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Despite increasing COVID cases around the world, sovereign wealth funds and pension plans see biggest risks to portfolios via interest rates


Posted on 03/01/2022

SWFI’s survey results are for the fourth quarter of 2021. Now in its 18th consecutive edition, the survey provides proprietary data from investment directors, portfolio managers, strategists and other asset distributors from sovereign funds, pension funds and endowments. Panel members invest almost exclusively over a longer time horizon of a year or more. Looking at the data, a few snapshots stand out quickly. A trend established in our last quarterly survey has worsened somewhat. Only 41.6% now expect their income to increase by 10% or more in the next 12 months. The remaining 58.4% do not expect such an increase. In the third quarter 45% expected an increase and in the second quarter 68% expected it. It is also noteworthy that the variants of the coronavirus, including Omicron, do not cause undue stress to financial experts. In every category to which it was relevant, those who saw the virus as a continuing threat to their investments were a small minority. A set of other numbers and comparisons to past ratings, against the backdrop of global economies advancing under the most unusual circumstances, deserve close consideration.

The survey is available online at SWFI.com under the Reports tab.

For three consecutive surveys conducted quarterly, the greatest potential risk to the stability of financial markets is the risk of rising interest rates. Inflation and geopolitical risks are concerns. In 2022, the Federal Reserve is expected to raise interest rates to fight inflation. But will it really happen?

In addition, a clear majority of allocators will be underweight US liquidity and passive bonds over the next twelve months, and overweight private equity, credit strategies, private infrastructure and active international equities. US equity markets and real estate performed mixed in terms of weighting.

Next issue of the Sovereign Wealth Quarterly.

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