As you can see, the vast majority of reserves are invested in bonds (issued by governments, public sector entities, foreign companies and supranational organisations) or placed with other central banks. This represents around 88% of investments, which further underlines the prime importance of security and liquidity in the management of our assets. The proportion of equities has varied over the years. Currently, they amount to 12%, the highest level since 2004, when investment in equities was first allowed following a change in the legal framework governing SNB investments. For bonds, the SNB uses a combination of major bond indices as benchmarks. The SNB’s portfolio can deviate from these indices for tactical reasons, but always within a clearly defined range. Using such deviations, the SNB’s portfolio managers can exploit market inefficiencies in order to improve returns. Moreover, this bond management method allows the SNB’s portfolio managers to retain a direct link with the main market players – a link which is essential for gathering first-hand market intelligence that might be of use for the SNB’s activities. At present, 96% of our bond investments are in assets rated AAA or AA, or are placed with other central banks and international organisations. BIS central bankers’ speeches  3  Since 2004, the SNB has also invested in foreign equities. This asset class allows us to increase the return on our foreign exchange reserves. Equities are managed entirely passively. Our asset managers ensure that our equities portfolio corresponds to that of the main international benchmarks.
Fritz Zurbrügg: Challenges posed by the growth in the SNB’s foreign exchange reserves Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Geneva, 8 November 2012. *  *  *  I would like to thank Pierre Monnin for his support in the preparation of this presentation. I am also indebted to Erich Gmür, Marco Huwiler, Peter Kuster and Sandro Streit for their insightful comments. Ladies and Gentlemen, It is my pleasure to welcome you here today at our traditional Money Market Event, which takes place every year here in Geneva. This occasion is particularly important for me, as it is the first time that I have the opportunity to meet you in such a setting. Since our previous Money Market Event last November, the situation on financial markets has continued to be a cause for concern to the Swiss National Bank (SNB). To mention but a few of the main factors: financial market uncertainty is still high, the global economic outlook has worsened considerably, and the situation on bond markets in peripheral Europe is still highly uncertain. Against this background, central banks have adopted a number of measures to address the challenges they face. These measures have increased the size of their balance sheets significantly. In Switzerland, the SNB has seen its foreign exchange reserves grow substantially. Managing these reserves is currently a major challenge, and has become the subject of much scrutiny by both the media and SNB watchers.