Commodity funds play an important role in transforming depleting natural resources into permanent income and stabilizing fiscal budgets over commodity cycles.
The World Bank Treasury has helped equip governments with the tools to assess the impact of different spending rules and asset allocations relative to a country’s spending and saving objectives. These tools allow our partners to simulate alternative spending and savings rules over varying commodity price regimes and investment cycles to assess their robustness in meeting policy objectives.
The World Bank Treasury has also helped governments in setting up the governance and investment management infrastructure to manage a global multi- asset class portfolio using a combination of both internal and external portfolio managers. Most importantly, this work typically includes building internal capacity to model the appropriate strategic asset allocation for the funds, giving the government strong ownership of this important policy decision.
The team dedicated to the engagement would comprise Treasury practitioners, particularly from the team managing the World Bank’s Pension and Endowment funds, which are invested across all major public and private markets. Its work focuses on building internal capacity to anchor any use of external consultants and asset managers through enhancements in the areas described below.
Design of fund rules with respect to stress-testing under various asset and commodity price scenarios
Assist policy makers in formulating an investment strategy to meet policy objectives with respect to current and future spending needs.
Develop customized models to enable the member to conduct scenario analysis for varying commodity price regimes and capital market returns.
Assess risk of not meeting objectives and develop risk mitigation strategies using dynamic rebalancing, financial derivatives or “circuit-breaker rules”.
Developing governance and strategic asset allocation capabilities
Assist fund trustees in setting up a governance structure with clear accountabilities for formulating policy objectives, investment policy, strategic asset allocation and management of assets.
Expanding internal asset management capacity
Assist in developing in-house capacity to formulate strategic asset allocation proposals for policymakers across broad asset classes.
Information technology
Assist fund managers in expanding asset management skills across a range of asset classes, through external manager programs and/or building internal capacity to manage broad range of fixed income instruments.
Engaging external partners in the private sector
Diagnostic and assistance in building a robust information technology platform for portfolio and risk management requirements
Legal support
Assist in engaging external service providers, including asset managers, global custodian and systems providers.
Developing a public communication strategy
Provide legal training to government lawyers on understanding characteristics of relevant industry standard agreements and specific issues relating to sovereign immunities.
Assist in developing a communication strategy to address frequently asked questions by official stakeholders, the public and the press regarding investment strategy and risks.
Assist in developing transparent reporting standards.