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Official Institutions managing over $7.3 trillion in assets cite dislocations in the U.S. Treasury market and trade war as long-term key risks for markets
Dubai, JUNE 24, 2025 - Franklin Templeton hosted its inaugural Reserve Management Summit (the Summit) in London which brought together central bank policymakers and reserve managers representing over $7.3 trillion in sovereign assets, to discuss key topics and exchange views on the global economy.
At the Summit, Franklin Templeton Institute surveyed these reserve managers and central bank representatives to gather insights on the key challenges, risks, and strategic priorities shaping reserve management in the years ahead. The survey captured responses on macroeconomic expectations, asset allocation shifts, and future-looking investment trends. Below are selected highlights:
Top Challenges and Macro Views
- 53% of participants cited dampening portfolio volatility as the single largest challenge facing reserve managers in 2025, followed by achieving return objectives (27%) and liquidity management (20%).
- On interest rate expectations, 38% each expect the U.S. 10-year Treasury yield to remain between 4.50% and 5.00% and 4.00% and 4.50% by year-end, while 15% foresee yields rising above 5.00%.
Strategic Allocation Shifts
- Gold was seen as the asset class most likely to increase in strategic allocation over the next three years (31%), followed by global equities (23%).
- Respondents were evenly split across other asset classes, with 15% each pointing to emerging market debt, private credit, and investment-grade credit as areas of growing importance.
- When asked specifically about credit allocation, 75% of respondents expect to increase allocations to investment-grade corporate credit over the next five years.
- When asked which emerging market allocation over the next three years, 42% of respondents selected emerging market hard currency debt, highlighting a preference for relatively lower-risk exposure within the asset class. Only 8% expect to increase allocations to either emerging market local currency sovereign debt or emerging market equities, while another 42% indicated none of the above, suggesting a cautious or selective approach to emerging market investments in the near term.
Currency Outlook
- While the U.S. dollar currently holds a 65% share of global reserves, only 50% expect that share to remain within the 60–70% range over the next five years, with 39% anticipating a drop to 50–60% and 11% expecting it to drop below 50%.
Long Term Shifts, Innovation & Risks
- Over the next decade, 53% believe the rise of a multi-polar world of reserve currencies will be the most likely force to revolutionize reserve management practices, followed by digital assets (27%) and the separation of investment and liquidity management functions for reserve managers (20%).
- Stable coins (46%) and tokenization of private assets (38%) were identified as the most transformative financial innovations over the next decade.
- The greatest perceived risk to global capital markets through 2030 was split between a potential trade war (40%) and dislocations in the U.S. Treasury market (40%), followed by the loss of the U.S. Dollar as the primary reserve currency (20%).
Stephen Dover, Chief Market Strategist and Head of the Franklin Templeton Institute, highlighted the evolving strategies of reserve managers as they seek diversification to mitigate risk. He commented: “While Treasuries remain their primary holdings, there is a growing interest in expanding into other fixed income assets, equities, alternative currencies, and gold. Additionally, they are exploring the transformative potential of stablecoins and the tokenization of private assets, signalling a shift that could reshape financial strategies for the future.”
Sandeep Singh, Head of CEEMEA & India and Co-Head of the Global Official Institutions Group at Franklin Templeton said, “In an era defined by rapid technological, geopolitical, and economic transformation, no single institution holds all the answers. Our survey reveals a decisive shift among reserve managers toward diversification, innovation, and risk-aware strategies. At Franklin Templeton, our commitment extends far beyond investment products—we are deeply focused on delivering innovation, exceptional client service, and thought leadership that supports the needs of the reserve managers.”
Contacts:
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Sarah Aziz Corporate Communications Manager Franklin Templeton The Gate, East wing, Level 2 Dubai Financial Centre Dubai UAE Tel: 0097156 1749957 Email: [email protected] |
Asaad Masri
Kekst CNC Senior Consultant Mobile +971 (0) 52 864 9785 Email: [email protected] |
Notes to Editors:
- Franklin Resources, Inc. [NYSE:BEN] is a global investment management organisation with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialisation on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,500 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and approximately $1.57 trillion in assets under management as of 31 May 2025.
- The firm established its presence in the region setting up in the UAE in 2000. The office in Dubai is now the hub for Central & Eastern Europe, Middle East and Africa (CEEMEA), supporting retail and institutional investors across the region including some of the world’s largest sovereign wealth funds, central banks, family offices and global private banks based locally. Building on this established regional presence, Franklin Templeton further expanded its commitment to the Middle East with the opening of its Riyadh office in March 2024.
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