Latest news with #sovereign wealth funds
Zawya
3 days ago
- Business
- Zawya
SWFs see geopolitical tensions as dominant short-term risks
Political and policy decisions have become core drivers of investment strategy, prompting sovereign investors to fundamentally reassess portfolio construction and risk management, according to the 13th annual Invesco Global Sovereign Asset Management Study. Geopolitical tensions (84%) remain the dominant short-term risks for sovereign wealth funds (SWFs) and central banks in the region, followed by a fallout from the Middle East conflict (68%), it said. An overwhelming majority (96%) of respondents believe that geopolitical rivalry will be a key driver of volatility, while 91% expect protectionist policies to entrench persistent inflation across developed economies. Most notably, 52% of Middle East SWFs now see deglobalisation as a material threat to investment returns, underscoring a marked shift in the market narrative. Invesco's study, a leading indicator on sovereign investor behaviour, draws on the insights from 141 senior investment professionals, including chief investment officers, heads of asset classes, and portfolio strategists, from 83 SWFs and 58 central banks across the world, collectively managing $27 trillion in assets. Active strategies gain traction One of the key shifts in portfolio construction identified in the study is the greater use of active strategies by respondents. On average, Middle East SWFs maintain 78% of their equities portfolio and 77% of their fixed income portfolio in active strategies. The survey shows that 33% of SWFs in the region are planning to increase active equity exposures over the next two years, with 50% doing the same with fixed income. While passive strategies continue to provide efficiency and scale benefits, particularly in highly liquid public markets, active approaches are being used to address index concentration risks, navigate regional dispersion, and enhance scenario resilience in an increasingly fragmented landscape. At the same time, portfolio construction decisions such as asset class, geographic, and factor tilts are increasingly viewed as core expressions of active management. Fixed income redefined and reprioritised Due to a combination of geopolitical shifts and interest rate normalisation, traditional portfolio construction models are being rethought, with many SWFs turning to more dynamic portfolio approaches that includes more fluid asset allocations, enhanced liquidity management, and greater use of alternatives. Within this landscape, fixed income has assumed a new importance within SWF portfolios, becoming the second-most favoured asset class behind infrastructure. On a net basis, 30% of Middle East SWFs plan to increase their fixed income exposure over the next 12 months. 'Amid geopolitical uncertainty and market shifts, investors across the Middle East are recalibrating their strategies,' says Josette Rizk, Head of Middle East and Africa at Invesco. 'Active asset management is growing in prominence due to its adaptability to a rapidly evolving economic environment. While private credit holds on to its popularity, fixed income has rebounded as the region's SWFs diversify exposures.' Private credit takes centre stage Private credit continues to gain momentum among SWFs in the Middle East, with 63% accessing the asset class through funds and 50% making direct investments or co-investments. The survey indicates that 50% of SWFs worldwide, including 40% of those based in the Middle East, plan to increase allocations to private credit over the next year. This growing interest reflects a broader rethinking of diversification as traditional stock-bond correlations erode in a higher-rate, higher-inflation environment. Sovereign investors are turning to private credit for floating-rate exposure, customised deal structuring, and return profiles that are less correlated with public markets. Once considered a niche asset class, private credit is now viewed as a strategic pillar of long-term portfolio construction. China remains a high priority SWFs are taking a more selective approach to emerging markets. Asia (excluding China) is a high priority for 43% of respondents worldwide and 25% in the Middle East. Meanwhile, China is once again an important focus for 28% SWFs globally and 33% in the Middle East, with 60% of the region's SWFs expecting to increase China allocations over the next five years. SWFs are increasingly orientating their China strategies around specific technology sectors, such as AI, semiconductors, EVs, and renewables, with 80% of respondents in the region believing the country's technology and innovation capabilities will become globally competitive in the future. 'Middle East SWFs are focusing a large proportion of their portfolios on Asian economies,' adds Rizk. 'Based on the outcomes of our study, we anticipate rising investment flows between the Middle East and China, with higher growth potential in selected sectors.' Active management is viewed as essential in this environment. Just 25% of Middle East SWFs rely on passive emerging market (EM) strategies, while 73% access EMs through specialist managers, citing the need for local insight and tactical flexibility. Digital assets, continued exploration Digital assets are no longer seen as an outsider topic among institutional investors. This year's study shows a small but notable increase in the number of SWFs that have made direct investments in digital assets – 11%, compared to 7% in 2022. Allocations are most common in the Middle East (22%), Asia Pacific (18%), and North America (16%), in contrast with Europe, Latin America, and Africa, where they remain at 0%. For Middle East SWFs, the biggest barriers to investing in digital assets include regulatory challenges (100%) and volatility (86%). 