Sovereign wealth funds shift towards alternatives as equities lose ground
Alternatives displaced equities as the most sought-after asset class among SWFs in Europe and the Americas during the 12 months to August 31, with Singaporean sovereign investor Temasek announcing it would increase its private credit exposure to up to 5 per cent from 2 per cent in the coming years (Lionel Ng/Bloomberg)
Sovereign wealth funds around the world have focused more than seven in 10 of their manager searches and planned allocations on alternative assets during the past year, favouring infrastructure and private markets in particular.
Alternatives accounted for 70.6 per cent of all expressions of interest* from sovereign wealth funds tracked globally by our sister title MandateWire during the 12 months to August 31 2026, up from 54.1 per cent in the previous 12-month period.
This was despite the number of expressions of interest in alternatives falling by almost a quarter to 243.
Alternatives displaced equities as the most sought-after asset class among SWFs in Europe and the Americas during the 12 months to August 31. The shift was particularly pronounced in Europe, where alternatives accounted for 52 per cent of expressions of interest, up from 25.5 per cent a year earlier, while equities' share fell to 26 per cent from 60 per cent.
In the Americas, equities' share of expressions of interest also fell to 30.8 per cent from 50 per cent, while alternatives' share edged up to 38.5 per cent from 36.4 per cent.
The trend is echoed in Invesco's 2026 Global Sovereign Asset Management Study, which found SWFs' equity exposures declined to 30 per cent from 32 per cent in the previous year, which it said was "consistent with the rotation away from concentrated listed equity".
Overall, the shift towards alternatives has been broad-based, with the broad asset class now accounting for a majority of SWF expressions of interest in three of the four regions tracked.
Asia-Pacific SWFs were the most active, representing more than half (53 per cent) of all expressions of interest in alternatives tracked globally during the 12 months to August 31 2026, followed by state-owned investors in India, the Middle East and Africa (32.1 per cent).
Singapore's GIC Private Limited, broadly reported as having $1.16tn in assets under management, announced the largest planned investment tracked in the Asia-Pacific region during the year. The fund said it would invest $30bn in hedge funds in the next three years, according to a July 24 FT report.
Another Singaporean sovereign investor, the $338bn Temasek Holdings, announced it would increase its private credit exposure to up to 5 per cent from 2 per cent in the coming years, said chief executive Dilhan Pillay.
Chief investment officer Rohit Sipahimalani previously said the fund was "looking at not-very-high-risk private credit, but credit that can give us low double-digit returns but a very high cash yield.
"We found that this asset class, over long periods, five years, 10 years, 20 years, tends to give a fairly stable range of returns," he said.
Despite the large planned allocations to hedge funds and private credit in Asia-Pacific, infrastructure was the most popular alternative asset class among SWFs globally in the 12 months to August 31 2026.
Infrastructure attracted 28.4 per cent of expressions of interest in alternatives globally in 2026, up from 22.8 per cent in 2025. With that, infrastructure overtook private equity as the most sought-after alternative asset class among SWFs.
Meanwhile, private equity accounted for 22.6 per cent of all expressions of interest in alternatives during the past year, down from 29.1 per cent in the previous corresponding period.
There was a marked shift in the geographical source of private equity demand.
Asia-Pacific SWFs accounted for more than half (50.9 per cent) of all expressions of interest in the asset class globally, up from 32.3 per cent in the previous year. By contrast, IMEA's share fell to 27.3 per cent from 55.9 per cent, when it was the biggest source of private equity interest globally.
Meanwhile, infrastructure overtook private equity as the most sought-after alternative asset class among IMEA investors. It accounted for 37.2 per cent of alternative expressions of interest in the region, up from 21.7 per cent a year earlier.
Notable infrastructure allocators in the IMEA region included Qatar Investment Authority, with AUM of around $330bn. The authority said in January it would commit up to $25bn to funds managed by Goldman Sachs Asset Management, as well as co-investments.
"This agreement builds on our longstanding relationship with Goldman Sachs and provides QIA with premium deal flow in sectors critical to our investment strategy, including AI, fintech, digital infrastructure and private credit," QIA chief executive Mohammed Saif Al-Sowaidi said in a statement at the time.
In India, the $4.9bn-plus National Investment and Infrastructure Fund also revealed early this year that it was planning to launch a $3.5bn sub-fund as part of a plan to develop the country's infrastructure sector.
Prime Minister Narendra Modi invited UAE SWFs to invest in the new fund, which builds on NIIF's first fund, the $2.3bn Master Fund, India's largest domestically raised infrastructure vehicle focusing on investing in core sectors such as transportation, energy and digital infrastructure.
Among investors surveyed by MandateWire in Europe and the Americas during the past year, the most notable manager searches were also launched for infrastructure and venture capital strategies.
In Europe, we exclusively reported that the $2.2tn Norwegian Government Pension Fund Global was planning to allocate $2.9bn to renewable infrastructure and energy transition funds run by global asset managers.
Harald von Heyden, global head of renewable infrastructure at the fund's manager, Norges Bank Investment Management, told MandateWire Analysis that NBIM was looking at ticket sizes of around $1bn, including co-investments.
Meanwhile, the three largest planned alternatives allocations in the Americas came from the $60.6bn Texas Permanent School Fund Corporation, led by a target of about $10.3bn to buyout and growth strategies. The fund also targeted roughly $1.8bn each to absolute return strategies and venture capital.
The shift towards alternatives comes as sovereign investors increasingly look beyond broad public market exposure for returns.
In Invesco's study, 65 per cent of SWFs cited private markets and illiquidity premia as a likely source of long-term returns beyond overall market returns, while 62 per cent pointed to real assets and infrastructure.
Infrastructure and private credit were also the clearest beneficiaries of SWFs' plans to move capital away from listed equities, finds the study.
Catherine Chan, head of institutional sales for Greater China and south-east Asia at Invesco, says the growth of AI is influencing how sovereign investors view infrastructure and listed market exposure.
"For sovereign wealth funds the investment opportunity is compelling, centred on infrastructure and productivity, but the concentration risk it has introduced into listed markets requires careful management," she says.
*Expressions of interest comprise manager searches, planned investments in individual new asset classes, and planned investments in individual existing asset classes recorded by MandateWire.