board regarding key conflicts of interest policies and arrangements and responsible investment principles and arrangements.
  - Provide annual reports to the Executive Board on the investment activities of the Trusts; prepare ad hoc reports as warranted.
- External asset managers:
  - Investment Assets shall be managed by external managers, except the Managing Director may directly manage: (a) investments in obligations of the Bank for International Settlements (BIS) and central bank deposits; and (b) other Investment Assets on an interim basis following termination of an external asset manager and pending transfer to another external asset manager.
  - External asset managers must be of the highest professional standards with suitable track records.
- Custody and audit:
  - Managing Director shall establish measures for safekeeping and custody of Investment Assets.
  - Investment Assets shall be audited by the Fund’s external auditors and included in the annual financial statements of the Fund.
- Review cycle:
  - The Executive Board shall review these Guidelines and the Fund’s relevant conflict of interest policies at least every five years.

### Investment of PRG Trust assets — objectives and targets
- Investment objectives:
  - (a) generate income to support the self-sustaining operations of the PRG Trust; (b) provide security to lenders to the PRG Trust; (c) provide adequate liquidity for operational needs.
- Return target:
  - Generate a margin of 90 basis points above the three-month SDR rate, over a long-term investment horizon of at least 10 years.
- Target asset allocation (as a percent of the Investment Assets of the PRG Trust):
  - 60 percent in liquidity and short duration fixed-income components (specific split to be established by the Managing Director).
  - 15 percent in a component of corporate bonds.
  - 5 percent in a component of emerging market government bonds.
  - 20 percent in a component of global equities.
- Eligible investments — liquidity:
  - Liquidity component limited to BIS deposits and central bank deposits, with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Eligible investments — short duration fixed-income (paragraph 16 structure):
  - Overall maximum average duration of 3 years.
  - Two tranches: Tranche 1 (shorter-duration, actively managed) and Tranche 2 (longer-duration, buy-and-hold).
  - Tranche 1 eligible asset classes: Group 1 and Group 2 (see below).
  - Tranche 2 eligible asset classes: Group 1 only.
  - Group 1 asset classes limited to:
    - debt obligations issued by national governments of members or their central banks;
    - debt obligations issued by national agencies of members;
    - debt obligations issued by supranational institutions;
    - obligations issued by the BIS, including deposits with the BIS and MTIs;
    - all denominated in SDR or the currencies included in the SDR basket.
  - Group 2 asset classes limited to:
    - debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization, by external managers (currency selection based on ex-ante criteria determined by the Managing Director);
    - debt obligations denominated in SDR or the currencies included in the SDR basket comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds;
    - cash-equivalent investments with maturities of one year or less, denominated in SDR or currencies included in the SDR basket.
  - Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach requires prompt action to restore limit.
- Corporate bond, emerging market government bond and global equity components:
  - Managing Director to establish parameters for eligible assets, duration and currency requirements.
  - On an exceptional basis, debt obligations issued by national governments of members or their central banks may be included in the corporate bond component.
- Residual cash:
  - May be held temporarily uninvested or in short-term instruments sponsored by the custodian(s) or an affiliate.
- Investment management style:
  - Liquidity component: managed to meet operational needs.
  - Short duration fixed-income: managed as per paragraph 16.
  - Corporate bonds, emerging market government bonds, global equities: managed passively, except emerging markets equities may be managed actively.
- Rebalancing:
  - Allocation shall be rebalanced at least annually to minimize deviation from allocation targets or more frequently if significant deviation occurs.
- Minimum credit ratings (based on Standard & Poor’s long-term rating scale at time of acquisition):
  - Except for obligations of the BIS, central bank deposits, uninvested cash balances and equities, all assets must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets.
  - Managing Director may establish higher credit ratings for eligible individual asset classes.
  - For assets not directly rated, Managing Director may infer a credit rating consistent with market practice.
- Divestment:
  - Investments that cease to meet rating thresholds or otherwise become ineligible after acquisition shall be divested within three months, except corporate bonds failing rating thresholds may be divested or retained per modalities established by the Managing Director.
- Limits on activities and derivatives:
  - Managing Director shall establish safeguards against short selling and financial leverage.
  - Derivatives may be used for managing interest rate risk, currency hedging, or reducing costs in portfolio balancing, benchmark replication and market access.
  - Currency composition of liquidity, short duration fixed-income, and corporate bond components shall be aligned with, or hedged to, the SDR basket composition.

