## Rules and Regulations for the Investment Account

## Source details

**Canonical URL:** [Rules and Regulations for the Investment Account](https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022007.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/pp/2022/english/ppea2022007.pdf.md)
- [Structured JSON version](/-/media/files/publications/pp/2022/english/ppea2022007.pdf.json)

---

### I. General Provisions
- Objective: provide a vehicle for investment of part of the Fund’s assets to generate income to meet the expenses of conducting the business of the Fund and to diversify and increase the Fund’s income over time.
- Sources of IA assets:
  - (a) currencies transferred from the General Resources Account (GRA) in accordance with Article XII, Section 6(f)(ii) of the Articles;
  - (b) placement of profits from the sale of pre-Second Amendment gold in accordance with Article V, Section 12(g) of the Articles, in amounts up to the total amount of the Fund’s general and special reserves at the time of any decision authorizing such transfers;
  - (c) transfer of profits from the sale of post-Second Amendment gold in accordance with Article V, Section 12(k) of the Articles;
  - (d) income from the IA investment that is not transferred to the General Resources Account to meet the expenses of the Fund (Article XII, Section 6(f)(iv)).
- Subaccounts: IA shall have a Fixed-Income Subaccount and an Endowment Subaccount; each has its own investment objective and management rules (Sections I and II, and I and III, respectively).
- Transfers between subaccounts: may be made with the approval of the Executive Board.
- Managing Director responsibilities:
  - implement investment policies set out in these Rules;
  - establish effective decision-making and oversight arrangements;
  - adopt measures, policies and procedures to avoid actual or perceived conflicts of interest;
  - adopt responsible investing principles to incorporate environmental, social, and governance (ESG) considerations into the investment process;
  - establish specific risk control measures and mechanisms to monitor observance by asset managers.
- Consultation and reporting:
  - Managing Director shall consult with the Executive Board regarding key conflict of interest policies and responsible investment principles (paragraph 7).
  - Managing Director shall provide annual reports to the Executive Board on IA investment activities; ad hoc reports as warranted (paragraph 8).
- External asset managers:
  - All IA assets shall be managed by external asset managers, except: (a) investments in obligations of the Bank for International Settlements (BIS) and central bank deposits; and (b) other assets on an interim basis following termination of an external asset manager (paragraph 9).
  - Selection: only external asset managers of the highest professional standards (paragraph 10).
- Custody: Managing Director shall establish adequate measures for safekeeping and custody (paragraph 11).
- Use of IA income: income may be invested, retained in the IA or used to meet the expenses of conducting the business of the Fund; Fund shall decide on use for each financial year (paragraph 12).
- Termination or reduction:
  - IA shall be terminated in event of liquidation of the Fund;
  - IA may be terminated, or the amount reduced, prior to liquidation by a 70 percent majority of total voting power;
  - Procedures in Article XII, Sections 6(f)(vii), (viii) and (ix) of the Articles apply to termination or reduction; decision shall specify subaccount to fund reduction (paragraph 13).
- Audit: IA assets shall be audited by the Fund’s external auditors and included in the Fund’s annual financial statements (paragraph 14).
- Review cycle: Executive Board expected to review these Rules and relevant conflict of interest policies every five years (paragraph 15).

