Emerging market central banks have pioneered Jing me investment tranches to generate greater returns ave le and developed markets are exploring their ability development of the to follow suit estmer he In last year’s report we identified that emerging : ere market reserve managers were developing an Ice investment tranche, to diversify away from low- servat yielding government bonds and generate better risk adjusted returns. This year, low interest rates again led EM central banks to increase the level of the investment tranche and invest in riskier asset classes, targeting higher returns over time to support future reserves adequacy. Additionally, certain emerging market central banks had recently relaxed fixed or managed exchange rate regimes, allowing for greater freedom to allocate reserves to the investment tranche. As central banks (including DM Low FME) expand the size and risk asset exposure of the investment tranche, they also are assessing how to best manage risk, return and cost, particularly where higher levels of reserves and depth of internal resources support developing internal management expertise. Central banks have a range of resources available in making their assessments, including case studies and performance data from those EM a central banks reaching the end of the first cycle of Fig 32. First investment tranche asset class (% citations) risk assessments, with many respondents indicating their willingness to share such information with a : peers. while we note the long timeline for the first Asset-backed Equities Corporate bonds Alternatives generation of EM central banks to establish their securities investment tranches (an average of 22 months across our emerging market sample), the availability of peer support and information sharing has the potential 54 to create a positive network effect supporting future implementations. Central banks acknowledge the need for external support as they move out the risk spectrum to corporate bonds and equ