Over the past decade, sovereign wealth funds (SWFs) have become pillars of global capital markets. Fueled by strong portfolio returns and steady state capital injections, SWFs have expanded faster than any other institutional investors.

That trajectory is expected to continue, with SWFs projected to reach $30 trillion in assets under management (AUM) by 2035. However, the roadmap for growth is changing.

The conditions that enabled historical growth are shifting, unsettled by higher interest rates and increasing volatility in hydrocarbon revenues. The effects of geopolitical fragmentation, technological disruption, and the energy transition are also intensifying—and redefining where and how sovereign capital can create value.

For the first time, Bain & Company surveyed leaders from eight SWFs to understand their priorities and how they are operating under pressure. While industry terminology varies, in our research, “SWFs” describe investors and investment vehicles owned by sovereign entities or nations. Our sample represented half of addressable SWF AUM. The responses reveal several trends, plus four imperatives for navigating this new environment.

It’s impossible to discuss SWFs without acknowledging the regional and broader conflicts affecting the Middle East. While responses in this report reflect conditions at the time (late 2025 and early 2026), they are not shortsighted. Investing is inherently a long game. As of this writing, we have no evidence that the long-term priorities of SWFs have changed. If anything, current events have sharpened their focus on supply chain resilience and security, the diversification of strategic partnerships (notably with Asia), and the monitoring of local economic impacts, including fluctuations in oil and gas revenues. If these conflicts are resolved relatively soon, countries may not need to draw on these funds to cover the financial costs of war. However, this is an evolving situation that we—and the world—will continue to watch with hope and compassion.

The continued rise of SWFs

In recent years, SWFs have expanded substantially, both in real terms and in their influence and sophistication. SWFs reached $15 trillion in AUM in 2025, reflecting a 10.3% CAGR—and outpacing every other class of institutional investor (see Figure 1).

Figure 1

The top 10 funds hold more than 75% of total wealth, concentrated in the Middle East (40%), Asia (40%), and Europe (20%).

SWF growth was powered by two main sources: 75% came from traditional financial performance and portfolio returns, while the balance came from state capital injections. Notably, this growth profile differs for funds that receive regular government support. For those entities, portfolio returns and state injections contributed equally (50/50) to their expansion.

State injections included approximately $890 billion in budget surpluses, mostly from hydrocarbon revenues. State asset transfers were also significant ($480 billion) and included the transfer of Saudi Aramco shares into the Public Investment Fund (PIF) and state-owned enterprise (SOE) transfers into Abu Dhabi Developmental Holding Company (ADQ)—assets which were recently transferred to L’Imade, a newly established investment entity. Indonesia also injected capital by launching the Danantara Indonesia superfund with an initial $170 billion in state assets.

Across the board, dividend distribution and borrowing have remained relatively limited, allowing SWFs to reinvest gains and amass wealth at an accelerated pace.

And that trajectory isn’t slowing. AUM is expected to reach $30 trillion by 2035, continuing to grow at an 8%–9% CAGR. But the roadmap is likely to look different based on a fund’s archetype. 

Defining characteristics of SWFs

SWFs are defined by unique combinations of mandate, asset allocation, and capital deployment.

Return-focused vs. dual-mandate funds

All SWFs are expected to meet return thresholds. Based on our research, more than 60% of SWFs target annual returns exceeding 6%–8% over the next five years. However, each fund also has a specific raison d’être—a purpose that falls somewhere between purely financial motivations and national objectives.

• Financial-return funds are focused on delivering stable, risk-adjusted returns. The Government of Singapore Investment Corporation (GIC), the Abu Dhabi Investment Authority (ADIA), and Norges Bank Investment Management (NBIM) fit here, with mandates to preserve and enhance their countries’ wealth by generating above-inflation returns within acceptable risk parameters.
  
