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13 July, 2021Euromoney, July 12 2021
A new Invesco report reveals that sovereign funds are shifting to equities, looking for more alternatives, being called upon for drawdowns and turning to Asia.
In its ninth year, Invesco’s Global Sovereign Asset Management Study has become one of the most important and useful chronicles of sovereign wealth fund and central bank investment behaviour.
The firm conducted 141 interviews this time around, involving 82 sovereign funds and 59 central banks. Between them, the interviewees manage $19 trillion in assets. It is worth knowing how they think.
Here are the stats that most interested Euromoney and what we think they mean:
1. More than one-third of sovereign investors interviewed in January and February 2021 saw drawdowns, and 78% of liquidity sovereigns – those that exist to act as buffers to economic shocks and invest on short time horizons – did so. This is, after all, what sovereign funds are for, but in practice most of them are rarely drawn upon. This time funds from Norway to Singapore to Nigeria were called upon for the public good. More than half of the funds in the Middle East and emerging markets saw outflows.
2. Everyone wants to invest in alternative assets, but where will they all go? Thirty-nine per cent of Invesco’s respondents said they intended to increase their allocations to infrastructure, 26% to private equity and 33% to real estate. Those are natural conclusions to reach in a low-yield world, but everyone wants those assets and there aren’t enough of them, which is going to push up prices and reduce returns.
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