## GUIDELINES FOR INVESTING PRG, PRG-HIPC, AND CCR TRUST ASSETS

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**Canonical URL:** [GUIDELINES FOR INVESTING PRG, PRG-HIPC, AND CCR TRUST ASSETS](https://www.imf.org/-/media/files/publications/pp/pp090617guidelines-investing-prg-prg-hipc-ccr-assets.pdf)

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### General Provisions
- Adoption: Executive Board adopted the Guidelines on March 22, 2017.  
- Purpose: Establish investment objectives and policies to guide investment of Investment Assets of the PRG Trust, PRG-HIPC Trust, and CCR Trust (each a “Trust,” collectively the “Trusts”).  
- Investment Assets: Resources transferred from the Special Disbursement Account (“SDA”) and donor contributions to the respective Trust.  
- Managing Director responsibilities:
  - Implement the investment policies set out in these Guidelines.
  - Establish effective decision-making and oversight arrangements.
  - Adopt policies and procedures to seek to avoid actual or perceived conflicts of interest.
  - 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.
  - Provide annual reports to the Executive Board on investment activities; prepare ad hoc reports as warranted by market or other developments.
- External asset managers:
  - Investment Assets shall be managed by external managers, except the Managing Director may 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.
  - Managing Director shall select external asset managers of the highest professional standards, considering proven skills and track record.
- Custody and audit:
  - Establish adequate 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: Executive Board shall review these Guidelines and relevant conflict of interest policies at least every five years.

### Investment of Assets of the PRG Trust
- 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 the PRG Trust’s operational needs.
- Return target:
  - Generate a margin of 90 basis points above the six-month SDR rate, over a long-term investment horizon of at least 10 years.
- Target asset allocation (percent of the Investment Assets of the PRG Trust):
  - 45 percent in liquidity and short duration fixed-income components (specific split to be established by the Managing Director).
  - 30 percent in a component of corporate bonds.
  - 5 percent in a component of emerging market government bonds.
  - 20 percent in a component of publicly listed equities.
- Eligible investments and limits:
  - Liquidity component:
    - Limited to BIS deposits and central bank deposits, maximum maturity of up to one year, denominated in SDR or currencies included in the SDR basket.
  - Short duration fixed-income component:
    - Maximum average duration of three years.
    - Limited to:
      - i. debt obligations issued by national governments of members or their central banks denominated in SDR, currencies included in the SDR basket or non-SDR currencies selected pursuant to ex ante criteria determined by the Managing Director;
      - ii. debt obligations denominated in SDR or currencies included in the SDR basket issued by national agencies of the members whose currencies are in the SDR basket;
      - iii. debt obligations denominated in SDR or currencies included in the SDR basket issued by international financial institutions;
      - iv. obligations of the BIS, including without limitation deposits with the BIS and Medium-Term Instruments, denominated in SDR or currencies included in the SDR basket;
      - v. cash-equivalent investments with maturities of one year or less, denominated in SDR or currencies included in the SDR basket.
  - Corporate bond, emerging market government bond, and publicly listed equity components:
    - Managing Director shall establish parameters for specific assets eligible, and for duration and currency requirements for the corporate bond and emerging market government bond components.
    - On an exceptional basis, debt obligations issued by national governments of members or their central banks may be included in the corporate bond component.
  - Uninvested cash balances may be held temporarily in short-term instruments of the custodian(s).
- Investment management:
  - Liquidity component managed to meet operational needs of the PRG Trust.
  - Short duration fixed-income component managed actively, except BIS obligations and central bank deposits managed by the Managing Director.
  - Corporate bonds, emerging market government bonds, and equities shall be managed passively.
- Rebalancing:
  - Allocation shall be rebalanced to the target allocation at least annually after the phase-in to target asset allocation has been completed.
  - Managing Director shall establish maximum deviation bands around targets and corresponding rebalancing modalities.
- Minimum credit ratings (based on Standard & Poor’s long-term rating scale) at time of acquisition:
  - For corporate bonds: equivalent to at least BBB-.
  - For all other assets (except obligations of the BIS, central bank deposits, uninvested cash balances and equities): equivalent to at least BBB+.
  - If asset not directly rated, Managing Director may infer a credit rating consistent with market practice.
- Divestment:
  - Any eligible investment that ceases to meet the rating threshold or otherwise becomes ineligible after acquisition shall be divested within three months.
  - Exception: corporate bonds which fail to meet the rating threshold after acquisition may be divested or continued to be retained in accordance with modalities established by the Managing Director.
- Limits on investment activities:
  - Managing Director shall establish adequate safeguards against short selling and financial leverage.
  - Derivatives may be used for managing interest rate risk, currency hedging, or reducing costs in the context of portfolio balancing, benchmark replication and market access.
  - Currency composition of the liquidity, short duration fixed-income, and corporate bond components shall be aligned with, or hedged to, the SDR basket composition.
- Phase-in:
  - Portfolio shall be phased in to the target asset allocation over a period of three years, or up to four years in exceptional circumstances.

### Investment of Assets of the PRG-HIPC and CCR Trusts (Other Trust Assets)
- Investment objectives:
  - Invest to enhance returns subject to liquidity requirements of each Trust while limiting the risk of impairment of capital over an investment horizon of no more than three years.
- Structure:
  - Each Trust’s Investment Assets shall be invested in a liquidity component and an investment component; specific allocation determined by the Managing Director.
- Eligible investments:
  - Liquidity component:
    - Limited to BIS deposits and central bank deposits, maximum maturity of up to one year, denominated in SDR or currencies included in the SDR basket.
  - Investment component:
    - Limited to:
      - marketable obligations issued by a member or by a national official financial institution of a member denominated in SDR;
      - marketable obligations issued by a member or by a national official financial institution of a member whose currency is in the SDR basket and denominated in the currency of that member;
      - 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.
  - Investment component shall have a maximum average duration of three years.
- Investment management:
  - Liquidity component managed to meet operational needs of the respective Trust.
  - Investment component managed actively except for obligations of the BIS and central bank deposits managed by the Managing Director.
- Currency composition:
  - Currency composition of Investment Assets shall be rebalanced periodically to the SDR basket composition.
- 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 and uninvested cash balances, all assets must have a credit rating equivalent to at least A.
  - If asset not directly rated, Managing Director may infer a rating consistent with market practice.
- Divestment:
  - Any eligible investment that ceases to meet the rating threshold or otherwise becomes ineligible after acquisition shall be divested within three months.
- Limits on investment activities:
  - Managing Director shall establish adequate safeguards against short selling and financial leverage.
  - Derivatives prohibited except for forwards entered into for purposes of currency hedging with eligible issuers under the investment component rules.
- Use of currencies:
  - Investment not involving 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.

*Source: Guidelines for Investing PRG, PRG-HIPC, and CCR Trust Assets (International Monetary Fund, September 6, 2017).*

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_Source: https://www.imf.org/-/media/files/publications/pp/pp090617guidelines-investing-prg-prg-hipc-ccr-assets.pdf_