Over a three-year period, average sovereign portfolio allocations to real estate investments have risen from 3 percent to 6.5 percent, said Invesco.
Invesco attributed the increased interest in alternatives to the low-return environment. Gains in alternatives have come largely at the expense of fixed-income allocations, which have declined from 25 percent of sovereign portfolios to 16 percent over the past four years.
Sovereign wealth managers have also shown increased interest in factor-based investing, says Invesco. While only 26 percent of sovereign investors currently use factors either internally through their overall allocation or by accessing an external manager, the most commonly cited barrier to participating in factor-based investing is a lack of in-house expertise on the subject.
For its study, Invesco conducted face-to-face interviews with 77 individual sovereign investors and reserve managers representing 66 percent of sovereign assets globally and 25 percent of foreign reserves, totaling almost $9 trillion of assets.