According to the latest Invesco Global Sovereign Asset Management Study, surging inflation has prompted sovereign wealth fund investors to re-examine their asset allocation. Private markets have been the main beneficiaries.

The study describes the views of 139 chief investment officers, heads of asset classes, and senior portfolio strategists at 81 sovereign wealth funds and 58 central banks. Altogether, they manage US$23 trillion ($34 trillion) in assets.

Key findings from the study show that sovereign wealth funds now see inflation and global geopolitics as the biggest threat to global growth over the next year.

Two-fifths of respondents expect inflation in developed markets to remain high over the next two years. A further two-fifths expect inflation to decline steadily, and just under a fifth anticipate stagflation.

There is some consensus that inflation should subside in the coming years. For example, over half of respondents (59 per cent) expect US inflation to average three to four per cent over the next five years.

Sovereign wealth funds are reconsidering their macroeconomic assumptions and adjusting investments accordingly as inflation and interest rates rise rapidly. Most respondents (59 per cent) have repositioned their portfolios in anticipation of further rate rises.

The study also found that:

  • Investors are likely to increase exposure in North America and Asia Pacific;
  • Further central bank allocations to RMB China’s renminbi are expected; and
  • Digital assets remain volatile, but digital central bank currencies are presenting new opportunities.

The post Wealth funds shift to private markets amid inflation and uncertainty: Invesco appeared first on Professional Planner.

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