Sovereigns are targeting markets offering security and growth Traditionally sovereigns have grouped countries by economic development or geographic region to form their overall geographic allocations. Indeed, last = k. , year, we highlighted increased allocations to North me 4, P| - America, based on perceptions of the US as a ‘safe “as _ =. ne 3 haven’ for sovereign assets, driven by the strength . a . = of its currency and positive tax changes for £ ; ae. international investors. > ee O'’ me ; While at a high level, sovereigns have been % = wr Ly ; unwilling to adjust regional allocations (as outlined in . # al ol es s theme 1), idiosyncratic geopolitical risks are causing , : mer *. F sovereigns to reweight to countries within these a at i, q 3 allocation bands. In developed markets, uncertainty aie * . : over global interest rates is shifting this focus to jon ae ia e identifying markets to shelter assets (as shown by ta , the increased attractiveness of the US and Germany . % § . in figure 7), with Brexit and the US election cited as We , the factors of fastest growing importance to asset ry. = &y, allocation (growing importance cited by 82% and “ 68% of sovereigns respectively). Similarly, emerging az markets sovereigns are identifying countries with the greatest potential for long-term economic growth. a 7.7 (ew Py 4 “4 6 | Bus 5.4 | y i ” “ae = Sovereigns are seeking greater exposure to perceived ‘safe havens’ within each key region. 14 HOUSE_OVERSIGHT_026694