Invesco Global Sovereign Asset Management Study 2023

Amid persistent high inflation and real interest rates, investors are recalibrating portfolios. Sovereign wealth funds favour fixed income and private debt, while Emerging Markets with solid demographics, political stability, and proactive regulation, particularly India, have emerged as prime investment destinations.

Sovereign wealth funds continue to find private assets appealing, but performance disparities have prompted investors to exercise more judicious selection. Infrastructure, especially renewable energy, has emerged as the preferred sector. Evaluating debt metrics and prioritising organic growth over leverage-dependant returns have become critical components in investment decision-making. 

Increasing geopolitical tensions and climate concerns are highlighting the need for secure, sustainable energy supply chains, propelling renewables to the top of investors’ agendas. Sovereign funds and central banks are prioritising green infrastructure investments and green bonds. Navigating the greenwashing terrain, investors are adopting an active stance, accepting development risks, and issuing green bonds to ensure authentic ESG alignment.

The recent decade witnessed a wave of new and emerging development sovereign funds, eagerly seeking partnerships with more established counterparts. These nascent funds concentrate on helping to catalyse the energy transition and achieving social goals. To bridge capability gaps, they are leaning on external asset managers and, as they continue to grow and mature, the demand for such expertise is set to rise.

Central banks looking to combat yield volatility and inflation risk see gold as a safe-haven asset. This spurred record gold purchases in 2022, a trend prevailing into the first quarter of 2023. While the US dollar retains global reserve currency supremacy, central banks are diversifying currency holdings, stirred by geopolitical uncertainties and attractive opportunities in Emerging Markets.