Building Passive Solutions: Meeting the Unique Needs of Central Banks and Sovereign Wealth Funds

Posted on 03/06/2018


This article is sponsored by UBS.

By: Dr. Massimiliano Castelli, Head of Strategy and Advice, Global Sovereign Markets and Philipp Salman, Strategy and Advice, Global Sovereign Markets

KEY POINTS

– Passive investment strategies have grown rapidly over the last 20 years, attracting assets from investors across the spectrum.
– In recent years, sovereign wealth funds (SWF) and Central Banks have increased their allocations to passive strategies, embracing the liquidity, transparency, low costs, and customization options that these investment strategies offer.
– The goals and restrictions of SWFs and Central Banks are often quite different to those of other institutional investors. This can require a customized solution.
– We expect sovereign investors to continue exploring new passive strategies and we outline emerging trends that could be of special interest for this investor group.
– Asset managers need to respond to the evolving needs of these institutions in the passive space.

Index investing has been one of the fastest growing strategies of the last 20 years, with an estimated USD 10 trillion invested globally, tracking a wide range of benchmarks across asset classes in a variety of investment vehicles. It is an investment style which appeals to a broad range of institutional investors, from Pension Funds to Sovereign Institutions. 1

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1. Source: IMF 2017, SWFI 2017, UBS 2017.