Report on IFAD s investment portfolio for the third quarter of 2007

Transcription

1 Document: EB 2007/92/R.43 Agend: 15()(ii) Dte: 6 Novemer 2007 Distriution: Pulic Originl: English E Report on IFAD s investment portfolio for the third qurter of 2007 Executive Bord Ninety-second Session Rome, Decemer 2007 For: Informtion

2 Note to Executive Bord Directors This document is sumitted for the informtion of the Executive Bord. To mke the est use of time ville t Executive Bord sessions, Directors re invited to contct the following focl point with ny technicl questions out this document efore the session: Munehiko Joy Tresurer telephone: e-mil: m.joy@ifd.org Queries regrding the disptch of documenttion for this session should e ddressed to: Deirdre McGrenr Governing Bodies Officer telephone: e-mil: d.mcgrenr@ifd.org

3 Report on IFAD s investment portfolio for the third qurter of 2007 I. Introduction 1. This report on IFAD s investment portfolio presents finl dt on the third qurter of It consists of six sections: sset lloction; investment income; rte of return nd performnce comprison; liquidity level; currency composition nd risk mesurement in IFAD s investment portfolio. The present report contins n nnex tht provides dditionl informtion on the second qurter of II. Asset lloction 2. Tle 1 shows the movements ffecting the investment portfolio s mjor sset clsses during the third qurter of 2007 nd compres the portfolio s sset lloction with the investment policy lloction. 3. During the period, there ws net outflow of US$64,811,000 equivlent from the opertionl csh portfolio, representing disursements for lons, grnts nd dministrtive expenses net of csh receipts nd encshment of Memer Sttes contriutions. 4. Short-term held-to-mturity investments mtured for nominl mount of US$300,000,000 equivlent during the period. The proceeds were reinvested in the diversified fixed-interest portfolio. An dditionl US$22,476,000 ws trnsferred from the short-term held-to-mturity portfolio into the opertionl csh portfolio to cover disursement needs. 5. Chnges in the portfolio s lloction rtios lso reflected positive net investment income of US$53,460,000 equivlent. 6. The net movements on foreign exchnge totlled US$59,666,000 equivlent. The United Sttes dollr deprecited ginst the euro, the British pound sterling nd the Jpnese yen, therey incresing the vlue of the portfolios including those currencies in United Sttes dollr terms. Tle 1 Movements in csh nd investments y portfolio third qurter 2007 (Thousnds of United Sttes dollrs equivlent) Opertionl csh Short-term held-tomturity Government onds Diversified fixedinterest Held-tomturity Infltionindexed onds Totl Opening lnce (30 June 2007) Net investment income/(loss) Trnsfers due to lloction ( ) (5 735) (1 196) - Trnsfers due to expenses (604) 9 (35) Net disursements (64 811) (64 811) Movements on exchnge (4) Closing lnce (30 Septemer 2007) Actul sset lloction 3.5% 4.4% 17.6% 42.7% 17.1% 14.7% 100.0% Investment policy sset lloction 5.5% % 25.5% 20.0% 100.0% Difference in sset lloction (2.0%) 4.4% 17.6% (6.3%) (8.4%) (5.3%) - Csh nd time deposits held with nks, redily ville for disursing lons, grnts nd dministrtive expenses. Short-term instruments (time deposits nd commercil ppers) mturing y Jnury

