GPI 2020: Reach for yield collides with Covid-19 flight to safety

GPIs turn back to sovereign debt and gold, but alternative investments such as real estate and infrastructure set to grow further

  • Central banks to increase allocation to government bonds and gold, while sovereign and pension funds reach for yield with further push into equities
  • GPIs surveyed plan to increase holdings of government bonds in net terms for first time; 10% of institutions plan to add to gold holdings, including 13% of sovereign funds
  • 29% of institutions plan to add to equity holdings, including 78% of pension funds; real assets popular, with 38% of sovereign funds and 33% of pension funds looking to expand real estate portfolio
  • Sustainability cemented as portfolio cornerstone: 76% of GPIs hold green bonds, 20% hold green equities. Almost half of sample looking to add more sustainable fixed income
  • Widespread interest in RMB, but only 8% of institutions (10% of central banks) plan to add to their holdings over the coming 12-24 months
  • Global public investor assets grow by $1.9tn to $39.5tn, 5% AUM increase on 2019 driven by global equities and gold holdings
  • Two-thirds of asset growth concentrated in Europe and Asia, with Latin American central bank reserves declining
  • Survey of 78 public investors conducted between April and June examines sentiment in the midst of Covid-19 shock


The global economic shock has pushed central banks back towards safe assets, after years of reserves diversification. According to our annual asset allocation analysis, their stock of sovereign debt has already grown to 66% of reserve assets. Gold holdings have risen as well. Meanwhile, central banks have relatively reduced their equity holdings. Over the coming 12-24 months, 28% of central banks are planning to rebalance their portfolios towards sovereign debt, with 15% expected to add to their equity and corporate bond holdings each.

Sovereign and pension funds maintain a strong appetite for risk assets. Of the sovereign funds surveyed, 63% said they would increase allocations to infrastructure, while 44% are doing the same in equities and 38% in real estate. Among pension funds, 67% said they would increase their equity allocations, and 22% plan to move out of government bonds over the next 12-24 months. Meanwhile, central banks and sovereign funds also plan to add to gold holdings, at 11% and 13% respectively.

The dollar retains a significant share of GPIs’ currency allocations, with the euro a distant second, at 57% and 24% respectively. This is unlikely to change, as GPI allocations to the dollar and the euro are set to grow in the next two years. Significantly, 90% of institutions, including 89% of central banks, said they would not be willing to use a digital special drawing right or basket of central bank digital currencies.

Awareness of climate risks is growing, with 37% of central banks holding some form of sustainable asset. Almost half (40%) of GPIs intend to increase allocation to green bonds within the next two years. A further 21% are adding to their green or sustainable equity holdings. Only a small share (3%) said they would reduce holdings of green and climate-aligned bonds. A majority of respondents (51%) cited ‘insufficient data or information’ as a significant obstacle to increasing holdings of sustainable assets.

This shifting behaviour comes amid a sustained rise in global public investor assets. OMFIF ranked the 750 largest central banks, sovereign funds, and public pension funds from 181 countries. Collectively, their assets under management grew 5% to $39.5tn in AUM, or 43% of world GDP.

Just five funds account for $571bn (31%) of the increase: Japan’s Government Pension Investment Fund, Norges Bank Investment Management, Central Bank of the Russian Federation, Stichting Pensioenfonds ABP of the Netherlands and the US Military Retirement Fund, benefiting from a booming equity market in 2019.

OMFIF’s annual Global Public Investor features findings from the most comprehensive worldwide survey of public sector investors. The report draws on the largest ever OMFIF survey sample of public investors, covering 78 institutions.

This year’s edition examines key themes for public investors including sustainable investment, the status of central bank digital currency, and best practice in the relationship between central banks and sovereign funds.

Join Today

Connect with our membership team

Scroll to Top