Non-Traditional Assets for Reserve Portfolios

Central Banking and Monetary Policy November 30, 2025
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Introduction

As sovereign reserves swell and traditional fixed-income yields remain historically low or volatile, central banks and sovereign wealth funds are increasingly looking towards non-traditional assets to meet their long-term return and diversification objectives. This course is designed to provide a comprehensive, critical evaluation of assets such as infrastructure, real estate, private equity, and structured credit within the specific constraints and mandates of reserve management. It goes beyond the typical institutional investor perspective, focusing on issues unique to central banks, including liquidity, safety, legal mandates, and operational complexity. Participants will learn how to integrate these assets into a risk-averse framework, moving beyond the conventional focus on government bonds and high-grade corporate debt. We will analyze the risk-return profiles and the necessary governance structures required to manage these complex, illiquid investments effectively.

Objectives

Upon completion of this course, participants will be able to:

  • Identify and evaluate the rationale for including non-traditional assets in sovereign reserve portfolios.
  • Analyze the unique liquidity, safety, and legal constraints when allocating reserve assets to illiquid markets.
  • Assess the risk-return profile of key non-traditional asset classes, including infrastructure, private equity, and real estate.
  • Develop and implement appropriate due diligence processes for selecting and monitoring external asset managers in these complex areas.
  • Formulate a strategic asset allocation framework that successfully integrates traditional and non-traditional assets.
  • Understand the accounting, valuation, and governance challenges specific to illiquid and hard-to-value investments.
  • Examine the role of Environmental, Social, and Governance (ESG) factors in the selection of non-traditional assets.
  • Evaluate the use of structured credit and collateralized loan obligations (CLOs) as yield-enhancing instruments.
  • Design a robust operational risk framework to support the management of non-traditional assets.

Target Audience

  • Investment Managers and Portfolio Strategists at Central Banks and SWFs.
  • Heads of Investment and Asset Allocation Committees.
  • Risk Management and Compliance Officers overseeing alternative investments.
  • Treasury and Operations personnel managing custody and valuation.
  • Government Economists and Policy Advisors on National Asset Management.
  • Senior Executives responsible for reserve investment mandates.

Methodology

  • Case Studies on Successful Reserve Allocations to Non-Traditional Assets
  • Workshops on Due Diligence and Manager Selection
  • Interactive Modeling of Risk-Return Profiles for Private Assets
  • Group Discussions on Liquidity Management Strategies
  • Expert Lectures on Legal and Accounting Standards (IFRS/GAAP)
  • Individual Assignments on Portfolio Construction Scenarios

Personal Impact

  • Acquisition of specialized knowledge in complex, illiquid asset classes.
  • Enhanced capability to contribute to the strategic diversification of the reserve portfolio.
  • Improved negotiation and oversight skills for managing external fund managers.
  • Increased understanding of the intersection of policy, governance, and investment execution.
  • Development of a more comprehensive and sophisticated risk management perspective.
  • Expanded professional network with industry leaders in sovereign asset management.

Organizational Impact

  • Achievement of better risk-adjusted returns and potential diversification benefits for the reserves.
  • Modernization of the organization's strategic asset allocation framework.
  • Strengthening of the governance structure for managing non-traditional asset risks.
  • Improved capability to meet long-term capital preservation and return objectives.
  • Establishment of a more robust due diligence and external manager monitoring function.
  • Enhanced organizational ability to attract and retain specialized investment talent.

Course Outline

Unit 1: Rationale and Constraints for Non-Traditional Assets

Strategic Justification:
  • The low-yield environment and the search for enhanced risk-adjusted returns.
  • Limitations of traditional fixed income in meeting long-term capital preservation goals.
  • Understanding the legal and statutory limitations on reserve asset classes.
  • Defining the liquidity and safety buffers required for sovereign reserve portfolios.
  • The concept of "strategic" vs. "operational" reserves and their asset allocation differences.

Unit 2: Core Non-Traditional Asset Classes

Private Markets Deep Dive:
  • Analyzing the characteristics and investment structures of **Infrastructure** equity and debt.
  • Evaluating the long-term capital appreciation potential of **Private Equity** and venture capital.
  • The role of global **Real Estate** (core, core-plus) as an inflation hedge.
  • Assessing the risks and opportunities in **Private Credit** and direct lending.
  • Valuation methodologies for illiquid assets: discounted cash flow (DCF) vs. comparable transactions.

Unit 3: Complex Fixed Income and Credit

Advanced Debt Instruments:
  • Understanding **Structured Credit** products: ABS, MBS, and CLOs.
  • Analyzing credit risk and tranches in securitized debt markets.
  • Distressed debt and high-yield corporate bonds: suitability and risk control.
  • Integrating credit analysis with macroeconomic and systemic risk assessment.
  • The impact of regulatory changes (e.g., Basel III) on credit market liquidity.

Unit 4: Investment and Manager Selection

Implementation and Governance:
  • Developing the investment policy statement (IPS) for non-traditional assets.
  • Due diligence processes for selecting and monitoring external asset managers.
  • Negotiating fee structures, alignment of interests, and performance benchmarks.
  • In-house vs. outsourced management models for private markets.
  • Establishing key performance indicators (KPIs) and reporting standards.

Unit 5: Risk, Operations, and Governance

Oversight and Control:
  • Addressing operational complexities: custody, settlement, and capital calls.
  • Designing a robust risk management framework for illiquid investments.
  • Model risk and independent valuation processes for hard-to-value assets.
  • The fiduciary duty and governance structure for managing complex reserves.
  • Integrating ESG and sustainable investment criteria into the selection process.

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