BY COMFORT OGBONNA
Sovereign wealth funds and central banks overseeing a combined $29 trillion in assets are significantly reshaping their investment strategies as growing geopolitical uncertainty, economic volatility, and energy security concerns continue to transform the global financial landscape. According to a new survey released by global investment management firm Invesco, many of the world’s largest institutional investors are increasingly directing capital toward energy-related assets while expressing rising concerns about the long-term strength of the U.S. dollar.
The survey, which gathered responses from 90 sovereign wealth funds and 54 central banks, highlights a major shift in how these institutions are approaching portfolio management. Rather than relying on traditional investment models, respondents are focusing on building portfolios capable of withstanding prolonged periods of uncertainty fueled by global trade disputes, armed conflicts, inflationary pressures, and disruptions to international supply chains.
Energy security and infrastructure supporting the global energy transition have emerged as the most attractive investment opportunities. Around 80% of respondents identified these sectors as the most reliable options for improving the resilience of their portfolios. As a result, infrastructure investments now account for approximately 9% of sovereign wealth fund assets in 2026, reflecting the growing importance of long-term projects capable of generating stable returns while addressing strategic national priorities.
The rapid expansion of artificial intelligence has also contributed to this investment trend. The enormous demand for electricity required to power AI data centers and advanced computing facilities has increased the attractiveness of investments in power generation, electricity transmission networks, renewable energy, and other critical infrastructure needed to support future technological growth.
Benjamin Jones, Head of Research at Invesco, said investors are fundamentally rethinking long-standing assumptions about diversification as the global economy enters a period marked by inflation shocks, geopolitical fragmentation, and increasingly concentrated financial markets. He noted that institutional investors are no longer treating resilience as an optional feature of their portfolios but as an essential requirement for protecting long-term wealth.
The survey also found that the traditional role of government bonds as a reliable hedge against stock market declines has weakened in recent years. As both bonds and equities have increasingly moved in the same direction during periods of market stress, investors are expanding their exposure to real assets such as infrastructure, energy projects, and commodities while placing greater emphasis on maintaining adequate liquidity.
Beyond changing asset allocations, confidence in the U.S. dollar is also becoming a growing concern among many central banks. The survey found that 61% of central bank respondents believe the rising level of U.S. government debt is negatively affecting the dollar’s long-term position as the world’s primary reserve currency. That represents a significant increase from just 20% who held the same view in 2024, highlighting how quickly concerns over America’s fiscal outlook have intensified.
Although the dollar has strengthened by roughly 3% this year, supported in part by geopolitical tensions surrounding the conflict involving the United States, Israel, and Iran, many market analysts believe that persistent policy uncertainty and mounting federal debt could place downward pressure on the currency over the longer term.
Even so, the survey suggests that any transition away from the dollar is likely to be gradual rather than sudden. The absence of a widely accepted alternative reserve currency continues to support the dollar’s dominant role in global finance. Nevertheless, nearly 29% of survey participants believe the dollar’s influence as the world’s leading reserve currency will weaken over the next five years, compared with only 12% who shared that expectation in 2022.
Geopolitical tensions are also prompting some institutions to reconsider where they store and manage their financial assets. Several respondents reported reviewing their reliance on U.S.-based custodians, counterparties, and financial clearing systems as part of broader contingency planning. One European central bank revealed that it had already transferred its custodial services away from a U.S.-based institution, while a Latin American central bank said it was establishing relationships with non-U.S. custodians to prepare for potential geopolitical disruptions or financial sanctions.
Despite these preparations, some respondents acknowledged that reducing dependence on U.S. financial infrastructure carries diplomatic and political risks. One central bank official cautioned that shifting assets away from American institutions could itself be interpreted as an unfriendly action by the United States, illustrating the delicate balance many countries are attempting to maintain between financial security and international relations.
Gold is also regaining popularity as a strategic reserve asset. Approximately one-third of the institutions surveyed said they plan to increase their gold holdings as part of broader diversification efforts. The precious metal continues to be viewed as a reliable store of value during periods of geopolitical instability, inflation, and currency uncertainty, reinforcing its traditional role as a defensive asset in central bank reserve portfolios.
The findings underscore a broader transformation taking place among the world’s largest institutional investors. As geopolitical risks multiply, global power dynamics evolve, and economic uncertainty persists, sovereign wealth funds and central banks are increasingly prioritizing resilience, diversification, and long-term stability over conventional investment strategies, signaling that the future of global portfolio management may look significantly different from the past.
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