Sovereign and public funds managing $6.5 trillion are putting risk back on the menu as inflation fears fall from the list of top concerns, and are betting big on India, a survey from the Official Monetary and Financial Institutions Forum showed.
The end of a years-long global inflation surge is allowing funds to refocus on long-term returns – with a “fundamental shift” toward private markets and opportunities spotted in India and sustainable assets, according to OMFIF’s annual survey of 28 global public pension and sovereign funds.
“A more risk-on approach implies a shift from fixed income into public equities,” the report from the London-based think tank said. “But there is a more fundamental shift – away from liquid, public markets and instead into illiquid, private markets.”
It said the shift indicated a willingness to forgo liquidity for improved returns, particularly as global interest rates appeared poised to fall or, at a minimum, remain stable.
Now that inflation has subsided, 25% of those surveyed expected to reduce cash holdings, and more than 40% expect to increase their allocations to public equities.
Not a single respondent listed China as the leading emerging market for investment this year – a stark shift from last year, when 23% put it at the top – with geopolitical risks, particularly tariffs and trade wars, remaining at the fore and Beijing battling its own economic woes.
India instead took the top spot, with 58% of funds in the survey deeming it the most attractive market, up from 38% a year ago.
“India’s strong macroeconomic fundamentals and regulatory environment are supporting its investment appeal, and large funds including the Korea Investment Corporation and Abu Dhabi Investment Authority have built a local presence there this year,” OMFIF said.
Some 63% of respondents wanted to invest more in sustainable venture capital, private equity or private debt, while the AI boom has sparked sovereign funds’ interest in digital infrastructure such as data centres.
(Reporting By Libby George; Editing by Kirsten Donovan)