'Investors are increasingly open to exploring the value digital assets may add to their portfolios,' says Rizk. 'In the Middle East, allocations are growing cautiously as investors balance new opportunities with regulatory challenges and market volatility.' Globally, central banks are simultaneously advancing their own digital currency initiatives, balancing innovation potential against systemic stability considerations. While no central bank respondents in the Middle East have launched a digital currency yet, 33% are considering it, viewing efficiency in payments (100%) and enhanced financial inclusion (44%) as the biggest benefits of central bank digital currencies (CBDCs). Central bank resilience and gold's defensive role Central banks are reinforcing their reserve management frameworks in response to mounting geopolitical instability and fiscal uncertainty. In the Middle East, 67% plan to increase their reserve holdings over the next two years, while 27% intend to diversify their portfolios. Gold continues to play a critical role in this effort, with 63% of central banks in the region expecting to expand their gold allocations over the next three years. Seen as a politically neutral store of value, gold is increasingly viewed as a strategic hedge against risks such as rising U.S. debt levels, reserve weaponisation, and global fragmentation. At the same time, central banks are modernising how they manage gold exposures. In addition to physical holdings, an increasing number are turning to more dynamic tools, such as exchange-traded funds (ETFs), swaps, and derivatives, to fine-tune allocations, improve liquidity management, and enhance overall portfolio flexibility without sacrificing defensive protection. This is expected to continue, with 21% of central banks globally and 25% in the Middle East saying they plan to hold investments in gold ETFs in the next five years, while 19% worldwide and 25% in the region intend to hold gold derivatives, the report said. - TradeArabia News Service Copyright 2024 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (
Bloomberg
14-07-2025
- Business
- Bloomberg
Sovereign Wealth Funds Warming Up to China Again, Invesco Says
There has been a resurgence of interest in China by sovereign wealth funds, with most now expecting to allocate more money to ride the country's tech-fueled rebound, according to Invesco Ltd. The world's second largest economy has become a high or moderate priority for 59% of sovereign wealth funds surveyed in Invesco's recent Global Sovereign Asset Management Study, up from 44% last year. The survey covered 83 SWFs and 58 central banks, which collectively manage around $27 trillion.
Yahoo
14-07-2025
- Business
- Yahoo
Wealth funds warm to active management - and China - to weather volatility, report shows
By Libby George and Marc Jones LONDON (Reuters) -The world's sovereign wealth funds are turning to active fund management and investments in China, while central banks are diversifying reserves to weather a volatile global environment, an Invesco survey of sovereign funds and central banks managing $27 trillion in assets showed. Still, the dollar reigns supreme, with the bulk of central banks saying it would take two decades to dethrone it - if ever - as the top reserve currency despite growing concerns. "Institutions with greater than $100 billion - so the pretty large institutions - those are the ones that were most interested in moving more to active management," said Rod Ringrow, Invesco's head of official institutions. Whereas funds liked passive management in predictable market conditions, predictable was "no longer the case," he added. "I think that frames the whole approach... in this move to active management." On average, wealth funds made returns of 9.4% last year, the joint second-best performance in the survey's history. Nevertheless, market volatility and de-globalisation concerns have spiked - and over the 10-year horizon, big worries centre around climate change and rising sovereign debt levels. Over 70% of the 58 central banks polled for example now believe rising U.S. debt is negatively impacting the dollar's long-term outlook. Nevertheless, 78% think it will take more than two decades for a credible alternative to the greenback to emerge. That is a jump from 58% last year while just 11% of central banks now view the euro as gaining ground compared to 20% last year. CHINA FOMO The survey was carried out between January and March - before U.S. President Donald Trump's "Liberation Day" tariff announcements and at the peak of excitement around DeepSeek AI's emergence in China. Wealth funds are seeing a major resurgence in interest in Chinese assets with nearly 60% intending to increase allocations there in the coming five years, specifically the tech sector. That number jumps to 73% in North America despite the worsening U.S.-Sino tensions, whereas in Europe it sits at just 13%. Wealth funds, the survey said, were now approaching China's innovation-driven sectors with the "strategic urgency they once directed toward Silicon Valley." "There's a little bit of a FOMO," Ringrow explained, a view that "I need to be in China now" as it shapes up to be a global leader in semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy. Private credit has also emerged as a key focus for funds seeking alternative sources of income and resilience. It is now adopted by 73% of wealth funds, up from 65% last year, and with half actively increasing allocations. "This represents one of the most decisive trends in sovereign asset allocation," the report said. There is also growing interest, especially among emerging market wealth funds, in stablecoins - a type of cryptocurrency that is most commonly pegged 1:1 to the dollar. Almost half of funds said stablecoins were the type of digital assets they were inclined to invest in, although that was still behind the likes of bitcoin, where the share was 75%.
