Invesco Global Sovereign Asset Management Study 2022

In our first theme we discuss how the inflation shock, rising interest rates and the Ukraine- Russia war are influencing asset allocations, including a continued rise in private market allocations. However, with no consensus on how these factors will unfold we also uncover high levels of uncertainty and a widespread belief that this a macro environment in transition with limited visibility and growing uncertainty about what comes next.

In our second theme we turn a spotlight on the challenges of scale and find external managers playing an increasing role in helping larger sovereign funds meet their private market objectives. We also note that asset manager partnerships becoming more prominent, with investors looking for assistance in areas such as beta management. In this theme we also discuss how sovereign funds are harnessing the power of data science and artificial intelligence, with these tools helping to deliver alpha at scale and improved efficiencies across large portfolios.

In our third theme we focus on digital assets. While investment in cryptocurrencies remains rare, we observe sovereign funds bullish on the underlying technology, with many keen to gain exposure via companies developing digital asset infrastructure. In this theme was also examine central bank digital currencies, with most banks now exploring how this technology could work in practise and many seeing their deployment as a potential threat to established cryptocurrencies. 

In our fourth theme we report on the continued rise in ESG integration. We discover sovereign investors increasingly focused on achieving measurable outcomes that can be tracked over time, which in turn is helping drive the use of impact strategies. In this theme was also discuss how Russia’s invasion of Ukraine has thrown a spotlight on some of the challenges related to passive investing, which for some investors has led to a renewed focus on active management to meet ESG objectives.

In our fifth theme we focus on developments in the management of central banks reserves. This includes an exploration of the ‘weaponization’ of Russian reserves via sanctions and the potential impact on the role of the US dollar as the world’s reserve currency. In this theme we also find central banks under pressure to protect reserves from the impact of inflation. This has added momentum to trend towards non-traditional asset classes and is in turn driving the increased use of external managers.