São Paulo – Rising inflation and Russia’s invasion of Ukraine are prompting Middle Eastern investors to revisit the allocation of their assets, according to information from the Invesco Global Sovereign Asset Management Study, reported by Saudi news agency Arab News. The study showed 55% of sovereign funds in the region had repositioned their portfolios.
“Inflation is surging, global growth is slowing, and geopolitical tensions are rising. The macro environment is now more uncertain, sending sovereigns to rethink how to position their portfolios as they look ahead,” said Zainab Faisal Kufaishi, senior executive and head for the Middle East and Africa of Invesco. Invesco operates with investment management.
The report, with views from 139 chief investment officers, suggested sovereign fixed income allocations have declined in recent years, and most are moving to private market alternatives, primarily real estate, private equity, and infrastructure. Among respondents, 82% said real estate assets are effective against inflation and bring higher yields.
According to the survey, 50% of sovereign wealth funds in the Middle East were interested in private assets – they mentioned an intention to increase investments in private equity. Also, 20% intend to increase investments in real estate and 20% in infrastructure in the next 12 months. The report showed about 22% of sovereign wealth fund assets are in the private sector globally.
After the invasion of Ukraine, sovereign wealth funds in the Middle East lost affinity with Europe. The report mentioned that 40% of them plan to reduce allocations in developed European countries and 30% in emerging countries in the continent in the next 12 months. The report also found respondents are more likely to increase portfolio exposure in North America, Asia-Pacific, and the Middle East.
Translated by Elúsio Brasileiro