  
• Dual-mandate funds, such as the PIF, combine financial discipline with national development. This is often achieved through SOEs that anchor value creation. For example, Mubadala co-owns Emirates Global Aluminium to drive non-oil and gas exports, while Temasek holds Singtel to advance Singapore’s telecommunications industry and digital infrastructure. These funds also seed new industries to create jobs and diversify local economies. For example, PIF launched Humain to pioneer AI development, specialized SOEs formed in Abu Dhabi to focus on renewables and advanced technology, and Temasek established Pavilion Energy to secure Singapore’s natural gas and liquefied natural gas supply.

About half of the top 20 SWFs have a stated commitment to their local economies, yet only a third of global SWF AUM is allocated to local assets or development agendas. Many of the largest funds face limits on investing at home.

Asset allocation and capital deployment

While portfolios remain anchored in public markets, they are shifting toward private assets.

Across the top 20 funds, approximately 70% of AUM sits in public markets and 30% in private markets (e.g., private equity [PE], infrastructure, real estate, venture capital, and private credit). There are notable variations, though: In Europe, NBIM is fully public, and the Kuwait Investment Authority remains mostly public. Public holdings are largely passive or minority stakes; only 20%–25% of SWFs hold strategic or controlling positions.

The portion of AUM allocated to private markets is becoming more active, and funds are increasingly likely to manage these exposures in-house rather than through third-party managers. Direct or coinvestments account for 50%–60% of investments, outpacing indirect general partner (GP) commitments (see Figure 2). PE is the largest private allocation (50%), followed by infrastructure and real estate (both at 25%).

Figure 2

A shifting landscape for SWFs

Buoyant markets have flattened. Hydrocarbon revenue, which has been the largest source of budget surpluses, is now uncertain. Asset transfers are slowing now that the bulk of SOE transfers are complete.

In short: SWFs are operating in a different world.

In this environment, higher interest rates are driving the cost of capital and compressing valuation multiples. Volatile hydrocarbon pricing makes cash flow less predictable. And private markets—previously the main engine of outperformance—are maturing. Liquidity remains uneven, and value creation increasingly requires active ownership and operational excellence rather than passive exposure.

And that’s not all.

Beyond these financial dynamics, structural forces are redefining sovereign investing. Geopolitical fragmentation is reshaping investment corridors, while rapid technological disruption is changing both what SWFs invest in and how they operate. Meanwhile, the accelerating energy transition is redirecting capital toward renewables, decarbonization, and sustainable infrastructure.

Four growth imperatives

We asked SWF leaders how they plan to sustain growth in the decade ahead. They cited four priorities (see Figure 3):

1. Recalibrating capital deployment
2. Delivering on their dual mandate and value creation
3. Unlocking value from artificial intelligence (AI)
4. Redesigning the operating model

Figure 3

Recalibrating capital deployment

Leading SWFs are rebalancing their portfolios to reflect new macroeconomic and geopolitical realities and enable greater flexibility. They’re also becoming more active in deployment across investment themes, regions, and asset classes.

Based on our research, capital deployment is shifting in four distinct ways:

Trend 1: Alternatives have gained staying power

The most notable shift in capital deployment over the past decade has been the steady increase in alternatives. They now account for approximately 30% of AUM, up from around 20% in 2015. In our research, SWFs consistently ranked alternatives as their top capital deployment priority for the next two to three years (see Figure 4).

Figure 4

Among alternatives:

• Interest in PE remains strong, yet SWFs are pacing investments more cautiously as exits renormalize and the market shifts from recovery into reacceleration.
• Returns are driving diversification. Funds have been maximizing returns by investing across a broader set of asset classes.
• Secondaries, private credit, infrastructure, and real estate are gaining traction as strategic complements to PE, offering greater yield stability, downside protection, and quicker capital cycles. Private credit is being closely monitored to manage potential risks. 

Trend 2: Direct access models are growing

Over the past decade, the era of passive limited partnership commitments with larger PE funds has given way to a more active, partnership-driven approach. More than 80% of the SWFs we surveyed expressed a desire to increase their coinvestment allocation.

This shift is consistent with broader direct and coinvestment trends. Coinvestments and direct investments now represent 50%–60% of SWF private deployments—up from approximately 40% in 2023. In the past 12 months, sovereign investors participated in approximately $160–$170 billion in global private market transactions, of which $120 billion was through direct investments. According to Global SWF, direct investment totals have averaged $120–$130 billion over the past five years.

