3 Considerations in Liquidity Management for Sovereign Funds

Sovereign investors and central bank reserve managers continually monitor price trends in exports, commodities and other macro-level inputs, as these factors can have a material impact on liquidity management strategies.

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On the sovereign wealth front, some of these institutional investors have a wide range of liabilities depending on government policy, applicable withdrawal legislation, funding sources and other factors. For example, Norway’s Government Pension Fund Global (GPFG) has a rule that 4% of the fund’s assets can be used for the country’s national budget per annum. In 2015, 179.6 billion NOK was transferred from the GPFG to the national budget. These scheduled cash calls and flows between official institutions, as well as anticipating unexpected events, supporting monetary policy, emerging funding, or urgent cash calls, are vital considerations when constructing an optimal liquidity profile. Another example is China’s central bank and the application of currency stability goals.

1. Reliable Institutions and Partners

Sovereign funds are engaging in greater scrutiny when selecting external managers for cash strategies and/or deposits. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]



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