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HONG KONG, April 14 (Reuters) – Hong Kong’s central bank is putting its growing reserves into higher risk, higher return hedge funds and private equity, the Financial Times said on Wednesday.

Private equity firm Kohlberg Kravis Roberts & Co. (KKR) had received funds from the Hong Kong Monetary Authority, sources told the FT, while Bain Capital and the Blackstone Group were in talks about investments with the authority.

The increased focus on alternative investments reflected a shift by the monetary body, which had a tradition of keeping its reserves in safe liquid assets, the report said.

The HKMA currently held far more in reserves than it needed to back the Hong Kong dollar, giving it more leeway to invest in riskier assets, the newspaper said.

The authority is required by law to back the Hong Kong Dollar (HKD) with U.S. dollars to sustain the currency peg that has been in place since 1983.

‘You don’t need all of the funds to help keep the Hong Kong dollar stable,’ Joseph Yam, the city’s former chief for the authority, said in the report.

‘The portfolio mix of the Exchange Fund is under regular review to ensure the Fund is prudently managed to achieve its statutory objectives,’ the authority said in an emailed response to Reuters on Wednesday. ‘The HKMA does not comment on the investment operations of the Exchange Fund because of the market-sensitive nature of the information.’

The private equity firms declined to comment or could not be immediately reached.

((Reporting by Ronnie Koo; Editing by Chris Lewis))

((michael.flaherty@reuters.com; +852 2843 6540)) Keywords: HKMA/HEDGEFUNDS

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