Sovereign Wealth Fund Strategies in Volatile Markets
A sovereign wealth fund (SWF) is a state-owned investment fund that manages a country's reserves in various asset classes with the aim of achieving financial stability and future economic development. Consider a scenario where a sovereign wealth fund is facing a potential decline in global equities due to geopolitical tensions affecting emerging markets. The fund's investment strategy is focused on long-term capital appreciation and maintaining adequate liquidity for domestic obligations.
The fund's investment committee is evaluating three options in response to the changing economic landscape:
Increase allocations to real assets and commodities to hedge against inflation and currency depreciation.
Shift a portion of the equity holdings to fixed income securities in developed markets to reduce overall portfolio volatility.
Invest in private equity and venture capital to seek higher returns given the current market conditions.
Which of the following strategies most accurately aligns with the fund’s long-term investment goals, considering its objectives of capital appreciation and liquidity preservation?