Allocation weights are defined such that reserve managers can adjust the allocation dynamically (using FX swaps and cross currency basis swaps) to take advantage of favourable (funding) spreads across time. Performance is carefully measured, but it is not compared to a benchmark (given the complexity of benchmarking long-dated borrowing that is transacted on an irregular basis).
The second pool, un-hedged reserves, is invested in sovereign debt markets with deep liquidity and across currencies with high FX turnover. These reserves are funded by the Bank’s New Zealand dollar liabilities so are exposed to changes in New Zealand dollar FX rates against each of the six currencies.