4 III. Investment income 7. Due to the turmoil in the credit sector, finncil mrkets experienced significnt turulence during the third qurter. However, IFAD's very conservtive nd highqulity investment portfolio ws not dversely impcted. On the contrry: due to investors flight to qulity, fixed-interest nd government ond mrkets in prticulr performed well. As consequence, IFAD s returns for the period were higher thn the previous qurter. 8. Tle 2 provides detils on net investment income for the third qurter of 2007 y portfolio. Overll net investment income during the period mounted to US$53,460,000 equivlent, contriuting to yer-to-dte income of US$89,431,000 equivlent. Tle 2 Net investment income y portfolio third qurter 2007 (Thousnds of United Sttes dollrs equivlent) Opertionl csh Government onds Diversified fixed-interest Infltionindexed onds Totl third qurter Short-term held-tomturity Held-tomturity Yer-todte 2007 Interest from fixed-interest investments nd nk ccounts Relized cpitl gins/(losses) (3 380) (5 557) Unrelized cpitl gins/(losses) (28) Amortiztion/ccretion - - (213) (213) (738) Income from securities lending Sutotl: gross investment income/(loss) Investment mnger fees (423) (152) (187) (762) (2 031) Custody fees/nk chrges (24) (3) (8) (23) (17) (12) (87) (237) Finncil dvisory nd other investment mngement fees - (6) (27) (62) (25) (22) (142) (555) Txes (1) (1) 2 Net investment income/(loss) A period s mortiztion mount represents portion of the difference etween the purchse price nd the finl redemption vlue of the held-to-mturity investments, in ccordnce with Interntionl Finncil Reporting Stndrds. IV. Rte of return nd performnce comprison 9. Performnce is mesured ginst pre-ssigned independent enchmrks indicting the return tht would e expected through pssive mngement of defined sectors of the mrket. The indexes used re the J.P. Morgn customized glol government onds index for government onds, the Lehmn Brothers United Sttes ggregte index for diversified fixed-interest onds nd the Brclys customized infltionlinked index for infltion-indexed onds. 10. Tle 3 compres the ctul net return on the overll portfolio to the enchmrk return. The portfolio returned 2.21 per cent during the third qurter of 2007, net of investment expenses nd excluding the impct of foreign exchnge movements. This represented n outperformnce of 5 sis points ginst the ggregte 2

5 enchmrk. On yer-to-dte sis the portfolio returned 3.79 percent, outperforming the enchmrk y 12 sis points. Tle 3 IFAD investment portfolio performnce compred with enchmrks third qurter nd yer-to-dte 2007 (Percentge in locl currency terms) Third qurter 2007 Yer-to-dte 2007 Rte of return Portfolio Portfolio Benchmrk Rte of return Out/(Under) performnce Portfolio Benchmrk Out/(Under) performnce Overll gross rte of return Less expenses (0.03) (0.03) - (0.11) (0.11) - Overll net rte of return The overll enchmrk ws sed on ctul portfolio weights t the end of ech month during the period. V. Liquidity level in IFAD s investment portfolio 11. IFAD s Liquidity Policy, pproved y the Executive Bord in Decemer 2006, sttes tht IFAD s liquidity ( highly liquid ssets ) 1 should remin ove the level of US$437 million for the Seventh Replenishment period. 12. Highly liquid ssets in IFAD s investment portfolio s t 30 Septemer 2007 mounted to US$1,226,000,000 equivlent, which comfortly clers the minimum liquidity requirement (tle 4). Tle 4 Liquidity level in IFAD s investment portfolio s t 30 Septemer 2007 (Millions of United Sttes dollrs equivlent) Actuls Percentge () Highly liquid ssets Short-term instruments Government securities () Firly liquid ssets Non-government securities (c) Prtilly liquid ssets Held-to-mturity Totl portfolio VI. Composition of the investment portfolio y currency 13. The mjority of IFAD s commitments re expressed in specil drwing rights (SDRs). Consequently, the Fund s overll ssets re mintined so s to ensure tht commitments for undisursed lons nd grnts denominted in SDRs re mtched, to the extent possile, y ssets denominted in the currencies nd rtios of the SDR vlution sket. Similrly, the Generl Reserve nd commitments for grnts denominted in United Sttes dollrs re mtched y ssets denominted in the sme currency. 1 Defined s eing convertile to csh quickly without significnt loss of vlue. 3

