RIYADH: Sovereign investors across the Middle East are placing greater emphasis on energy security as they navigate an increasingly volatile global environment, according to a new analysis.
The 14th annual Invesco Global Sovereign Asset Management Study found that nearly nine in 10, or 89 percent, of Middle East sovereign wealth funds surveyed identified energy security as a top investment priority, surpassing the global average of 80 percent.
The report added that 67 percent of Middle East investors identified critical infrastructure as another key investment priority, reflecting a growing emphasis on securing the physical and digital foundations of economic stability.
Earlier this month, another analysis from Bain & Co. said that sovereign wealth funds in the region are entering a critical new phase in which strategic adaptation will determine their ability to sustain robust growth over the next decade.
This comes as Gulf sovereign investors place greater emphasis on resilience as they navigate geopolitical tensions, supply chain disruptions, and market volatility.
Josette Rizk, head of Middle East and Africa at Invesco, said: “Sovereign investors in the Middle East are taking a highly pragmatic approach to a more uncertain world.”
She added: “While resilience is not yet as deeply embedded as in some global peers, it is rapidly becoming a core consideration in how portfolios are built and managed.”
According to her, what stands out is “the clarity of the region’s investment priorities,” with energy security, infrastructure, and private markets forming the backbone of long-term strategy, alongside strong conviction in the transformative potential of artificial intelligence.
Every Middle East sovereign wealth fund surveyed expects the next decade to be more challenging than the previous two, compared with 69 percent of sovereign wealth funds globally.
Although only 31 percent of regional sovereign wealth funds currently rank resilience as a core investment priority, compared with 48 percent globally, nearly half said resilience is becoming as important as returns in portfolio construction.
Among central banks, 56 percent shared the same view.
This indicates a clear convergence between traditional return objectives and risk management considerations. Risk management frameworks are strengthening, with 80 percent of sovereign wealth funds and 88 percent of central banks relying on risk concentration monitoring — both above global averages.
Private markets continue to play an increasingly important role in regional sovereign portfolios.
All Middle East sovereign wealth funds surveyed identified private markets as a key driver of long-term returns, significantly above the 65 percent global average.
Infrastructure is expected to attract the largest share of additional capital, with 70 percent of respondents planning to increase allocations over the next 12 months.
These investments are increasingly viewed as sources of both resilience and stable long-term income, extending a broader global shift that has made infrastructure the fastest-growing alternative asset class over the past five years.
ETF adoption grows
The report also said that exchange-traded funds are gaining traction, but usage varies by institution.
Around one-third, or 33 percent, of sovereign wealth funds in the region currently use them, slightly below the global average of 43 percent.
In contrast, 43 percent of regional central banks use exchange-traded funds, higher than the 31 percent global average.
Sovereign wealth funds deploy them mainly for tactical asset allocation and liquidity management, while central banks use them for strategic long-term exposure. Interest in active and environmental, social and governance-focused exchange-traded funds is also increasing, with more sovereign investors considering future adoption.
The AI factor
AI is a core focus for sovereign investors in the region, with particularly high levels of conviction and adoption.
All Middle East sovereign wealth funds view AI as a transformative technology with a multi-decade impact, compared with 77 percent globally.
AI infrastructure and semiconductors are seen as especially compelling, with 100 percent of sovereign wealth funds identifying them as attractive long-term themes.
Middle East sovereign wealth funds overwhelmingly view the US as best positioned to lead AI development, with none identifying China, highlighting a clear divergence from global sentiment.
Adoption is already well underway, with 88 percent of Middle East sovereign investors using AI in their investment processes, exceeding the 69 percent global average. Sovereign wealth funds are leading, with 100 percent adoption compared with 75 percent among central banks.
The Invesco study involved interviews conducted by NMG Consulting between January and March, with the sampled institutions managing a combined $29 trillion in assets.
