Long‑term investors navigated a year of trade tensions, policy divergence and rapid AI‑driven transformation — and enter 2026 positioned for a more fragmented global landscape.
We are pleased to release a new collaborative report with State Street Associates, offering a data‑driven view of how long‑term institutional investors — including sovereign wealth funds — navigated the financial and geopolitical turbulence of 2025.
Drawing on State Street’s proprietary indicators, which reflect activity across more than $53.8 trillion in institutional assets, and qualitative insights from IFSWF members, the report examines how global investors adjusted their portfolios amid shifting trade policies, diverging central‑bank strategies and accelerating progress in Artificial Intelligence.
High equity exposure meets a weaker dollar. Discipline now matters more than momentum
Despite the volatility triggered by new US import tariffs, geopolitical tensions and a more uncertain macroeconomic backdrop, the analysis shows that investors maintained a broadly resilient risk stance throughout 2025. Equity allocations climbed to their highest point in a decade, even as funds became more sensitive to valuation and concentration risks entering 2026. Many sovereign wealth funds also began selectively rotating away from the US, increasing exposure to Japan, Europe and emerging markets as part of a wider move toward regional diversification.
The report also highlights a shift in currency positioning, with investors reducing overweight exposure to the US dollar and other safe‑haven currencies in favour of the euro and selected developed‑market currencies. In fixed income, exposure remains valuation‑driven, with interest increasing in core Eurozone, Japanese and Australian debt. Meanwhile, private markets continue to be treated as strategic long‑term allocations, with infrastructure — particularly related to AI adoption, energy transition and supply‑chain resilience — emerging as a key area for deployment in 2026.
As we enter 2026, the findings suggest that long‑term investors are preparing for a more fragmented global economic environment, marked by greater regional divergence, policy uncertainty and rising market turbulence. In this context, sovereign wealth funds emphasise the importance of diversification, liquidity flexibility and disciplined governance to maintain resilience.