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• Whilst a shift towards more defensive assets is visible in 2020 among central banks and sovereign investors, the “secular” trend towards more diversification remains intact with equities now being an eligible asset class at 43% of central banks, a new all-time high. 
• Top concerns related to the investment of FX reserves are lower/negative yields mentioned by 69% of respondents. Inflation and rising US interest rates are a concern for only 6% of survey participants.19% of respondents think that the US FED could turn to negative interest rates if needed. Interest rates are expected to remain low for a prolonged period of time. 
• When it comes to more general concerns affecting the global economy, trade wars are still the #1 risk, unchanged from the previous year. Risks coming from political developments in the US moved up to second place and were mentioned by 72% of respondents, up from 30% in the previous year. Regarding the COVID-19 crisis specifically, 42% of participants expect further disruptions in major economies including new shutdowns until a vaccine is found.
• The global dominance of the USD remains intact despite falling yield differentials. Demand for euro denominated assets remains relatively low. The RMB continues its “marathon” of becoming a key reserve currency with the average long-term target allocation to the Chinese currency increasing to 5%. 
• 50% of surveyed institutions reduced risks in their portfolios during the downturn in March. Of those central banks already invested in equities, 40% rebalanced (bought) during the decline.

In a special section of this year's Reserve Management Seminar Survey, we explored how the ongoing COVID-19 crisis has affected reserve managers. 

• While 58% of participants indicated that the crisis only had a “moderate” impact on their investment activities, 35% experienced severe (19%) or very severe (16%) consequences.
• A multi-year global economic slowdown is seen as the key longer-term risk resulting from the crisis, followed by unmanageable debt levels.
  
• When it comes to the global economic impact of the crisis, the vast majority of participants expects global GDP to contract by more than 6% for full-year 2020, followed by a U-shaped recovery.