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Investment Trends Among Sovereign Wealth Funds Asset Allocation Stable, Returns Less Volatile

Returns for SWFs have been volatile since 2020. Year 2021 was a year of exceptional growth. By contrast, 2022–2023 was a period of bust and recovery, with markets feeling the effects of the inflationary shock and the sharp policy rate increases that followed.

Macro Policy Strategist
Head of Macro Policy Research

This is our biennial update on the asset allocation trends of sovereign wealth funds (SWF). The key theme over the last three years has been a structural shift in the macro environment – an end to the era of ultra-loose monetary policy coupled with rising inflation and increasing geopolitical risks, among others. Against this backdrop, markets have been exceptionally volatile, and SWFs have not been immune.

Year 2022 was the first since 2008 when SWFs on average reported a negative return, beating conventional benchmarks. We find that the outperformance of SWFs remains true over the long term as well, but only when adjusted for risk. Meanwhile, asset allocation has largely remained steady, reflecting slower growth of private market portfolios, due to private markets facing absorption constraints and public markets gaining traction again.

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