— Public Pension Fund
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Digital assets are one area of interest, but none of the interviewees are yet seeking to invest in cryptocurrencies directly, given the lack of regulatory certainty and investment security. Instead, public asset owners look to indirect investments in the digital currency space. According to the public asset owners interviewed, digital assets and tokenization attract more interest. Many see tokenized assets as a powerful way to increase market liquidity, especially in alternative asset classes such as real estate. In particular, SWFs foresee an opportunity to shape the market. One fund official said: “We want to be leaders in this space – market makers who play a role in creating liquidity.”
— Sovereign Wealth Fund
— Public Pension Fund
— Public Institution
Among emerging sectors, the space economy is also generating excitement. Institutions with equity investments are familiar with companies such as SpaceX and their ecosystems. In the Middle East, in particular, public asset owners are interested in the broader sector, such as satellite telecommunications, where the prospect of returns is distant. One public institution, for example, has a joint venture with a satellite company and plans to invest significantly in building capacity for its country and region.
Several institutions in APAC also recognize carbon as an emerging asset class, with one suggesting it could become a core part of its portfolio. Carbon allowances or credits are a small and volatile market, currently worth around US$100 billion with an estimated US$250 billion in annual turnover1 and growing 20% annually as emissions trading systems and regulatory regimes mature.2 Moreover, investors look to carbon and its derivatives (futures and options) as a tool to hedge the climate risk in their portfolios.
1. McKinsey & Company: Putting carbon markets to work on the path to net zero, October 2021
2. McKinsey & Company: Putting carbon markets to work on the path to net zero, October 2021
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