In addition, SWFs are starting to dominate large mergers and acquisitions (M&A) deals, leveraging their capital scale and reach. Examples are abundant:

• Aligned Data Centers: Three players—the Artificial Intelligence Infrastructure Partnership (which includes Temasek, among other companies), BlackRock’s Global Infrastructure Partners, and Abu Dhabi’s MGX—purchased Aligned Data Centers for approximately $40 billion.
• Dayforce: ADIA provided capital to help PE firm Thoma Bravo acquire Dayforce, a human resources software company, for $12 billion.
• Electronic Arts: Saudi Arabia’s PIF is leading a consortium to acquire Electronic Arts for $55 billion in a take-private deal expected to close in the first quarter of 2027.
• Hologic: Blackstone and TPG acquired Hologic’s medical device business for approximately $18.3 billion, with ADIA and GIC taking minority stakes.

SWFs have been transitioning from indirect to direct investing over the past 10–15 years, lessening their reliance on GPs as they develop their own portfolio management and value-creation capabilities (see Figure 5).

Figure 5

At the start of the transition, SWFs leveraged limited partnerships to invest in funds managed by others (e.g., funds of funds or separately managed accounts). As they sought more control, funds engaged GPs to manage customized investments and increase exposure to specific themes. Over time, PE firms began offering coinvestment rights on larger deals—shifting the relationship from “fund manager and client” to “equal strategic partner.” To play this more active role, SWFs had to build internal capabilities in due diligence, investment decision-making, and financing.

Today, many funds possess the deployment scale, talent, and governance structure needed to coinvest alongside GPs or lead direct investments independently. Direct access gives SWFs tighter control over capital deployment, reduces fee leakage, and allows funds to retain a larger share of the value they help create.

Trend 3: Geographic interests are shifting east

More than 80% of the SWF leaders we surveyed expect to increase their allocations to Asia (excluding China), while half plan to expand their exposure in Europe. This geographic reweighting gives SWFs an opportunity to diversify—aligning with the world’s fastest-growing economies while hedging against Western valuation peaks and political scrutiny.

Beyond diversification, Asia offers a deep pool of potential strategic partners and access to high-growth opportunities. As Asian economies expand rapidly, local companies are seeking global capital and expertise to help them scale internationally. This creates a natural hub for coinvestment and long-term value creation.

Mubadala announced plans to double its Asian exposure by 2030, increasing the region’s share of AUM from 12% to 25%.

Trend 4: New funding sources are fueling expansion

The top 10 SWFs hold investment-grade credit ratings—and they’re leveraging these strong scores to open new sources of funding and liquidity. Among top funds, structured leverage and debt-to-AUM ratios have risen steadily, increasing from 0%–5% in 2019 to 10%–15% in 2025.

PIF led this shift, becoming the first SWF to issue a green bond in 2022 ($3 billion). Additional bonds and sukuk (Islamic bonds) followed—totaling more than $30 billion by 2025—with each bond heavily oversubscribed. Mubadala took a similar path in 2025, broadening its funding base with $750 million in 10-year bonds and launching dirham-denominated notes.

Beyond debt, SWFs are also monetizing and recycling capital from mature assets to fund new opportunities. Mubadala monetized its position in GlobalFoundries through an initial public offering in 2021 and a secondary sale in 2024, redeploying the proceeds into high-growth technology and infrastructure investments.

PIF has also recycled capital, selling 120 million shares of Saudi Telecom Company in 2021 and an additional 100 million shares in 2024 while remaining the company’s majority shareholder. Similarly, GIC is divesting $1 billion in PE fund interests across roughly 30 secondary market funds to reinvest in higher-growth channels.

Delivering on their dual mandate and value creation

Balancing financial performance with national economic development is a central theme for most SWFs, though it manifests in different forms.

