The fund’s fixed-income investments are allocated 70 percent to bonds issued by governments and related institutions and 30 percent to securities issued by the corporate sector.
The investments in government bonds are distributed according to the economic size of a country, as measured by its gross domestic product. The fund also considers the strength of a country’s public finances when investing in government bonds.
The majority of the investments are in developed countries, with a high percentage of government bonds denominated in euros, dollars, pounds and yen. About 10 percent of the bonds are in currencies from emerging markets. These bonds generally have an investment grade credit rating.
The investments in corporate bonds include debt issued by companies as well as covered bonds, or debt issued by banks that are secured by a portfolio of mortgage loans. Corporate bonds normally provide a higher return than government bonds.
All corporate bond investments are made after a credit assessment, whether external or internal. Holdings in non-investment grade bonds are targeted to not exceed 5 percent of the overall fixed-income portfolio.