6 14. The Executive Bord of the Interntionl Monetry Fund reviews the SDR vlution sket every five yers to determine which currencies should e prt of the sket nd wht their percentge weight should e t the dte of reweighting of the sket. 15. The new units for ech of the four currencies composing the SDR vlution sket were determined on 30 Decemer 2005 in such wy tht the vlue of the SDR ws precisely US$ , in terms of oth the old units nd the new units, which ecme effective on 1 Jnury The pplicle units, together with their weights s t 1 Jnury 2006 nd 30 Septemer 2007, re shown in tle 5. Tle 5 Units nd weights pplicle to the SDR vlution sket 1 Jnury Septemer 2007 Currency Units Percentge weight Units Percentge weight US dollr Euro Yen Pound sterling Totl At 30 Septemer 2007, ssets in freely convertile currencies in the form of csh, investments, promissory notes nd contriutions receivle from Memer Sttes under the Fifth, Sixth nd Seventh Replenishments, net of provisions, mounted to US$2,967,120,000 equivlent, s summrized in tle 6 (compred with US$2,893,810,000 equivlent s t 30 June 2007). Tle 6 Currency composition of ssets in the form of csh, investments nd other receivles s t 30 Septemer 2007 (Thousnds of United Sttes dollrs equivlent) Currency Csh nd Contriutions receivle investments Promissory notes from Memer Sttes US dollr group Euro group c Yen Pound sterling Totl Includes only ssets in freely convertile currencies. Excluded ssets in non-convertile currencies mounted to US$715,000 equivlent for csh nd investments nd US$1,399,000 equivlent for promissory notes. Includes ssets in Austrlin, Cndin nd New Zelnd dollrs (AUD, CAD nd NZD). c Includes ssets in Swiss frncs (CHF), Swedish kronor (SEK) nd Dnish nd Norwegin kronor (DKK nd NOK). 17. The lignment of ssets y currency group ginst the SDR vlution sket s t 30 Septemer 2007 is shown in tle 7. The lnce of the commitments denominted in United Sttes dollrs t 30 Septemer 2007 mounted to US$174,795,000 equivlent, composed of the Generl Reserve (US$95,000,000) nd commitments for grnts denominted in United Sttes dollrs (US$79,795,000). Totl 4

7 Tle 7 Alignment of ssets per currency group with SDR vlution composition s t 30 Septemer 2007 (Thousnds of United Sttes dollrs equivlent) Currency Asset mount Less: commitments denominted in US dollrs Net sset mount Net sset mount SDR weights Difference US dollr group 940 ( ) Euro group (2.00) Yen Pound sterling Totl ( ) Includes ssets in AUD, CAD nd NZD. Includes ssets in CHF, SEK, DKK nd NOK. 18. As t 30 Septemer 2007, there ws n excess lloction in United Sttes dollr currency group holdings (+0.9 per cent) nd in the Jpnese yen (+1.1 per cent), nd shortfll in the euro currency group (-2.0 per cent). VII. Risk mesurement 19. With the exception of opertionl csh nd held-to-mturity investments, investment portfolio performnce is suject to mrket movements. Historiclly, different sset clsses hve shown different levels of voltility, often referred to s risk. Voltility is mesured in terms of stndrd devition of returns from their men. At 30 Septemer 2007, the stndrd devition of IFAD s investment portfolio ws 1.6 per cent, compred with 1.7 per cent for the investment policy. 20. Vlue-t-risk (VR) is the mesure of risk tht IFAD uses to estimte the mximum mount tht the portfolio could lose in vlue over three-month time horizon, with 95-per-cent confidence level. Tle 8 shows the VR of IFAD s investment portfolio nd policy s t 30 Septemer 2007 nd for previous periods. Tle 8 Vlue-t-risk (VR) (Forecst horizon of three months, confidence level of 95 per cent) Investment portfolio Investment policy Dte VR Amount (Thousnds of US dollrs) VR Amount (Thousnds of US dollrs) 30 Septemer June Mrch Decemer Septemer June Mrch Decemer

8 21. At 30 Septemer 2007, the investment portfolio s VR ws 1.4 per cent, higher thn t the previous qurter s end nd in line with the investment policy VR of 1.4 per cent. The VR increse is consequence of refunding the diversified fixed-income sset clss in July, in order to ring the portfolio lloctions closer to the policy lloction. 6

