Financial assets

The management of the Bank of Finland’s financial assets is guided by the investment policy decided annually by the Bank’s Board. The investment policy covers fixed-income investments, long-term investment and the principles of responsible investment.

The fixed-income investment policy for foreign reserves sets a strategic allocation for the Bank’s fixed-income investments by asset class and determines an appropriate level of interest rate risk for the various currencies. Long-term investment has a higher expected return and lower liquidity requirement than with other portfolios. The risk-return ratio improves for the balance sheet as a whole when the portfolio of investments is diversified.

A long-term investment policy that takes account of balance sheet risks as a whole ensures that the balance sheet is healthy and promotes the Bank of Finland’s goal of a steady distribution of profit to the state budget without endangering capital adequacy.

The Bank of Finland’s foreign reserves portfolio is invested in debt securities that have high credit ratings and are of high liquidity. They comprise sovereign bonds and central bank deposits, supranational and agency bonds, covered bonds, corporate bonds and cash instruments.

The Bank of Finland makes long-term investments in order to maintain the real value of the long-term capital items of the balance sheet. The Bank’s long-term investments consist of equity, real estate, fixed-income and cash investments. Equity investments are placed in passive exchange traded index funds (ETFs) that mirror the global index for developed markets and take account of sustainability and climate issues. Real estate investments are diversified across a number of unlisted European real estate funds. Each of the funds owns real estate in desirable locations, which makes the properties easy to let.