Investment Policy
This section describes the main elements of the Economic and Social Stabilization Fund (ESSF)’s investment policy.
The investment guidelines that specify the objectives, limits, and risk parameters, determined by the Ministry, with support from the Financial Committee, are made available to the public below. These guidelines are used by the Central Bank of Chile and by the external managers of the fund.
Investment objectives: as long as the size of the fund is less than 5% of GDP, its main objective is to maximize its market value in pesos in times of financial stress, circumstances in which it could be inconvenient to finance fiscal needs by resorting to indebtedness via bonds, both because of their higher cost and because of an eventual adverse effect on sovereign spreads. Therefore, the investment portfolio should be highly liquid when the Fisco requires it in such situations. If the size of the fund exceeds 5% of GDP, the strategic asset allocation will be reviewed again with the objective of obtaining higher returns in the long term, fundamentally with regard to the resources that exceed this limit.
Strategic asset allocation: the portfolio composition is 81% in Treasury Bills and Sovereign Bonds, 4% in Sovereign Inflation-Linked Bonds and 15% in U.S. Agency Mortgage-Backed Securities (MBS).
Benchmarks: for each component of the strategic asset allocation, a benchmark has been defined, which corresponds to a representative index of the respective market.
| Asset class | Percentage of Total Portfolio | Benchmarks |
|---|---|---|
| Sovereign bills and bonds | 10.0% | ICE BofaAML US Treasury Bills Index |
| 40.0% | Bloomberg Global Aggregate - Treasury: U.S. 1-10 Yrs | |
| 19.0% | Bloomberg Euro Aggregate - Treasury: Aaa 1-10 Yrs Bloomberg Euro Aggregate - Treasury: Aa 1-10 Yrs |
|
| 9.0% | Bloomberg Global Aggregate - Treasury: Japan 1-10 Yrs | |
| 3.0% | Bloomberg Global Aggregate - Treasury: China 1-10 Yrs | |
| Inflation-Linked Sovereign Bonds | 4.0% | Bloomberg Global Inflation-Linked: U.S. TIPS 1-10 Yrs |
| U.S. Agency MBS | 15.0% | Bloomberg US Mortgage-Backed Securities Index |
Management: The Treasury Bills and Sovereign Bonds portfolios and the Sovereign Inflation-Linked Bonds portfolio are managed directly by the Central Bank of Chile. The U.S. Agency Mortgage-Backed Securities are managed by external administrators hired by the Central Bank of Chile, selected through a bidding process.
Ex ante tracking error limit: an ex ante tracking error limit of 25 basis points has been defined for the fixed income portfolio. In the case of U.S. Agency Mortgage Backed Securities, the monthly average is required to be less than 20 basis points and on a daily basis not to exceed 30 basis points.
For more information on other elements of the investment policy (currencies, eligible issuers and instruments, leverage and use of derivatives, etc.), please refer to the Investment Guidelines associated with the management of the Economic and Social Stabilization Fund (ESSF) resources, contained in this section.
Ministry of Finance 
