Central bankers who manage currency reserves have turned to new – and riskier – investments to offset the global collapse in bond yields triggered by the pandemic, according to a new investigation.

The annual survey of 78 reserve managers with combined assets of $ 6.4 billion found that reducing returns presented the greatest challenge to these investors over the past year. For many, it has resulted in a transition to new asset classes, including corporate bonds, emerging market bonds and equities.

Reserve managers are typically among the most risk-averse investors in the world, but they hold considerable leverage with the more than $ 12 billion they manage, according to the most recent IMF figures. This liquidity, accumulated by central banks to keep their currencies stable or to protect them in times of crisis, is usually stored in safe assets such as short-term government debt.

However, the survey conducted by Central Banking Publications suggests that the pressure of low yields is forcing some to take more risk to preserve their capital. Bond yields around the world fell to record levels last year as central banks cut interest rates and launched massive debt buying programs to combat the fallout from the pandemic. Although yields have since rebounded, they remain very low by historical standards.

Just over half of survey respondents said they were considering investing in new asset classes, while 44% said they might add new currencies to their holdings. According to the IMF, 59 percent of the world’s $ 12.7 billion in foreign exchange reserves are held in US dollars, with the remainder mostly denominated in euros, yen or pounds sterling.

The survey also found that 42% were considering inflation-linked bonds and 23% were considering increasing their holdings of gold.

Another reserve manager from the Americas said he has increased his holdings of Chinese bonds, inflation-linked bonds and gold, adding “we are always ready to look for opportunities to make our reserves more efficient in terms of risk / return ”.

Central banks, like many investors, have struggled with falling bond yields over the past decade, leading to a global “yield hunt” that has supported riskier assets. Many of the safer bonds offer negative yields once inflation is factored in, while in Japan and the Eurozone negative nominal yields are also commonplace.

The survey highlights “the challenge of capital preservation faced by the large number of reserve managers who mostly hold short-term portfolios in highly rated government securities,” said Bernard Altschuler, head of central bank coverage at HSBC.