Central banks take on balance sheet risks as a result of their investment activities (as in holding foreign reserves), their monetary policy operations, and from time to time as providers of lender of last resort credit to their counterparts. As investors, central banks have traditionally been conservative.
This means that when faced with trade-offs between risk and return, central banks have traditionally tended to favour assets with very low credit risk even if the expected returns from such investments have been modest. Traditionally, central banks have also preferred very liquid, short-term investments. These choices have been clearly visible in the way foreign exchange reserves are usually invested.