INTRODUCTION
In recent years, the stock of sovereign financial assets of many governments has increased substantially. Increasingly, financial assets consisting of foreign exchange reserves, sovereign wealth funds, public pension funds, and structural cash surpluses, represent an important component of the sovereign balance sheet. At the liability side, the market value of sovereign debt represents a major claim against most sovereigns. As a result, the composition of sovereign balance sheets has been trans- formed significantly.
The objectives are: (1) to gain a better understanding of the drivers of this change; (2) to show why it is advisable for debt management offices (DMOs) to take into account the risk characteristics of the most relevant sovereign assets; and (3) to explain that it is not necessary to review and assess the value of all sovereign assets. These objectives constitute practical steps towards integrated risk management largely from a DMO perspective.