9 Annex EB 2007/92/R.43 Report on IFAD S investment portfolio for the second qurter of 2007 I. Introduction 1. This report on IFAD s investment portfolio presents dditionl informtion on the second qurter of It consists of two sections: composition of the investment portfolio y currency nd risk mesurement. II. Composition of the investment portfolio y currency 2. The mjority of IFAD s commitments re expressed in specil drwing rights (SDRs). Consequently, the Fund s overll ssets re mintined so s to ensure tht commitments for undisursed lons nd grnts denominted in SDRs re mtched, to the extent possile, y ssets denominted in the currencies nd rtios of the SDR vlution sket. Similrly, the Generl Reserve nd commitments for grnts denominted in United Sttes dollrs re mtched y ssets denominted in the sme currency. 3. The Executive Bord of the Interntionl Monetry Fund reviews the SDR vlution sket every five yers to determine which currencies should e prt of the sket nd wht their percentge weight should e t the dte of reweighting of the sket. 4. The new units for ech of the four currencies composing the SDR vlution sket were determined on 30 Decemer 2005 in such wy tht the vlue of the SDR ws precisely US$ , in terms of oth the old units nd the new units, which ecme effective on 1 Jnury The pplicle units, together with their weights s t 1 Jnury 2006 nd 30 June 2007, re shown in tle 1. Tle 1 Units nd weights pplicle to the SDR vlution sket 1 Jnury June 2007 Currency Units Percentge weight Units Percentge weight US dollr Euro Yen Pound sterling Totl At 30 June 2007, ssets in freely convertile currencies in the form of csh, investments, promissory notes nd contriutions receivle from Memer Sttes under the Fourth, Fifth, Sixth nd Seventh Replenishments, net of provisions, mounted to US$2,893,810,000 equivlent, s summrized in tle 2 (compred with US$2,919,153,000 equivlent s t 31 Mrch 2007). 7

10 Annex EB 2007/92/R.43 Tle 2 Currency composition of ssets in the form of csh, investments nd other receivles s t 30 June 2007 (Thousnds of United Sttes dollrs equivlent) Currency Csh nd investments Promissory notes Contriutions receivle from Memer Sttes Totl US dollr group Euro group c Yen Pound sterling Totl Includes only ssets in freely convertile currencies. Excluded ssets in non-convertile currencies mounted to US$719,000 equivlent for csh nd investments nd US$1,399,000 equivlent for promissory notes. Includes ssets in Austrlin, Cndin nd New Zelnd dollrs (AUD, CAD nd NZD). c Includes ssets in Swiss frncs (CHF), Swedish kronor (SEK) nd Dnish nd Norwegin kroner (DKK nd NOK). 6. The lignment of ssets y currency group ginst the SDR vlution sket s t 30 June 2007 is shown in tle 3. The lnce of the commitments denominted in United Sttes dollrs t 30 June 2007 mounted to US$174,012,000 equivlent, composed of the Generl Reserve (US$95,000,000) nd commitments for grnts denominted in United Sttes dollrs (US$79,012,000). Tle 3 Alignment of ssets per currency group with SDR vlution composition s t 30 June 2007 (Thousnds of United Sttes dollrs equivlent) Currency Asset mount Less: commitments denominted in US dollrs Net sset mount Net sset mount SDR weights Difference US dollr group ( ) Euro group (1.9) Yen Pound sterling (0.3) Totl ( ) Includes ssets in AUD, CAD nd NZD. Includes ssets in CHF, SEK, DKK nd NOK. 7. As t 30 June 2007, there ws n excess lloction in United Sttes dollr currency group holdings (+1.2 per cent) nd in the Jpnese yen (+1.0 per cent), which ws offset y shortfll in the euro currency group (-1.9 per cent) nd British pounds sterling (-0.3 per cent). III. Risk mesurement 8. With the exception of opertionl csh nd held-to-mturity investments, investment portfolio performnce is suject to mrket movements. Historiclly, different sset clsses hve shown different levels of voltility, often referred to s risk. Voltility is mesured in terms of stndrd devition of returns from their men. At 30 June 2007, the stndrd devition of IFAD s investment portfolio ws 1.0 per cent, compred with 1.7 per cent for the investment policy. 8

11 Annex EB 2007/92/R Vlue-t-risk (VR) is the mesure of risk tht IFAD uses to estimte the mximum mount tht the portfolio could lose in vlue over three-month time horizon, with 95-per-cent confidence level. Tle 4 shows the VR of IFAD s investment portfolio nd policy s t 30 June 2007 nd for previous periods. Tle 4 Vlue-t-risk (VR) (Forecst horizon of three-months, confidence level of 95 per cent) Investment portfolio Investment policy Dte VR Amount (Thousnds of US dollrs) VR Amount (Thousnds of US dollrs) 30 June Mrch Decemer Septemer June Mrch Decemer At 30 June 2007, the investment portfolio s VR ws 0.9 per cent, slightly higher thn t the previous qurter s end, ut well elow the investment policy VR of 1.4 per cent. The investment policy VR reflects the policy lloction (tle 1 of report on the third qurter). 9