Press Release No. 09/44

Press Release No. 09/44
February 20, 2009

The International Monetary Fund (IMF) convened its second annual Roundtable of Sovereign Asset and Reserve Managers in Washington, DC on February 18-19, 2009. The Roundtable—which is designed to facilitate the exchange of ideas and experiences in sovereign asset and reserve management—was attended by high-level delegates from central banks, ministries of finance and sovereign asset managers from 32 countries, representatives from select international institutions, as well as private sector representatives.

The theme of the second Roundtable, which was organized by the IMF’s Monetary and Capital Markets Department, was to discuss policy and operational issues confronting reserves and sovereign assets managers in the current financial crisis and heightened market volatility.

The discussions covered the implications of the crisis on reserve adequacy and reserve management, the use of other sovereign foreign currency assets held by Sovereign Wealth Funds (SWFs) and their investment objectives, and the extent to which traditional approaches towards strategic asset allocation may be affected for reserve managers and SWFs . Emphasis was placed on the need for sound reserve management practices that are consistent with the macroeconomic conditions, and continuing close collaboration amongst central banks and governments. Strong institutional and risk management structures will continue to play a critical role going forward. The impact of market volatility on managing risk and wealth from oil and other non-renewable commodities was also discussed. Among the issues discussed were the implications of various asset allocation frameworks and hedging strategies, and the important role that SWFs can play in smoothing income over commodity price cycles.

A workshop was also held, jointly with the World Bank, on approaches for deriving optimal duration of reserves taking into account market volatility and balance sheet considerations. The workshop examined the scope for cost efficiencies by managing assets across the sovereign balance sheet, while taking interest rate risk into account.

Mr. John Lipsky, the IMF’s First Deputy Managing Director, who addressed the roundtable, noted the important changes to the global economic and financial landscape, and the challenges these presented for sovereign asset and reserve managers. He set out a number of important policy issues on which further technical engagement would be useful, including on the existing framework towards reserve adequacy, the scope for an asset-liability management approach towards mitigating sovereign balance sheet risks, the implication of liabilities on the asset allocation choice of pension reserve funds, and the scope for direct and indirect hedging against oil price risk for countries with commodity stabilization and savings funds.