Slide 9: Key characteristics The large size, the very long time horizon and a lack of immediate liquidity needs are three key characteristics of the Fund. Together, they form the backbone of the Fund’s investment strategy: •  First, the long-term horizon for the Fund implies a substantial capacity for taking on risk. We are able to act as a countercyclical investor. •  Second, the size facilitates a broader diversification of investments, moving towards a more global portfolio. In early summer 2007, after a thorough assessment by Fund’s owner, the equity share was to be raised from 40 to 60 per cent. From summer 2007 to 2009, the Fund bought EUR 160 billion worth of equities in international markets. For this sum, the Fund was able to buy 1.0 per cent of Europe’s listed equities – and 0.5 per cent of the equities listed on the other continents. The largest volume of transactions was carried out right through the financial crisis of 2008 and 2009. Indeed, there probably were times when the Fund was the only sizable buyer in the market, which probably helped to stabilise financial markets in this period. The long-term horizon also enables us to vary the risk level of the Fund, through rebalancing asset classes: If the equity share increases to more than 4 percentage points from the target weight of 60 per cent, we will sell equities and buy bonds. Conversely, we will sell bonds and buy equities when stock prices have fallen.
After more than 40 years in banking, many of them in Hong Kong, he is about to retire from the field. He is thus currently much in demand among his many friends within the financial community, who wish to fete him on his retirement. He is also receiving bookings in his new, risk-taking career as popular singer and entertainer – a field in which we wish him every success. I take this opportunity to pay tribute to David for his outstanding contributions to Hong Kong during difficult and challenging times, not just in the financial sphere, but also in the many community and charitable activities in which he is involved. Ladies and gentlemen, it is an honour to welcome Governor Jaime Caruana as speaker, and Mr David Eldon as discussant. I now have much pleasure in inviting Governor Caruana to deliver the seventh HKMA Distinguished Lecture. 2  BIS Review 9/2005