Sovereign investors increase ETF use, Invesco finds

Invesco’s 2026 Global Sovereign Asset Management Study found 39% of sovereign investors now use exchange-traded funds. The report, its 14th annual study, links higher ETF use to market volatility, geopolitical uncertainty and liquidity pressures.

The study says global ETF assets reached about USD 19.5 trillion at the end of 2025, after roughly 15% annual growth over two decades. Invesco attributes the expansion to institutional demand for flexibility, liquidity and implementation efficiency.

Adoption varies by institution type. Investment sovereigns lead with 58% using ETFs, liability sovereigns report 53% usage and development sovereigns report 24%, reflecting mandates that favour direct holdings and active ownership. Regionally, 52% of respondents in Europe use ETFs, while 28% in North America do.

Central banks and sovereign wealth funds report different uses. Two-thirds of central banks (67%) primarily use ETFs to build strategic exposure in asset classes where they lack internal expertise. Central banks cite ease of use as the top driver (82%), followed by liquidity and trading efficiency (73%) and range of product availability (56%). Commodity ETFs, especially gold, are used to gain exposure without the operational requirements of holding physical bullion.

Sovereign wealth funds use ETFs mainly for tactical asset allocation and liquidity management: 64% use them for tactical allocation and 52% for liquidity management. Passive equity ETFs are used by 70% of central banks and 82% of sovereign wealth funds. Passive fixed income ETFs are used by 40% of central banks and 67% of sovereign wealth funds. Thematic ETFs are used by 30% of sovereign wealth funds and 5% of central banks.

Active ETFs and ESG strategies show limited uptake. Seven percent of sovereign wealth funds currently allocate to active ETFs and a further 26% are considering them. Twelve percent of central banks allocate to ESG ETFs, compared with 7% of sovereign wealth funds. The study says constraints on adoption include control requirements, index construction, reporting standards and achieving precise exposure alignment for ESG mandates.

Alternative ETFs face questions about whether a listed structure can deliver illiquidity premia, low correlation and differentiated returns; the study notes those doubts may ease as track records lengthen.

Josette Rizk, Head of Middle East & Africa at Invesco, commented that “ETFs are taking on broader roles across sovereign portfolios: central banks are using them to access new asset classes efficiently, while sovereign wealth funds use them for tactical flexibility and targeted exposure.”