Portfolio Segregation

The HKMA manages the Exchange Fund in distinct portfolios in order to meet the specific statutory purposes of the Exchange Fund. Broadly speaking, the Exchange Fund has two major portfolios – the Backing Portfolio and the Investment Portfolio.

  • The Backing Portfolio ensures that the Monetary Base is fully backed by high-quality, highly liquid US dollar-denominated assets, in addition to fulfilling the commitments of Convertibility Undertakings under the Linked Exchange Rate System. The ratio between the assets in the Backing Portfolio and the Monetary Base should be maintained between 105% and 112.5%. Assets will be injected into or transferred out from the backing portfolio when the lower or the upper trigger point is reached. This arrangement enables a higher investment return on excess assets while ensuring sufficient liquid assets in the Backing Portfolio.
  • The Investment Portfolio invests in the bond and equity markets (in both developed and emerging market economies) with a view to preserving the Exchange Fund's value and its long-term purchasing power.

With the aim of diversifying risks and enhancing medium-to-long term returns, the Exchange Fund started investing in private equity and overseas real estate under the Long-Term Growth Portfolio (LTGP) in 2009 in a prudent and incremental manner. The cap for the market value of investments under the LTGP is set at the aggregate of one-third of the accumulated surplus of the Exchange Fund and the portion of the Future Fund and placements by subsidiaries of the Exchange Fund linked to the LTGP.

The Strategic Portfolio was established in 2007 to hold shares in Hong Kong Exchanges and Clearing Limited acquired by the Government for the account of the Exchange Fund for strategic purposes. Because of the unique nature of this Portfolio, it is not included in the assessment of the investment performance of the Exchange Fund.

Portfolios of Exchange Fund

The sizes of major assets and liabilities of the Exchange Fund at end-2018 are:

The sizes of major assets and liabilities of the Exchange Fund at end-2018

Other Topics about Investment Management
Last revision date : 26 August 2019