Unsettling Investment Environment Forcing Institutional Change

An unsettling global investment environment is forcing change among central banks, sovereign wealth funds (SWFs) and government pensions, according to a recent report from State Street Corp. of Boston, MA. “Official Institutions: Transforming to Meet the Needs of a New World,” noted that official institutions are adapting investment and operating models to be more flexible.

State Street’s global survey quizzed more than 100 official institutions; 77% of surveyed central banks indicated the highest potential impact from rising interest rates. Meanwhile, 90% of SWF and government pension funds indicated that equity market corrections would have a moderate, or significant impact on investment strategies over the next three years.

SWFs and government pension funds are showing strong appetite for alternative investments, with 68% SWFs surveyed likely to increase allocation to commodities, and 88% of surveyed government pensions real estate investments.