Latest news with #developed economies
Zawya
22-07-2025
- Business
- Zawya
SWFs see geopolitical tensions as dominant short-term risks
Political and policy decisions have become core drivers of investment strategy, prompting sovereign investors to fundamentally reassess portfolio construction and risk management, according to the 13th annual Invesco Global Sovereign Asset Management Study. Geopolitical tensions (84%) remain the dominant short-term risks for sovereign wealth funds (SWFs) and central banks in the region, followed by a fallout from the Middle East conflict (68%), it said. An overwhelming majority (96%) of respondents believe that geopolitical rivalry will be a key driver of volatility, while 91% expect protectionist policies to entrench persistent inflation across developed economies. Most notably, 52% of Middle East SWFs now see deglobalisation as a material threat to investment returns, underscoring a marked shift in the market narrative. Invesco's study, a leading indicator on sovereign investor behaviour, draws on the insights from 141 senior investment professionals, including chief investment officers, heads of asset classes, and portfolio strategists, from 83 SWFs and 58 central banks across the world, collectively managing $27 trillion in assets. Active strategies gain traction One of the key shifts in portfolio construction identified in the study is the greater use of active strategies by respondents. On average, Middle East SWFs maintain 78% of their equities portfolio and 77% of their fixed income portfolio in active strategies. The survey shows that 33% of SWFs in the region are planning to increase active equity exposures over the next two years, with 50% doing the same with fixed income. While passive strategies continue to provide efficiency and scale benefits, particularly in highly liquid public markets, active approaches are being used to address index concentration risks, navigate regional dispersion, and enhance scenario resilience in an increasingly fragmented landscape. At the same time, portfolio construction decisions such as asset class, geographic, and factor tilts are increasingly viewed as core expressions of active management. Fixed income redefined and reprioritised Due to a combination of geopolitical shifts and interest rate normalisation, traditional portfolio construction models are being rethought, with many SWFs turning to more dynamic portfolio approaches that includes more fluid asset allocations, enhanced liquidity management, and greater use of alternatives. Within this landscape, fixed income has assumed a new importance within SWF portfolios, becoming the second-most favoured asset class behind infrastructure. On a net basis, 30% of Middle East SWFs plan to increase their fixed income exposure over the next 12 months. 'Amid geopolitical uncertainty and market shifts, investors across the Middle East are recalibrating their strategies,' says Josette Rizk, Head of Middle East and Africa at Invesco. 'Active asset management is growing in prominence due to its adaptability to a rapidly evolving economic environment. While private credit holds on to its popularity, fixed income has rebounded as the region's SWFs diversify exposures.' Private credit takes centre stage Private credit continues to gain momentum among SWFs in the Middle East, with 63% accessing the asset class through funds and 50% making direct investments or co-investments. The survey indicates that 50% of SWFs worldwide, including 40% of those based in the Middle East, plan to increase allocations to private credit over the next year. This growing interest reflects a broader rethinking of diversification as traditional stock-bond correlations erode in a higher-rate, higher-inflation environment. Sovereign investors are turning to private credit for floating-rate exposure, customised deal structuring, and return profiles that are less correlated with public markets. Once considered a niche asset class, private credit is now viewed as a strategic pillar of long-term portfolio construction. China remains a high priority SWFs are taking a more selective approach to emerging markets. Asia (excluding China) is a high priority for 43% of respondents worldwide and 25% in the Middle East. Meanwhile, China is once again an important focus for 28% SWFs globally and 33% in the Middle East, with 60% of the region's SWFs expecting to increase China allocations over the next five years. SWFs are increasingly orientating their China strategies around specific technology sectors, such as AI, semiconductors, EVs, and renewables, with 80% of respondents in the region believing the country's technology and innovation capabilities will become globally competitive in the future. 'Middle East SWFs are focusing a large proportion of their portfolios on Asian economies,' adds Rizk. 'Based on the outcomes of our study, we anticipate rising investment flows between the Middle East and China, with higher growth potential in selected sectors.' Active management is viewed as essential in this environment. Just 25% of Middle East SWFs rely on passive emerging market (EM) strategies, while 73% access EMs through specialist managers, citing the need for local insight and tactical flexibility. Digital assets, continued exploration Digital assets are no longer seen as an outsider topic among institutional investors. This year's study shows a small but notable increase in the number of SWFs that have made direct investments in digital assets – 11%, compared to 7% in 2022. Allocations are most common in the Middle East (22%), Asia Pacific (18%), and North America (16%), in contrast with Europe, Latin America, and Africa, where they remain at 0%. For Middle East SWFs, the biggest barriers to investing in digital assets include regulatory challenges (100%) and volatility (86%). 'Investors are increasingly open to exploring the value digital assets may add to their portfolios,' says Rizk. 'In the Middle East, allocations are growing cautiously as investors balance new opportunities with regulatory challenges and market volatility.' Globally, central banks are simultaneously advancing their own digital currency initiatives, balancing innovation potential against systemic stability considerations. While no central bank respondents in the Middle East have launched a digital currency yet, 33% are considering it, viewing efficiency in payments (100%) and enhanced financial inclusion (44%) as the biggest benefits of central bank digital currencies (CBDCs). Central bank resilience and gold's defensive role Central banks are reinforcing their reserve management frameworks in response to mounting geopolitical instability and fiscal uncertainty. In the Middle East, 67% plan to increase their reserve holdings over the next two years, while 27% intend to diversify their portfolios. Gold continues to play a critical role in this effort, with 63% of central banks in the region expecting to expand their gold allocations over the next three years. Seen as a politically neutral store of value, gold is increasingly viewed as a strategic hedge against risks such as rising U.S. debt levels, reserve weaponisation, and global fragmentation. At the same time, central banks are modernising how they manage gold exposures. In addition to physical holdings, an increasing number are turning to more dynamic tools, such as exchange-traded funds (ETFs), swaps, and derivatives, to fine-tune allocations, improve liquidity management, and enhance overall portfolio flexibility without sacrificing defensive protection. This is expected to continue, with 21% of central banks globally and 25% in the Middle East saying they plan to hold investments in gold ETFs in the next five years, while 19% worldwide and 25% in the region intend to hold gold derivatives, the report said. - TradeArabia News Service Copyright 2024 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (
