London: India has emerged as the second most coveted investment market for sovereign wealth funds and public pension funds in 2022, after the United States, according to a study published by asset manager Invesco on Monday.
Sovereign investors, who now manage $33 trillion in assets, have also seen a rapid increase in allocation to private markets, the Invesco Global Sovereign Asset Management study said, although this growth may begin to slow with fixed income.
“Sovereign investors have invested with the wind at their backs for the secular bull market that emerged from the global financial crisis over the past 10 years,” said Rod Ringaro, head of official institutions at Invesco.
The average annual return for sovereign investors over the past decade is 6.5% and for sovereign wealth funds alone 10% in 2021, Invesco found. However, 2022 could prove to be a turning point with higher inflation and tighter monetary policy affecting long-term expected returns.
Invesco said that while the United States remained the top destination, some sovereign investors were keen to rebalance portfolios, fearing they had become overly dependent on US markets, leaving them vulnerable to corrections in equity markets Is. Back in 2014, the UK was the most desirable destination.
The study predicted that emerging markets would benefit from the latest change.
Among developing countries, India has overtaken China as the most popular emerging market, climbing from No. 9 in 2014 to No. 2 in 2022.
“While this is partly because funds with dedicated Asian allocations are hedging their China exposure, investors have appreciated India’s positive economic reforms and strong demographic profile,” the study found.
China currently ranks sixth.
Invesco found that the past decade had seen a steady increase in the creation of sovereign wealth funds, of which a dozen were established in Africa, 11 of which have a strategic mandate to develop local economies.
(Reporting by Karin Strohecker; Editing by Sandra Maler)
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