Exposure towards countercyclical assets reduces selling pressure in times of crisis, when these assets tend to appreciate. This is not just theory. Our experience of the last crisis showed that investing in countercyclical assets, such as long-term government bonds and foreign reserves, while maintaining a low exposure to credit risk, paid off in periods of financial distress and provided positive risk-adjusted returns.
As a final remark, it may be worth mentioning that the issue of the cyclicality of market investment is not just a concern for the Bank as a manager of its own funds: in our capacity as a macroprudential authority, we also see it as one of the main fronts on which financial stability action should advance.10 Financial markets naturally tend to be procyclical.