Coin Geek
15-07-2025
- Business
- Coin Geek
Blockchain against sexism; UNESCO tackles AI's carbon footprint
Getting your Trinity Audio player ready... Amid the mass infiltration of artificial intelligence (AI) tools in the workplace, experts are expressing concern over the grim prospects of gender bias against women. However, blockchain technology offers a solution to mitigate this risk. An expert said blockchain is a veritable tool to combat AI prejudices against women in the workplace. Lisa Loud, executive director at Secret Network, warned that the uncontrolled use of AI tools can 'perpetuate historical prejudice' against women, widening the existing gender biases. Loud cites an International Labour Organization (ILO) study underscoring that up to 10% of job roles held by women in high-income countries may be replaced by AI. The dire figures are nearly triple the percentage for men in developed economies, with AI bias appearing in key areas. The report highlights that administrative and clerical roles, predominantly held by women, are the most accessible targets for generative AI. Furthermore, less than 30% of women have AI-engineering skills, exacerbating the prejudice in training large language models (LLMs). Despite the neutral narrative, integrating blockchain in LLM systems exposes streaks of gender bias. Loud argues that the widespread use of blockchain 'encodes economic rights' for both genders, making it impossible for AI algorithms to act impartially. Furthermore, the Secret Network executive advocates for on-chain credential wallets to provide a verifiable database for academic data and professional qualifications. With blockchain's data storage capabilities, AI tools in the workplace will have access to unbiased information to make professional decisions. Loud is backing the use of smart contract payrolls to ensure automated and equal pay for both genders while providing an immutable and transparent ledger for public verification. Furthermore, blockchain's watermarking functionality and cryptographic signature support the auditing of workplace decisions reached by AI agents. Integrating blockchain with AI remains an uphill climb Despite the benefits of integrating blockchain with AI processes, a real-world application is fraught with challenges. Blockchain's perceived complexity stands as a stumbling block for several firms keen on integrating it, but Loud argues that the complexity is evident in proprietary data sets. She added that the relationship between the two emerging technologies is symbiotic, with AI playing a key role in optimizing blockchain systems. Aware of their transformative benefits, a raft of nations like Nigeria are pledging to train citizens in blockchain and AI technologies. Small acts in reducing AI's energy consumption Still within the AI sector, a United Nations Educational, Scientific and Cultural Organization (UNESCO) report has revealed strategies to reduce the skyrocketing energy consumption metrics for AI models. The UN agency disclosed that reducing the number of characters in queries can reduce AI energy footprints by up to 90%. The report, unveiled at the AI for Good global summit, added that turning to specific models can improve energy consumption without reducing performance. OpenAI CEO Sam Altman said that a single ChatGPT query uses 0.34 kWh, nearly 70 times as much as a Google Search. In a day, the LLM receives a little over a billion queries, translating to 310 GWh per year, equalling the energy consumption of a small nation. Given ChatGPT's exponential growth rate, energy experts are predicting a near-term spike in electricity consumption levels. Other AI companies, like ChatGPT, are also grappling with soaring energy costs and exploring strategies to reduce their steep electricity bills. 'The exponential growth in computational power needed to run these models is placing increasing strain on global energy systems, water resources, and critical minerals, raising concerns about environmental sustainability, equitable access, and competition over limited resources,' read the report. The UNESCO report confirmed that slashing prompts from 300 to 150 words marked decreased energy consumption levels. Furthermore, ditching general LLMs for specific models suited to the task at hand contributed to the falling metrics. Aware of the energy strain, OpenAI has launched GPT-4o mini, a specific model with fewer parameters. Microsoft (NASDAQ: MSFT) and Google have also thrown their hats into the ring with their range of lightweight models, scoring wins with Gemma and Phi-3, respectively. Models like Gemini and ChatGPT are broad, requiring higher amounts of electricity to sift through mountains of data to generate a response. Technology companies are exploring alternative energy sources While using shorter queries and miniature versions of LLMs is in the hands of consumers, technology companies are exploring energy efficiency systems. For starters, AI firms are throwing their weight behind alternative energy sources, forming the subject of a raft of bilateral agreements. Microsoft is investing in several countries, improving renewable energy and emerging technology research to optimize its data center electricity consumption levels. A new report predicts that AI in renewable energy will reach $4.6 billion by 2032, rising at a compound annual growth rate (CAGR) of 22%. In order for artificial intelligence (AI) to work right within the law and thrive in the face of growing challenges, it needs to integrate an enterprise blockchain system that ensures data input quality and ownership—allowing it to keep data safe while also guaranteeing the immutability of data. Check out CoinGeek's coverage on this emerging tech to learn more why Enterprise blockchain will be the backbone of AI . Watch: Adding the human touch behind AI title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