Some funds focus on supply chain security and control to secure national resilience. For example, they gain strategic access to critical raw materials, manufacturing processes, or food supply. Others are dedicated to local GDP growth and job creation. These funds pursue diversification by accelerating existing sectors or seeding entirely new ones to drive local growth.

Translating these national ambitions into measurable economic outcomes is often a multi-decade journey. Currently, 11 of the top 20 SWFs explicitly pursue dual mandates. Those that succeed share six foundations:

1. Clearly defined ambitions and measures of success. Leading funds establish long-term visions and key performance indicators that extend beyond financial returns (e.g., GDP impact, job creation, or foreign direct investment). These targets steer portfolio companies toward the right objectives.
    
2. Investment in areas with national advantages. Top funds concentrate capital where they have domestic structural strengths, such as demand, resource advantages (e.g., low-cost energy), or location advantages (e.g., aviation or logistics hubs).
   
   For example, L’Imad—which took over management of Etihad Airways from ADQ—works to position Abu Dhabi as a global aviation hub. Similarly, Temasek built PSA International into a global logistics leader, reinforcing Singapore’s status as a premier trans-shipment hub. Khazanah Nasional Berhad plays a comparable role in Malaysia, shaping national champions across aviation, healthcare, and infrastructure, while the Indonesia Investment Authority (INA) channels sovereign capital into priority sectors such as transport and energy to accelerate domestic development.
   
   
3. Holistic value chain access. To build competitive local industries, SWFs need access and control across the entire value chain—from raw inputs to end markets. Leaders view investments through the lens of ecosystem development rather than company building.
   
   
4. Incremental and adaptive execution. A “start small, learn fast” approach has helped SWFs mitigate risk during early-stage sector development. Many follow an agile, capital-disciplined approach—launching pilots and validating concepts before scaling.
   
   
5. Innovative partnerships and deal structures. While joint ventures are efficient from a capital perspective, some sectors need more flexible options as they mature. New models are emerging, such as the PIF–Lenovo deal. By taking a minority stake in a global leader, Saudi Arabia gained access to technology and positioned itself as a regional hub for advanced electronics manufacturing. Such deals may become essential when local markets cannot support a majority buyout or need to acquire capabilities.
   
   
6. Strong government and ecosystem support. SWFs cannot transform their economies alone. Success requires tight coordination with government entities and the local private sector to ensure sector-building policy, regulation, infrastructure, and incentives are fully aligned.

Unlocking value from AI

AI is both an investment opportunity and a performance engine. SWFs are deploying capital into AI initiatives to drive returns while simultaneously embedding AI into risk, portfolio, and investment processes to sharpen performance. And they’re putting a lot of skin in the game: More than $350 billion has been committed to the global AI build-out.

Investments cross the entire value chain, including data centers, semiconductors, large language models, and related services, applications, and solutions. Before transitioning to L’Imad, ADQ entered a $25 billion partnership with Energy Capital Partners to develop energy and data center infrastructure in the US, while QIA partnered with Blue Owl to launch a $3 billion data center platform.

Roughly 30% of AI allocations are directed toward nation-building initiatives to create domestic champions. Notably, Mubadala and AI holding company G42 co-founded MGX, a $100 billion investment platform focused on AI infrastructure and semiconductors. This reflects Mubadala’s dual ambition for economic diversification and digital sovereignty.

PIF signed a memorandum with Qualcomm to establish AI data centers and edge-to-cloud services in Saudi Arabia. Temasek joined the AI Infrastructure Partnership with Microsoft, BlackRock, and MGX to build sovereign-scale data centers across Asia.

GIC has also increased its exposure to AI across both public and private markets, backing leading technology platforms and funds globally. Meanwhile, newer funds such as INA are beginning to explore digital infrastructure as part of their long-term investment strategies.

AI is also a transformation lever, supercharging SWFs’ internal capabilities. NBIM has become a leader in this space, leveraging AI to streamline investment processes, enhance decision making, and augment internal capabilities—reportedly achieving 20% time savings and near-universal adoption.

