Sovereign investors expect the next decade to be more demanding than the last two, with returns depending less on broad market exposure and more on skill, selectivity, and implementation.
Around 40% of sovereign wealth funds report a shorter investment horizon than their stated one, making governance, liquidity-planning, and stakeholder discipline critical to capturing premia.
Capital is becoming more selective as investors rely less on concentrated listed equity exposure and look to infrastructure, private credit, and other sources to diversify away from broad public markets.
A clear majority of respondents to this year’s Global Sovereign Asset Management Study, believe that the investment environment has shifted. Most sovereign wealth funds (SWFs) and central banks agree the next decade will be more challenging than the previous two, and long-term investors will need to tolerate higher volatility to meet their objectives (Figure 1).
For this year’s study, the 14th in our annual series, we interviewed 144 senior investment professionals (90 sovereign wealth funds and 54 central banks) whose institutions collectively manage approximately US$29 trillion in assets.
An APAC investment sovereign said, "Returns are going to rely more on skill, good judgement, and disciplined portfolio construction rather than easy market gains." Conditions of governance, liquidity planning, and stakeholder management determine which institutions can stay long-term, even when doing so is uncomfortable.
Most sovereign wealth funds describe themselves as long-term investors, but in practice many are operating on a shorter horizon than their mandates state. The ability to capture illiquidity premia and other long-duration return sources depends on deploying capital with the patience these institutions claim.
For sovereign wealth funds, volatility and drawdown sensitivity as well as board and stakeholder expectations are the primary constraints. Political and electoral cycles also play significant roles. A North American liability sovereign said, "These factors do not change long-term goals, but they can impact timelines."
Liquidity needs and unexpected cash calls are the most frequently reported cause of central banks' actual investment horizon falling short of their stated one. This is particularly characteristic of emerging market institutions, where unanticipated demands on reserves can occur.
Few respondents from both groups say they very frequently change course in response to short-term events (Figure 2). More commonly, shocks prompt temporary adjustments and a heightened focus on liquidity, without shifting the strategic direction of the portfolio.
The responses to a less supportive environment vary by institution type. Sovereign wealth funds are moving toward greater allocations to private and illiquid assets and placing greater emphasis on active management. Central banks are more likely to be reassessing long-term return assumptions, increasing use of scenario analysis and stress testing, and reducing their reliance on historical correlation patterns. Both groups, however, are moving in the same direction — greater selectivity and more deliberate portfolio construction.
Private market and illiquidity premia, real assets and infrastructure, and active security selection are the most frequently cited expected sources of return beyond broad market exposure (Figure 3). For many institutions, these allocations serve a dual purpose, combining return generation with diversification away from concentrated public market exposure. Returns are becoming more dependent on how and where capital is deployed than on broad market performance.
An APAC central bank made the point directly: "We have had to rethink what still makes sense," acknowledging that some long-established assumptions about portfolio construction are being tested.
Net allocation intentions in the 2026 study show a significant turn against equities, with SWFs more likely to be reducing listed equity exposure. Infrastructure and private credit are the clearest beneficiaries, attracting net positive intentions on the strength of structural demand and yield dynamics, respectively. For the first time, private credit appears as a separate asset class, reflecting how embedded it has become across the sample.
The movement away from equities is not an indiscriminate shift. The concern is specifically about concentration risk with the distribution of returns and the degree to which broad index exposure now represents a bet on a narrow group of companies.
The prevalence of supply shocks and a more fragmented world are driving the need for stronger, more resilient infrastructure. As with the oil shocks of the past, the response has been greater investment in infrastructure and energy diversification.
Private credit attracts allocations particularly in North America. Here, a liability sovereign said it was looking to roughly double its private credit portfolio over the next five years, concentrating on mid-cap healthcare, software, climate risk, and business solutions. However, this year there was a notable uptick in concern that crowding may erode the structural advantages that made it attractive.
Several respondents described an active effort to close the gap between stated and actual horizons, through clearer governance frameworks, better-defined decision rights, and more explicit liquidity policies that allow the long-term portion of the portfolio to remain committed through periods of market stress without triggering forced sales elsewhere. These governance features are most commonly identified as effective at preserving long-term investment discipline.
The version of long-term investing that worked well in the post-crisis decade is generating less return per unit of risk than it did. Sovereign investors are responding with greater selectivity across asset classes, more intentional portfolio construction, and a sharper focus on governance structures that can hold to long-term objectives when markets are difficult and external scrutiny is high.
Closing the gap between stated and practical investment horizons requires liquidity planning, governance design, and stakeholder management that actively protects the ability to be patient. Institutions with appropriate governance and liquidity structures may be better positioned to maintain long-term allocations during periods of market stress.
Get the full report, which covers five in-depth themes that are shaping the views and actions of sovereign investors around the world.
Why are sovereign investors rethinking long-term investment strategies?
Sovereign investors increasingly believe the next decade will be more challenging, with higher volatility and lower returns from broad market exposure. As a result, investment success is expected to depend more on skill, selectivity, and disciplined portfolio construction rather than passive market gains.
What is the “patience gap” in sovereign investing?
The patience gap refers to the disconnect between sovereign wealth funds’ stated long-term investment horizons and their actual behaviour. In practice, factors such as market volatility, liquidity needs, and stakeholder pressures often shorten investment horizons, limiting the ability to capture long-term premia.
How are sovereign investors changing asset allocation strategies?
Sovereign investors are moving away from concentrated listed equity exposure and toward more selective allocations in private markets, infrastructure, and private credit. These assets are valued for their diversification benefits and potential to generate returns beyond broad market performance.
Why is governance becoming more important in sovereign portfolios?
Strong governance frameworks, clear decision-making processes, and robust liquidity planning are critical to maintaining long-term discipline. These structures help institutions stay invested through periods of stress and ensure they can capture long-term opportunities without being forced into short-term decisions.
Source: Invesco Global Sovereign Asset Management Study 2026
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