Yahoo
14-07-2025
- Business
- Yahoo
Wealth funds warm to active management - and China - to weather volatility, report shows
By Libby George and Marc Jones LONDON (Reuters) -The world's sovereign wealth funds are turning to active fund management and investments in China, while central banks are diversifying reserves to weather a volatile global environment, an Invesco survey of sovereign funds and central banks managing $27 trillion in assets showed. Still, the dollar reigns supreme, with the bulk of central banks saying it would take two decades to dethrone it - if ever - as the top reserve currency despite growing concerns. "Institutions with greater than $100 billion - so the pretty large institutions - those are the ones that were most interested in moving more to active management," said Rod Ringrow, Invesco's head of official institutions. Whereas funds liked passive management in predictable market conditions, predictable was "no longer the case," he added. "I think that frames the whole approach... in this move to active management." On average, wealth funds made returns of 9.4% last year, the joint second-best performance in the survey's history. Nevertheless, market volatility and de-globalisation concerns have spiked - and over the 10-year horizon, big worries centre around climate change and rising sovereign debt levels. Over 70% of the 58 central banks polled for example now believe rising U.S. debt is negatively impacting the dollar's long-term outlook. Nevertheless, 78% think it will take more than two decades for a credible alternative to the greenback to emerge. That is a jump from 58% last year while just 11% of central banks now view the euro as gaining ground compared to 20% last year. CHINA FOMO The survey was carried out between January and March - before U.S. President Donald Trump's "Liberation Day" tariff announcements and at the peak of excitement around DeepSeek AI's emergence in China. Wealth funds are seeing a major resurgence in interest in Chinese assets with nearly 60% intending to increase allocations there in the coming five years, specifically the tech sector. That number jumps to 73% in North America despite the worsening U.S.-Sino tensions, whereas in Europe it sits at just 13%. Wealth funds, the survey said, were now approaching China's innovation-driven sectors with the "strategic urgency they once directed toward Silicon Valley." "There's a little bit of a FOMO," Ringrow explained, a view that "I need to be in China now" as it shapes up to be a global leader in semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy. Private credit has also emerged as a key focus for funds seeking alternative sources of income and resilience. It is now adopted by 73% of wealth funds, up from 65% last year, and with half actively increasing allocations. "This represents one of the most decisive trends in sovereign asset allocation," the report said. There is also growing interest, especially among emerging market wealth funds, in stablecoins - a type of cryptocurrency that is most commonly pegged 1:1 to the dollar. Almost half of funds said stablecoins were the type of digital assets they were inclined to invest in, although that was still behind the likes of bitcoin, where the share was 75%.
Reuters
13-07-2025
- Business
- Reuters
Wealth funds warm to active management - and China - to weather volatility, report shows
LONDON, July 14 (Reuters) - The world's sovereign wealth funds are turning to active fund management and investments in China, while central banks are diversifying reserves to weather a volatile global environment, an Invesco survey of sovereign funds and central banks managing $27 trillion in assets showed. Still, the dollar reigns supreme, with the bulk of central banks saying it would take two decades to dethrone it - if ever - as the top reserve currency despite growing concerns. "Institutions with greater than $100 billion - so the pretty large institutions - those are the ones that were most interested in moving more to active management," said Rod Ringrow, Invesco's head of official institutions. Whereas funds liked passive management in predictable market conditions, predictable was "no longer the case," he added. "I think that frames the whole approach... in this move to active management." On average, wealth funds made returns of 9.4% last year, the joint second-best performance in the survey's history. Nevertheless, market volatility and de-globalisation concerns have spiked - and over the 10-year horizon, big worries centre around climate change and rising sovereign debt levels. Over 70% of the 58 central banks polled for example now believe rising U.S. debt is negatively impacting the dollar's long-term outlook. Nevertheless, 78% think it will take more than two decades for a credible alternative to the greenback to emerge. That is a jump from 58% last year while just 11% of central banks now view the euro as gaining ground compared to 20% last year. The survey was carried out between January and March - before U.S. President Donald Trump's "Liberation Day" tariff announcements and at the peak of excitement around DeepSeek AI's emergence in China. Wealth funds are seeing a major resurgence in interest in Chinese assets with nearly 60% intending to increase allocations there in the coming five years, specifically the tech sector. That number jumps to 73% in North America despite the worsening U.S.-Sino tensions, whereas in Europe it sits at just 13%. Wealth funds, the survey said, were now approaching China's innovation-driven sectors with the "strategic urgency they once directed toward Silicon Valley." "There's a little bit of a FOMO," Ringrow explained, a view that "I need to be in China now" as it shapes up to be a global leader in semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy. Private credit has also emerged as a key focus for funds seeking alternative sources of income and resilience. It is now adopted by 73% of wealth funds, up from 65% last year, and with half actively increasing allocations. "This represents one of the most decisive trends in sovereign asset allocation," the report said. There is also growing interest, especially among emerging market wealth funds, in stablecoins - a type of cryptocurrency that is most commonly pegged 1:1 to the dollar. Almost half of funds said stablecoins were the type of digital assets they were inclined to invest in, although that was still behind the likes of bitcoin, where the share was 75%.