Similarly, Mubadala has embedded AI into bespoke tools to drive operational excellence. Investment committee members use AI to expedite deal reviews and validate assumptions, while the fund more broadly uses the technology to optimize resource allocation and streamline operations.

Funds are also pushing for AI adoption within their portfolio companies, viewing the technology as a core lever for value creation and competitive advantage.

Redesigning the operating model

SWFs have evolved far beyond their origins as passive custodians of national wealth. Leading funds are transforming their operating models to match the scale and complexity of the assets they manage today. And modern structures require leaner frameworks, global reach, and governance models that balance speed with control.

While technology and data often sit at the center of these new models, there’s no universal blueprint. The ideal form depends on a fund’s specific mandate and asset allocation:

• For financial-return funds, an asset-class organization is typically the most effective model because it provides clarity, specialization, and disciplined capital deployment. Many of these SWFs are broadening their asset-class mix to capture emerging opportunities across secondaries, private credit, and special situations.
  
  
• For dual-mandate funds, leaders must clearly separate the local development agenda from the financial-return agenda, assigning each side dedicated leadership, governance, and performance metrics. Within the local agenda, sector-based structures are emerging as the preferred model, as they support deeper domain expertise, ecosystem building, and tighter alignment with national development priorities. For some funds, the local agenda may be complemented by geographic or asset-class overlays, depending on the maturity and scale of domestic initiatives.

Operating model transformation must also consider these four dimensions:

• Capturing global opportunities: Historically, SWFs have primarily operated from their home markets. Today, nine of the top 10 have global offices. Proximity to deal flow, GPs, and portfolio companies enables faster execution, deeper relationships, and more active value creation—especially for funds that engage in direct dealmaking.
  
  
• Collaborating across platforms: Intergroup deals and thematic investing are rising in importance. SWFs increasingly need “one fund” execution models—structures where teams codevelop insights and jointly pursue opportunities across asset classes and sectors. Global peers have proven that structured mechanisms for cross-platform collaboration can unlock deal access when supported by shared incentives, common data and insight platforms, and enabling policies.
  
  
• Boosting back-office productivity: SWFs have grown into large, complex organizations that employ thousands of professionals—roughly half of whom work in back- or middle-office roles. As they’ve grown, SWFs have accumulated operational, risk, and compliance needs that exceed those of most traditional investment firms. Many funds are now rightsizing by balancing internal capabilities with outsourcing and expanding certain skill sets. Functions like digital transformation; AI; environmental, social, and governance; risk management; and value creation now represent 10%–20% of total headcount.
  
  
• Delegating authority to balance agility and control: Leaders are evolving governance models to make their funds more competitive in fast-moving deals. Successful funds are decentralizing decision making by empowering subcommittees within portfolio companies, developing shared investment policy frameworks, and codifying investment processes. Standardized approval frameworks and documentation protocols enable both agility and control.

The next 10 years

Scale is an advantage, but SWFs need long-term vision to ensure their success.

SWFs are long-term investors by design, and consistent direction has given them a powerful advantage. To retain that edge in a volatile world, SWFs must commit to sustained execution. If they constantly recalibrate to shifting conditions, they risk drifting off course and reducing their impact.

To define a clear path for the next decade, leaders might ask: What does the fund need to become by 2035—and how will it get there?

The answers should go beyond AUM or return targets, clarifying ambitions across five dimensions: 

• Asset allocation: Where will you deploy capital to win consistently, not just opportunistically?
• Investment approach: What differentiates your model (e.g., direct investing, partnerships, thematic conviction)?
• Value creation: How will you generate alpha beyond capital—through operational excellence and active ownership?
• National economic impact: What is your formula for delivering long-term development? Are there clear priority sectors where your country has (or can build) a sustainable competitive advantage?
• Operating model: How will you build an AI-enabled organization that is both efficient (cost disciplined) and effective (better and faster at decision making)? How will you balance agility with control?

The next decade demands strategic clarify and consistency—and bold moves over incremental gains.

Tomorrow’s leaders are clarifying their identity today, building capabilities to support it, and executing with discipline. Those who choose a path—and stay the course—will be rewarded.