### II. Fixed-Income Subaccount
- Investment objective: 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 (paragraph 16).
- Asset allocation and tranches:
  - Two tranches: shorter-duration Tranche 1 and longer-duration Tranche 2; maximum average duration of 3 years (paragraph 17(a)).
  - Tranche 1: managed actively; eligible asset classes are Group 1 and Group 2 (paragraph 17(b)).
  - Tranche 2: managed buy-and-hold; eligible asset classes are Group 1 (paragraph 17(c)).
  - Asset transfers between tranches and allocations of future inflows/outflows determined by the Managing Director (paragraph 17(d)).
- Eligible investments:
  - Group 1 asset classes limited to:
    - i. debt obligations issued by national governments of members or their central banks;
    - ii. debt obligations issued by national agencies of members;
    - iii. debt obligations issued by supranational institutions;
    - iv. obligations issued by the BIS, including without limitation deposits with the BIS and MTIs;
    - all denominated in SDR or the currencies included in the SDR basket (paragraph 18(a)).
  - Group 2 asset classes limited to:
    - i. 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 the Managing Director, by external managers, provided any currency selection is based on ex-ante criteria determined by the Managing Director;
    - ii. debt obligations denominated in SDR or the currencies included in the SDR basket, comprising: (A) securities issued by subnational governments; (B) mortgage-backed and other asset-backed securities; (C) covered bonds; and (D) short-dated unsecured corporate bonds;
    - iii. cash-equivalent investments with maturities of one year or less, denominated in SDR or the currencies included in the SDR basket (paragraph 18(b)).
  - Managing Director shall establish parameters for determining eligible investments within these categories (paragraph 18(c)).
- Limits:
  - Up to the maximum 40 percent of the total value of Fixed-Income Subaccount assets may be invested in Group 2 asset classes; breach requires prompt action to return within limit (paragraph 19).
  - May temporarily hold residual cash balances uninvested, or in short-term instruments sponsored by custodians or affiliates (paragraph 20).
- Minimum credit ratings (based on Standard & Poor’s long-term rating scale) at time of acquisition, except obligations of the BIS, central bank deposits, and cash balances in short-term instruments:
  - (a) BBB- for corporate bonds;
  - (b) BBB+ for remaining assets.
  - Managing Director may establish higher credit ratings for eligible individual asset classes (paragraph 21).
  - For unrated assets, Managing Director may infer a credit rating consistent with market practice (paragraph 22).
- Divestment: investments that cease to meet rating threshold or become otherwise ineligible shall be divested within three months, except corporate bonds which may be divested or retained according to modalities established by the Managing Director (paragraph 23).
- Limits on investment activities: Managing Director shall establish safeguards against short selling and financial leverage (paragraph 24).
- Currency hedging and derivatives:
  - Exchange rate risk for eligible investments denominated in non-SDR currencies shall be hedged back into SDR basket currencies with objective to preserve SDR basket composition; currency hedging may be used for SDR basket replication or achieving overall currency exposure in line with SDR basket (paragraph 25).
  - Derivatives may be used for managing interest rate risk, currency hedging, or reducing costs in portfolio balancing, benchmark replication, and market access (paragraph 26).

### III. Endowment Subaccount
- Investment objective: achieve a long-term real return target of 3 percent in U.S. dollar terms; real return calculated using Global External Deflator (GED), with U.S. CPI component adjusted to use actual U.S. CPI instead of projected U.S. CPI (paragraph 27).
- Strategic Asset Allocation (SAA) benchmark (paragraph 28):
  - 15 percent in global sovereign bonds;
  - 10 percent in U.S. Treasury Inflation-Protected Securities (US TIPS);
  - 15 percent in global corporate bonds;
  - 25 percent in developed market equities;
  - 10 percent in emerging market equities;
  - 5 percent in infrastructure debt;
  - 10 percent in infrastructure equities;
  - 10 percent in real estate investment trusts (REITs).
- Management approach:
  - Except for allocation to emerging market equities, which may be managed actively, all Endowment Subaccount assets shall be managed passively (paragraph 29).
  - Infrastructure debt investments may be made in private markets (paragraph 30).
  - Managing Director shall establish parameters for eligible investments and modalities for investment approaches not otherwise specified (paragraph 31).
  - Asset allocation benchmark does not apply to residual cash balances temporarily held uninvested or in short-term instruments sponsored by custodians or affiliates (paragraph 32).
- Rebalancing: assets shall be rebalanced at least annually to minimize deviation from the SAA benchmark, or more frequently in event of significant deviation (paragraph 33).
- Minimum credit ratings for fixed-income assets at time of acquisition (based on Standard & Poor’s long-term rating scale), except uninvested cash:
  - (a) BBB- for corporate bonds and infrastructure debt, provided Managing Director may establish modalities allowing limited investment in infrastructure debt rated below BBB- at time of acquisition;
  - (b) BBB+ for remaining assets (paragraph 34).
  - For unrated assets, Managing Director may infer a credit rating consistent with market practice (paragraph 35).
- Divestment: eligible investments that cease to meet rating threshold or become otherwise ineligible shall be divested within three months, except corporate bonds and infrastructure debt which may be divested or retained per modalities established by the Managing Director (paragraph 36).
- Limits on investment activities: Managing Director shall establish adequate safeguards against short selling and financial leverage (paragraph 37).
- Currency hedging and derivatives:
  - Exchange rate risk for fixed-income securities denominated in (a) developed market currencies vis-à-vis the U.S. dollar shall be hedged; and (b) emerging market currencies vis-à-vis the U.S. dollar may be hedged. Currency hedging is not permitted for other passively managed assets (paragraph 38).
  - Derivatives may be used for managing interest rate risk, currency hedging operations required or permitted under paragraph 38, or reducing costs in portfolio balancing, benchmark replication, and market access (paragraph 39).

*Rules and Regulations for the Investment Account (adopted January 23, 2013; amended January 12, 2022).*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022007.pdf_