Invesco Global Sovereign Asset Management Study

Our fifth Invesco Global Sovereign Asset Management Study seeks to provide unique insights into the investment objectives and behaviours of sovereign investors during a challenging investment environment.

Introduction

We published our first report on the sovereign asset management industry in 2013 following interviews with 43 sovereign investors. This year marks our fifth annual study with the evidence-based findings based predominantly on face-to-face interviews with 97 leading sovereign wealth funds, state pension funds and central banks with assets in excess of US$12 trillion.

Over the past five years we’ve noted a number of factors influencing sovereigns such as low interest rates, the falling oil price and reduced funding. This year however we note geopolitical shocks in developed markets are shaping decision making. When coupled with uncertainty over the end of quantitative easing, the commencement of quantitative tightening and ongoing volatility in currencies and commodities it’s clear sovereign investors are faced with a challenging macroeconomic and therefore investment environment.

The first theme in this year’s report addresses the aforementioned factors and notes a continuing return gap between target and actual returns with asset deployment challenges limiting the ability for sovereigns to match strategic asset allocation targets. We note sovereigns are increasingly looking to evolve their business models through internalisation or investment partnerships to reduce management costs and improve placement efficiency.

Geopolitical risks have led to an increased concentration on perceived ‘safe haven’ international markets such as the US, India and Germany as well as an increasing focus on home market allocations in an effort to reduce foreign currency exposure.

We focus on real estate in our third theme, highlighting accelerated growth in the asset class. We examine the drivers for these allocations as well as setting out how and where assets are being deployed.

Despite sovereigns being well placed to implement Environmental, social and governance (ESG) strategies due to their size and long-term orientation, the uptake of ESG practices by sovereigns appears to have varying success. We highlight sovereigns’ polarised perspectives on ESG investing across various regions.

We conclude with a theme focused on central banks. This year we have expanded and segmented our central bank sample to understand differences in strategy and pace of change with respect to investment tranches across developed and emerging markets.

We hope the unique, evidence-based findings in this year’s report provide a valuable insight into a fascinating and important group of investors.

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Important information

This document is for information purposes only and is not an offering. It is not intended for and should not be distributed to, or relied upon by members of the public. Circulation, disclosure, or dissemination of all or any part of this material to any unauthorised persons is prohibited.

The opinions expressed are current as of the date of this publication, are subject to change without notice and may differ from other Invesco investment professionals.

The document contains general information only and does not take into account individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor.

This is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. While great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon.