Bond markets across the globe look set to lose further favor with sovereign wealth fund investors as a net 47% say they expect to decrease their home-market bond exposures.
The third annual report by Invesco about the SWF market, covering $7.1 trillion in assets from 59 investors, found that trend against home-market bonds had increased from a net 38% planning such a shift in the 2014 report.
A propensity for cash was marked, however, with only a net 17% of respondents set to shift from cash, vs. a net 25% in 2014.
At the other end of the investor views was infrastructure, with a net 50% expecting to increase allocation to home-market infrastructure, vs. a net 33% in 2014. Global infrastructure is set to increase as well, with a net 63% expecting to shift allocations into the asset class, compared with a net 53% in 2014.
While still a popular choice, home-market real estate is expected to increase in portfolios for a net 33% of SWF investors, vs. a net 54% in 2014.
Within infrastructure allocations, Invesco found a preference for emerging markets infrastructure vs. wider emerging markets exposure. Within total allocations to infrastructure assets across a sample of 56 investors, 17% is situated in the emerging markets, yet these investors have only a 9% total weighting to emerging markets generally.
For real estate, however, SWFs show a developed markets bias. Invesco found 73% of real estate portfolios are allocated to developed markets real estate, with a 56% allocation to developed markets overall.
The report said the attraction of emerging markets infrastructure is driven by its perception as being a low-risk entry point to emerging markets, and preferable supply and demand dynamics vs. developed markets infrastructure.
Comparisons for specific asset classes were not available by press time.