Sixteen years ago, state-appointed professionals created the International Forum of Sovereign Wealth Funds, a knowledge exchange platform for managing public financial assets responsibly. The 2024 annual meeting in Muscat, Oman, hosted by Oman Investment Authority, marked a pivotal moment for IFSWF. Its theme – ‘Embracing disruption and searching for resilient futures’ – provided a platform for open discussion and collaboration, aptly termed the ‘Muscat dialogue’.
Over the three days, the Muscat dialogue comprised of sovereign funds and other state-owned investors discussing various policy, investment and operational issues. This open dialogue was instrumental in what could guide responsible financial management in managing state-owned financial assets in a complex global macro-financial landscape.
The changing role of sovereign funds
Traditionally, sovereign funds were established as stabilisers safeguarding national wealth. Some were explicitly tasked to help build macroeconomic resilience during growth volatility.
However, discussions in Muscat highlighted that these institutions are increasingly being tasked with taking on a broader domestic role against pressing global challenges such as climate change, supply chain disruptions, geoeconomic fragmentation and rapid technological advancements. As custodians of public monies and investors, governments increasingly view their funds as macroeconomic instruments for deploying capital, generating returns, and shaping and supporting structural transitions in their domestic economies.
A broader policy role
Sovereign funds are components of a country’s macroeconomic strategy alongside other sovereign financial entities, such as central banks, public pension funds and development-focused funds.
Collectively, these institutions form a vital financial fiscal buffer for nations, helping them absorb shocks, stabilise economies and achieve long-term objectives. Their integration into broader policy frameworks demonstrates the increasing recognition of their relevance in managing sovereign wealth on behalf of the people.
However, changing expectations of their mandate and purpose require IFSWF members to adhere to the highest governance and management standards. As custodians of national wealth, they must balance fulfilling fiduciary responsibilities with addressing broader policy goals such as sustainability and equitable growth.
The discussions in Muscat explored the evolving mandates of SWFs, with four major themes emerging.
Investing in a dynamic policy environment
Navigating ever-changing regulatory landscapes, geopolitical tensions and macroeconomic shocks requires agility. Sovereign investors must balance addressing immediate challenges and maintaining a long-term vision. Their ability to adapt and evolve in the face of these pressures makes them indispensable players in national and global economic policy frameworks.
Financing the energy transition
Sovereign funds are increasingly taking a leadership role in the global energy transition, with renewable energy emerging as a focus. While these funds alone cannot resolve the climate crisis, their ability to mobilise private capital and de-risk investments in recipient countries is transformative. By championing robust governance, transparency and integrity in their investment destinations, sovereign funds can catalyse climate action and set standards for responsible investing globally.
Artificial intelligence
AI technology represents both promise and pitfalls for investors. It can offer sovereign investors unprecedented opportunities to enhance and streamline investment processes and portfolio management. However, concerns such as data biases, regulatory uncertainties and the cultural shifts needed to integrate AI effectively were hotly debated. Participants emphasised the importance of well-defined, high-conviction AI use cases to ensure meaningful adoption while avoiding potential risks.
Reimagining asset allocation
Traditional asset allocation models must be revised to handle economic uncertainty better in today’s volatile environment. The pandemic and subsequent inflationary pressures highlighted the limitations of models that failed to anticipate systemic shifts. Discussions in Muscat called for adaptive strategies that balance liquidity needs with long-term growth, ensuring resilience in a constantly evolving financial landscape.
What lies ahead
The Muscat dialogue concluded with six actionable priorities for IFSWF members. First, to enhance governance by strengthening transparency. Second, to leverage technology with AI and integrate digital tools into investment processes while addressing associated risks. Third, to expand partnerships – to amplify the cross-border impact of investments and foster creative collaboration with development banks, multilateral organisations and private investors. The remaining priorities include leading in renewable energy, modernising asset allocation and prioritising social impact as sovereign funds must continue safeguarding national wealth for future generations while addressing broader social objectives.
The next IFSWF annual meeting in Abu Dhabi in 2025 will serve as a benchmark for assessing the progress made on the priorities outlined in Muscat. The ‘Abu Dhabi dialogue’ will provide an opportunity to evaluate how sovereign investors have further adapted to the shifting global economic and geopolitical landscape.
Until then, Muscat’s insights will continue to shape the strategies of sovereign-owned funds worldwide, ensuring their continued relevance as instruments of stability, innovation and sustainability in an unclear future.
The International Forum of Sovereign Wealth Funds originally published a version of this article.
Udaibir Das is visiting professor at the National Council of Applied Economic Research, senior non-resident adviser at the Bank of England, senior adviser of the International Forum for Sovereign Wealth Funds, and distinguished fellow at the Observer Research Foundation America. He was previously appointed at the Bank for International Settlements and the International Monetary Fund.