Hong Kong Monetary Authority Investment Portfolio (HKMA)

What Is the Hong Kong Monetary Authority Investment Portfolio?

The Hong Kong Monetary Authority Investment Portfolio is an investment portfolio run by the Hong Kong Monetary Authority. The authority is the sovereign wealth fund of the government of the Hong Kong Special Administrative Region.

Understanding the Hong Kong Monetary Authority Investment Portfolio (HKMA)

The investment portfolio is only one of two in the Hong Kong Monetary Authority's Exchange Fund. The Exchange Fund likewise deals with a backing portfolio that upholds the operations of the Hong Kong Currency Board. Since the backing portfolio is invested exclusively in exceptionally liquid U.S. government securities, it is generally not considered part of the sovereign wealth fund. According to the Sovereign Wealth Fund Institute, the investment portfolio controlled $580.54 billion in assets starting around 2021 and is the fourth biggest sovereign wealth fund in the world.

The Hong Kong Monetary Authority

The Hong Kong Monetary Authority is the region's currency board and de facto central bank. It was laid out April 1, 1993, when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organization reports straightforwardly to the financial secretary.

Under the Exchange Fund Ordinance, the Hong Kong Monetary Authority's primary objective is to guarantee the stability of the region's currency and banking system. It is additionally responsible for advancing the effectiveness, integrity, and development of the financial system.

A majority of the Exchange Fund assets are managed inside. The backing fund is all managed inside, similar to a portion of the investment portfolio. In any case, the Exchange Fund utilizes outer managers for its equity portfolios and other specialized investments. The investment benchmark for the Exchange Fund consists of 75% bonds and 25% equities.

The Hong Kong Monetary Authority Investment Portfolio

The Hong Kong Monetary Authority investment portfolio is invested basically in the bond and equity markets of OECD (Organization for Economic Co-operation and Development) countries. The target allocation is 73% bonds and 27% equities. The target currency mix is 89% USD-and HKD-denominated assets to 11% other denomination assets.

The investment cycle of the Exchange Fund is underpinned by decisions on two types of asset allocation: strategic and tactical. The strategic asset allocation, reflected in the investment benchmark, addresses the long-term optimal asset allocation given the investment objectives of the Exchange Fund. Guided by the strategic allocation, assets are tactically allocated trying to accomplish an excess return over the benchmark. This means the genuine allocation is frequently not the same as the benchmark, or strategic, allocation.