Public Asset Managers remain cautious amid inflation and geopolitical uncertainties: Key Insights from the 20th Annual Executive Forum for Public Asset Managers

The World Bank Reserve Advisory & Management Partnership (RAMP) convened executive public asset managers at the 20^th Annual Executive Forum for Policymakers and Senior Officials in Washington, DC

Central bank reserve managers, along with public asset managers at public pension funds, sovereign wealth funds, and international financial institutions, attended the World Bank’s Reserve Advisory & Management Partnership (RAMP) 20^th Annual Executive Forum for Policymakers and Senior Officials, held in Washington, DC, to address common challenges, share effective responses, and expand their peer-to-peer networks.

RAMP’s flagship event, the Executive Forum, occurs annually in Washington, immediately following the IMF-World Bank Spring Meetings, and hosts central bank governors, heads of pension and sovereign wealth funds, and leading scholars and Nobel Laureates as presenters and participants.

The two-day event brought together over 125 senior-level participants from 72 countries, representing 81 central banks, sovereign wealth funds, public pension funds, and international financial institutions. Notably, it hosted nearly 40 governors, deputy governors, board members, and chief executive officers.

Attendees delved into vital topics for public asset managers, from the big picture of macroeconomic outlooks and monetary policy to the fundamentals of asset management. Discussions also ventured into the exciting realms of trending topics such as sustainability and artificial intelligence, exploring how these key matters are reshaping public asset management practices.

Anshula Kant, Managing Director and World Bank Group Chief Financial Officer, set the stage for the event by providing insightful opening remarks. The event then boasted an esteemed lineup of keynote speakers including Donald Kohn, former Vice Chairman of the Federal Reserve, Meghan O’Sullivan, Director of the Belfer Center for Science and International Affairs at Harvard University, and Adam Posen, President of the Peterson Institute for International Economics. They were joined by renowned panelists from around the globe.

During these vibrant exchanges, panels, and discussions, participants shared insights, strategies, and ideas to better manage public assets in today's complex financial landscape. Here are some of the key takeaways:

1. The macroeconomic outlook has improved slightly, yet uncertainty and inflationary pressures persist, prompting cautious policy easing to maintain stability. Global growth is regaining momentum, leading to optimistic financial markets and the prospect of coordinated rate cuts worldwide. Nonetheless, uncertainty lingers amid inflationary pressures, looming debt-to-GDP ratios, and growing fragmentation and geopolitical disruptions. This setting calls for cautious monetary policy to maintain price stability and efforts to contain debt vulnerabilities, particularly in emerging markets. The extent of a soft landing will depend on the ability to control inflation and an effective policy response.
2. Public asset managers are seeking ways to protect their portfolios from inflation and market volatility while being cautious about diversification in today's higher-interest-rate environment. Many public investors observed losses in their portfolios in 2022 as a result of the rising interest rates and market volatility. Consequently, they are now looking to enhance their returns in the current higher-for-longer interest rate environment. However, the appetite to invest in SDR currencies and riskier asset classes has decreased because of potentially higher liquidity needs, mandate constraints, and the more attractive return on government bonds. Public asset managers recognize the danger of geopolitics and climate change as they safeguard public financial assets. Furthermore, they are growing increasingly concerned over cybersecurity, catching up with technological innovation, and talent retention.
3. The United States dollar holds a stable long-term outlook as a reserve currency. Public asset managers expect the currency composition of foreign reserves to continue broadly unchanged and concentrated around the US dollar. The Federal Reserve should ensure that the US Treasury market remains liquid and well-functioning to not discourage investors. However, the long-term US fiscal outlook is receiving more attention.
4. Public investors are exploring the transformative potential of artificial intelligence and new technologies within their investment frameworks. New digital instruments, such as Central Bank Digital Currencies (CBDCs), took the spotlight during the discussions, offering enticing prospects for enhancing transaction efficiency and redefining the landscape of monetary policy. The discussions emphasized the importance of collaboration, forming partnerships, and transparency among public investors and policymakers in the quest for innovation and technological advancement.
5. Public asset owners are increasingly integrating sustainability into their investments, yet they are challenged with incorporating it efficiently and easily into their investment frameworks. Public investors are now challenged with a shift from a broad focus on sustainability to more specific issues, particularly concerning the availability and consistency of data, as well as the limited supply of suitable financial instruments. This evolution highlights the progress achieved by many in navigating these specific obstacles. Public asset owners play a critical leadership role in accelerating the climate transition, not only fostering innovation but also leading by example.

The Reserve Advisory & Management Partnership is a program developed within the World Bank Treasury that delivers advisory services, hosts executive training, and provides asset management services—all within a global network of public asset managers.

Established in 2001, the Partnership serves over 75 members, including central banks, international financial institutions, pension funds, and sovereign wealth funds. RAMP is a trusted advisor to members and delivers advisory and training services to implement sound practices in reserves and public sector asset management. RAMP hosts an annual program of executive technical workshops, leveraging Treasury’s 75 years of experience and collective knowledge, and sponsors external training. RAMP also delivers asset management services delivered by the same team that manages the World Bank’s assets and convenes events that build community and promote knowledge sharing among public sector asset managers.

You can learn more at ramp.worldbank.org.