Geopolitical Tensions Outpace Inflation as Top Concern for Global Asset Managers
Thank you for reading this post, don't forget to subscribe!LONDON, July 22 (Reuters) – Geopolitical tensions, including escalating trade disputes between the United States and China, have overtaken inflation as the primary concern for sovereign wealth funds and central banks managing approximately $22 trillion in assets, according to a survey by Invesco released on Monday.
With inflation pressures easing and many countries gearing up for elections, geopolitical conflicts—ranging from Russia’s ongoing war in Ukraine to increasing trade barriers—have become the focal point for global investors.
Rod Ringrow, Invesco’s head of official institutions, stated, “This year, elections are dominating the landscape. Geopolitics has surpassed inflation in both short-term and long-term outlooks.”
The survey revealed that 83% of respondents identified geopolitical tensions as their most pressing short-term concern, exceeding the 73% who cited inflation. Looking ahead, 86% of respondents placed geopolitical fragmentation and protectionism at the top of their decade-long concerns. Climate change ranked as the second-biggest long-term risk.
Ringrow commented, “Climate change is now a mainstream issue. Sovereign funds and central banks are increasingly factoring it into their investment strategies.”
The Invesco Global Sovereign Asset Management Study, now in its 12th year, surveyed 83 sovereign wealth funds and 53 central banks during the first quarter of 2024.
Central banks have also been rattled by the West’s seizure of over $300 billion in Russian assets due to the Ukraine conflict. This has heightened the appeal of gold, with 56% of central banks noting that the “potential weaponization” of reserves has increased their interest in gold as a safe asset.
Ringrow noted, “There’s a rising trend among central banks to acquire physical gold and store it locally to avoid potential seizures in traditional hubs like London and New York.”
On a more optimistic note, over half of the respondents believe emerging markets will benefit from a more multipolar world, with 67% of sovereign wealth funds expecting these markets to either match or surpass developed economies. India is seen as particularly attractive due to its bonds being included in global investment indices. However, Ringrow highlighted that other emerging markets, such as Mexico, Brazil, Indonesia, and South Korea, are also well-positioned to capitalize on shifts in trade and economic activity.
