Being prepared for this type of risk will make it easier for us, as a society, to maintain the GPFG’s long-term investment strategy in a future downturn. Today, I am going to focus on some of the most turbulent periods in global equity markets – and on the lessons to be learned. 1/6  BIS central bankers' speeches  Owning shares in a large number of companies also exposes the GPFG to another type of risk. Answers and action may be demanded from shareholders in response to an incident in a company for reasons other than the incident’s effect on expected return. This type of exposure must also be managed, and the Bank’s work on responsible investment is important in this context. I will come back to this at the end of my speech. Financial risk Chart 3: High volatility driven by equities Chart 3 shows the real return on a hypothetical portfolio since 1900, invested worldwide and comprising 70 percent equities and 30 percent fixed income instruments. The return is measured in USD. As illustrated in the chart, the return has varied widely from one year to the next. The fixed income investments cushion the largest falls in value, but as shown in the chart, the return on the portfolio largely tracks equity market returns. With 70 percent of the GPFG allocated to equities, changes in the fund’s value ahead will be driven by equity market developments. Let us therefore focus on equity market risk.
Descending safely: Life after Libor - speech by Andrew Bailey i  Given at Alternative Reference Rates Committee – the SOFR symposium: The final year  Descending safely: Life after Libor ‐ speech by Andrew Bailey | Bank of England  Page 1  Published on 11 May 2021  Andrew Bailey talks about the move away from the use of Libor. He says using robust overnight risk-free rates will help to create a more resilient and transparent financial system. Speech Many thanks to Tom [Wipf] and the Alternative Reference Rates Committee (ARRC) for the invitation to join today’s SOFR symposium and to John [Williams] for his remarks. Introduction I have spoken on the transition from Libor each year since 2017 when we set out that despite the significant improvements in its governance and oversight, there were increasing challenges in anchoring the submissions on which those rates were based, to the greatest extent possible, in actual transactions. The underlying market that Libor seeks to measure – the market for unsecured wholesale term lending between banks – is no longer sufficiently active to support such a widely used reference rate. This has not changed in the last four years. At that time we highlighted the market disruption that could stem from an unplanned disappearance of Libor. Working together with the panel banks and the wider market, it was in the interest of all involved that we stabilised those rates until such times as transition arrangements were sufficiently well advanced.