### Investment of RS Trust assets — objectives and parameters
- Investment objectives:
  - (a) generate income to support RS Trust operations; (b) provide security for RS Trust loans; (c) provide adequate liquidity for withdrawal needs.
- Asset structure:
  - Invested in liquidity and short duration fixed-income components; specific allocation to be established by the Managing Director.
- Liquidity component:
  - Managed to meet RS Trust operational needs.
  - Limited to BIS deposits and central bank deposits with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Short duration fixed-income component:
  - Maximum average duration of 3 years.
  - Two tranches: Tranche 1 (actively managed) and Tranche 2 (buy-and-hold), with asset class eligibility mirroring the Group 1 and Group 2 definitions used for the PRG Trust.
  - Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach requires prompt action to restore limit.
- Investment objective for short duration fixed-income:
  - Achieve investment returns in SDR terms that exceed the 3-month SDR interest rate by a margin of 50 basis points over time while minimizing frequency and extent of negative returns and underperformance over an investment horizon of three to four years.
- Residual cash:
  - May be held temporarily uninvested or in short-term instruments sponsored by the custodian(s) or an affiliate.
- Minimum credit ratings:
  - Except for obligations of the BIS, central bank deposits, and uninvested cash balances, assets must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets (based on Standard & Poor’s long-term rating scale) at the time of acquisition.
  - Managing Director may establish higher credit ratings and infer ratings for unrated assets consistent with market practice.
- Divestment:
  - Investments that cease to meet rating thresholds or otherwise become ineligible shall be divested within three months, except corporate bonds failing rating thresholds may be divested or retained per modalities established by the Managing Director.
- Limits on activities and derivatives:
  - Managing Director shall establish safeguards against short selling and financial leverage.
  - Derivatives may be used for interest rate risk management, currency hedging, or cost reduction in portfolio balancing, benchmark replication and market access.
  - Currency composition of the liquidity and short duration fixed-income components shall be aligned with, or hedged to, the SDR basket composition.

### Investment of PRG-HIPC and CCR Trust assets — objectives and constraints
- Investment objectives:
  - Invest to enhance returns subject to liquidity requirements while limiting the risk of impairment of capital over an investment horizon of no more than three years.
- Asset components:
  - Each Trust to hold a liquidity component and an investment component; specific allocation determined by the Managing Director.
- Liquidity component:
  - Limited to BIS deposits and central bank deposits with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Investment component eligible instruments:
  - Marketable obligations issued by a member or by a national official financial institution of a member that are denominated in SDR;
  - Marketable obligations issued by a member or national official financial institution of a member whose currency is in the SDR basket and denominated in that member’s currency;
  - Marketable obligations issued by international financial organizations and denominated in SDR or in a currency in the SDR basket;
  - Deposits with a commercial bank, a national financial institution of a member, or an international financial institution denominated in SDR or in a currency in the SDR basket.
- Duration and management:
  - Investment component shall have a maximum average duration of three years.
  - Liquidity component managed to meet operational needs.
  - Investment component shall be managed actively except for BIS obligations and central bank deposits managed by the Managing Director.

*International Monetary Fund — Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trusts’ Assets (Section 1).*

### Section 2

### ppea2022006 - Section 2

### Currency composition
- The currency composition of the Investment Assets of the PRG-HIPC and CCR Trusts shall be rebalanced periodically to the SDR basket composition.

### Minimum Credit Ratings
- Except for obligations of the BIS, central bank deposits and uninvested cash balances, all assets in which the PRG-HIPC Trust and CCR Trust invest must have a credit rating equivalent to at least A (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition. (Paragraph 48)
- In cases where an asset is not directly rated, the Managing Director may determine whether a credit rating may be inferred for such asset in a manner that is consistent with market practice. (Paragraph 49)

### Divestment
- Any eligible investment that ceases to meet the rating threshold in paragraph 48 or otherwise becomes ineligible after acquisition shall be divested within three months. (Paragraph 50)

### Limits on Investment Activities
- The Managing Director shall establish adequate safeguards against short selling and financial leverage. (Paragraph 51)
- Derivatives shall be prohibited except for forwards entered into for purposes of currency hedging with eligible issuers under paragraph 43. (Paragraph 52)

### Use of Currencies
- Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used.
- When an exchange of currencies is involved, investment shall be made with the consent of the issuers of such currencies. (Paragraph 53)

*Source: ppea2022006 - Section 2*

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_Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022006.pdf_