Insights


Are DIY Retirement Investors in Over Their Heads?

  • Because Sovereign Wealth Funds (SWFs) play such an important role in global capital markets, we continue to track their asset allocation preferences.
  • The following report is an update to our 2015 study of SWF asset allocation.

Elliot Hentov
Head of Policy and Research
Alexander Petrov
Policy Research Strategist

Key Points

The main findings of this updated report are:

  • Overall, asset accumulation has slowed considerably, but is still positive. However, growth has become very uneven as several commodity-based funds have contracted in size.
  • The structural shift into alternatives1 continues unabated, primarily at the expense of fixed income portfolios.
  • This trend toward alternatives is nearly universal, while SWFs display very heterogeneous investment behaviour otherwise.Looking ahead, we believe this trend is bound to plateau as we see institutional and market obstacles constraining further increases.

From the turn of the millennium, the SWF sector has experienced rapid growth in assets under management, but that has come to an end. The slowing of organic asset accumulation and the proliferation of new SWFs carries significantimplications for asset allocation. We are publishing this update to our 2015 articleto discuss the changes in the sector over the past two years and presentseveral new angles from which the sector can be viewed.

Footnotes

1Alternatives” is the term used to encompass all asset classes that are not publicly traded, notably referring to private equity, real estate, hedge funds, infrastructure and private debt.

2Elliot Hentov, “How Do Sovereign Wealth Funds Invest? A Glance at SWF Asset Allocation,” State Street Global Advisors, 2015