Sovereign wealth funds and central banks are entering a major phase of portfolio reassessment as geopolitical risks, inflation, and trade uncertainty continue to rise.

According to Invesco’s latest survey, institutions managing a combined $29 trillion in assets are increasing their focus on energy assets, infrastructure, and real assets in an effort to make their portfolios more resilient against global shocks.

Energy Becomes a New Focus for Major Capital Flows

The survey, which covered 90 sovereign wealth funds and 54 central banks, found that around 80% of respondents viewed energy security and energy transition infrastructure as the most credible assets for improving portfolio resilience.

This reflects a major shift in investment thinking. In a world shaped by war in Ukraine, conflict in the Middle East, trade tariffs, and risks of disrupted shipping routes, major investors are no longer focused only on returns. They are also prioritizing defensive strength.

In addition, the growing demand for artificial intelligence infrastructure has increased the appeal of energy-related assets. AI requires massive amounts of electricity to operate data centers, making energy and related infrastructure an increasingly important part of long-term investment strategies.

Bonds Are No Longer an Absolute Safe Haven

For many years, bonds were widely viewed as a key tool for balancing risk when equity markets became volatile. However, the correlation between stocks and bonds has shifted in recent years, weakening the traditional defensive role of fixed income.

As a result, many institutions are turning their attention toward more tangible assets such as infrastructure, energy, and gold. These assets are expected to provide better protection in an environment of inflation, geopolitical conflict, and heightened financial market volatility.

Concerns Over the U.S. Dollar Are Becoming More Visible

One of the most notable findings in the survey is the growing concern over the long-term position of the U.S. dollar.

Around 61% of central banks surveyed said that U.S. debt levels are having a negative impact on the dollar’s long-term role as a global reserve asset. This is a sharp increase from 20% in 2024.

In addition, 29% of respondents said they believe the dollar’s reserve-currency status will be weaker in five years, up from 12% in 2022.

However, this does not mean the dollar is about to lose its central role quickly. At present, there is still no alternative that is large enough, liquid enough, and trusted enough to fully replace the dollar. Therefore, any shift away from the dollar is likely to be gradual.

Gold Remains a Key Diversification Asset

Alongside energy and infrastructure, gold continues to attract attention. Around one-third of surveyed institutions said they intend to increase their gold holdings as part of their diversification strategy.

This aligns with the broader trend among central banks and large institutional investors seeking assets that are less dependent on the traditional financial system, especially as geopolitical risks and concerns over the dollar continue to grow.

Conclusion

Major institutional capital is showing an important shift: the priority is no longer just return generation, but also resilience against global shocks.

Energy, infrastructure, real assets, and gold are becoming more important in institutional portfolios, while long-term confidence in the U.S. dollar is facing more questions.

However, this should not be interpreted as an immediate abandonment of the dollar. Rather, it reflects a gradual portfolio rebalancing process by large institutions seeking to reduce reliance on a single source of risk.

In a world marked by geopolitical fragmentation, unpredictable inflation, and financial market volatility, portfolio resilience is becoming just as important as returns.

Source: Reuters