Sovereign Investors with $29 Trillion Pivot to Energy Assets, Flag Dollar Fears

Sovereign wealth funds and central banks managing $29 trillion in assets are turning to energy assets and raising concerns about the dollar in a portfolio reassessment driven by unprecedented geopolitical shifts, according to an Invesco survey published on Monday.

The survey of 90 sovereign wealth funds and 54 central banks showed an increasing focus on diversification and investment portfolios that can "take a hit and still hold it together" amid trade tariffs, closed shipping channels, and wars in Ukraine and the Middle East.

Energy and Infrastructure Appeal

Approximately 80% of respondents said energy security and energy transition infrastructure were the most credible investments for making their portfolios more resilient, with infrastructure reaching 9% of sovereign wealth fund assets in 2026. The race to build energy-hungry AI infrastructure added to the appeal, the report found.

"In a world of inflation shocks, geopolitical fragmentation, and more concentrated markets, investors are rethinking old assumptions about diversification and redesigning portfolios to withstand a wider range of outcomes," said Benjamin Jones, Invesco head of research. "Resilience is becoming a hard requirement, not a nice-to-have."

The positive bond-equity correlation in recent years has also eroded reliance on bonds for diversification, with more investors focusing on liquidity and real assets.

Dollar Concerns Deepen

Concerns about the dollar were "widespread and deepening," with 61% of central banks polled stating that US debt levels negatively impact the dollar's long-term position as a reserve asset, up from 20% in 2024. While the US-Israeli war with Iran has helped lift the dollar 3% this year, analysts say US policy uncertainty and high debt mean the currency could weaken over the long term.

The lack of a credible dollar alternative is likely to make any shift away from it incremental, but 29% of respondents said the dollar's reserve-currency status will be weaker in five years, up from 12% in 2022.

Several institutions also reported reviewing their reliance on US-based custodians, counterparties, and clearing infrastructure due to geopolitical tensions. One European central bank said it had already replaced its US custodian, while a Latin American central bank said it was setting up new non-US custodial relationships to prepare for a "worst-case scenario." However, one central bank respondent noted that any such move was fraught: "This act in and of itself could be interpreted as hostile by the U.S."

Gold Holdings to Increase

One-third of those polled said they intended to boost gold holdings as part of the diversification trend.

Market Sentiment: 

The sentiment is cautious but clearly shifting, reflecting a structural pivot by the world’s largest sovereign investors toward resilience and diversification away from traditional dollar-centric assets. The Invesco survey of $29 trillion in assets reveals a decisive move into energy infrastructure, with 80% of respondents citing it as the most credible investment for portfolio resilience. The AI-driven surge in power demand adds a powerful tailwind to this trend, linking energy security directly to the technology megatrend.

Dollar concerns are deepening significantly. The 61% of central banks citing US debt levels as a negative factor for the dollar’s reserve status, up from just 20% in 2024, marks a major shift in sentiment. The 29% expecting the dollar’s reserve-currency status to weaken in five years, compared with only 12% in 2022, reflects growing apprehension about US fiscal sustainability and policy uncertainty. However, the lack of a credible alternative limits the pace of change, and any de-dollarisation will likely be incremental.

The reported review of US-based custodians and clearing infrastructure by several institutions, including one European central bank that has already replaced its US custodian and a Latin American bank preparing for a worst-case scenario, signals a tangible shift in operational behaviour. Yet, as one respondent noted, any such move carries geopolitical risk, as it could be interpreted as hostile by the US.

The one-third of respondents planning to increase gold holdings underscores gold’s enduring role as a hedge against dollar weakness and geopolitical fragmentation. For investors, the survey points to a multi-year trend: energy infrastructure, gold, and diversification away from US-centric financial structures will be key beneficiaries.

The pace of change will depend on geopolitical developments and US fiscal policy, but the direction is clear. Sovereign investors are positioning for a more volatile, multipolar world, with resilience as a primary objective. The implications for markets are significant, and the sovereign playbook favours real assets, reduces dollar concentration, and embraces diversification, offering a prudent roadmap for long-term investors. The shift is gradual but structural, and its impact will be felt across asset classes for years to come.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.