One development to emerge since the shock of the global financial crisis has been a drive by central banks to diversify away from US Treasuries and inject a degree of growth into their reserves management. The willingness of these traditional, insular organisations to evolve makes the modifications they are making truly historic.

One source referred to it as a tectonic shift. More than expanding the range of currencies in their portfolios, a growing minority now see a place for previously unthinkable asset classes such as equities and corporate credit. Bank of Korea has been at the forefront of this revolution, willing to absorb a lot of new thinking.

It now recruits staff with investment knowledge from outside the organization to improve its sophistication level, hiring the director of its reserve investment division and head of global credit portfolio team via public contest last year.

It has made comprehensive changes to its investment and asset allocation approach, now looking globally by
sector type, and it has restructured its risk management department. By the end of 2012, equities accounted for almost 6% of BoK’s $330 billion in foreign reserves.

It is also expanding into emerging markets and China’s onshore renminbi bond and equity markets. Against this it has halved the proportion of its investment into government debt, replacing with agency, corporate and asset-backed bonds. Sovereign wealth funds tend to grab all the headlines, but none have made changes as major as those at Bank of Korea.

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