Sovereign wealth funds suffer negative returns for first time in a decade

investmentweek.co.uk:

'Although average returns in 2022 were negative, there was significant variation within these results.'

According to the Invesco Global Sovereign Asset Management Study, this is the first time since the survey began in 2013 that sovereign funds suffered negative returns.

Taking into consideration the current economic backdrop, the vast majority of respondents (86%) — which includes CIOs, heads of asset classes and senior portfolio strategists — said inflation will be higher in the current decade than it has been in the past.

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As a result, fixed income was highlighted as the asset class sovereign wealth funds are most likely to increase in their strategic allocation over the next 12 months, with a 28% net allocation.

This was followed by infrastructure (25%), private equity (21%), listed equities (15%) and real estate (9%).

But the behaviour of fixed income assets in 2022 has prompted a shift in the way sovereign investors perceive the asset class, Invesco discovered.

Instead of the traditional ‘set and forget' position, investors were likely to be in favour of an active and tactical approach in order to create value by rebalancing across different fixed income segments and using various strategies, similar to listed equities.

Investors also emphasised the greater role alternative fixed income assets can play, such as private credit, high yield and infrastructure debt.

«Although average returns in 2022 were negative, there was significant variation within these results», said Rod Ringrow, head of official institutions at Invesco. «The better performers were those that recognised the risks posed by inflated asset prices and were willing to make substantial