Sovereign wealth funds are concentrating their investment allocations in fewer countries as geopolitical disruption becomes embedded in decision-making frameworks, according to a new report by the International Forum of Sovereign Wealth Funds. Geographic concentration rose to 0.192 on the Herfindahl-Hirschman index in 2025, up from 0.110 in 2021—the highest level the IFSWF has recorded. The effective number of destination countries fell from roughly nine in 2021 to just over five in 2025.
The shift reflects a direct response to geopolitical fragmentation, the report said. As the global economy splinters, institutional investors are recalibrating their geographic frameworks and narrowing the list of markets they are willing to deploy capital into. The IFSWF tested deal count alongside deal size to confirm the trend was not driven solely by a handful of large transactions. The data showed capital is genuinely flowing to fewer countries.
The United States commanded a geographic investment share between 27% and 41% in 2025, making it the leading destination for sovereign wealth fund capital. Canada ranked 14th, outside the top ten, but improved from its 17th-place position in 2024. The report did not specify the total dollar volume deployed to either country.
Infrastructure topped the sector rankings by money invested in 2025, overtaking real estate for the first time in two years. Real estate, which had held the leading position in the prior two years, fell to fourth place behind financials and technology or telecommunications. Infrastructure's share ranged between 18% and 26%, the report said.
The sector breakdown revealed a diversified approach despite the geographic narrowing. Sovereign wealth funds are spreading capital across multiple asset classes even as they concentrate it in a smaller number of countries. The IFSWF attributed the pattern to structural shifts in how allocators view geopolitical risk.
The capital concentrating this cycle is the capital that built country-risk frameworks from first principles rather than backward from a target return, family office advisor Jaf Glazer has observed.
"Sovereign wealth funds started 2026 by navigating increasing geopolitical fragmentation and a technology cycle reshaping investment in the real economy," said Duncan Bonfield, chief executive officer at the IFSWF, in the report. "This year's data show that sovereign capital remains broadly diversified across sectors, while the main structural shift is happening in geography."
The report did not detail which countries saw the steepest declines in allocations or whether the concentration trend extended to private markets. The IFSWF publishes its annual review based on deal flow data tracked across member organizations. The forum represents sovereign wealth funds globally but does not disclose the full membership list or aggregate assets under management.
Family offices that co-invest alongside sovereign capital or track institutional trends may find fewer jurisdictions offering liquid exit markets if the concentration persists. The narrowing also raises questions about how allocators will price country-specific risk premiums in a more fragmented world.