LONDON (Reuters) -The world's sovereign wealth funds are turning to active fund management and investments in China, while central banks are diversifying reserves to weather a volatile global environment, an Invesco survey of sovereign funds and central banks managing $27 trillion in assets showed.

Still, the dollar reigns supreme, with the bulk of central banks saying it would take two decades to dethrone it - if ever - as the top reserve currency despite growing concerns.

"Institutions with greater than $100 billion - so the pretty large institutions - those are the ones that were most interested in moving more to active management," said Rod Ringrow, Invesco's head of official institutions.

Whereas funds liked passive management in predictable market conditions, predictable was "no longer the case," he added. "I think that frames the whole approach... in this move to active management."

On average, wealth funds made returns of 9.4% last year, the joint second-best performance in the survey's history.

Nevertheless, market volatility and de-globalisation concerns have spiked - and over the 10-year horizon, big worries centre around climate change and rising sovereign debt levels.

Over 70% of the 58 central banks polled for example now believe rising U.S. debt is negatively impacting the dollar's long-term outlook. 

Nevertheless, 78% think it will take more than two decades for a credible alternative to the greenback to emerge. That is a jump from 58% last year while just 11% of central banks now view the euro as gaining ground compared to 20% last year. 

CHINA FOMO    

The survey was carried out between January and March - before U.S. President Donald Trump's "Liberation Day" tariff announcements and at the peak of excitement around DeepSeek AI's emergence in China. 

Wealth funds are seeing a major resurgence in interest in Chinese assets with nearly 60% intending to increase allocations there in the coming five years, specifically the tech sector. 

That number jumps to 73% in North America despite the worsening U.S.-Sino tensions, whereas in Europe it sits at just 13%.

Wealth funds, the survey said, were now approaching China's innovation-driven sectors with the "strategic urgency they once directed toward Silicon Valley." 

"There's a little bit of a FOMO," Ringrow explained, a view that "I need to be in China now" as it shapes up to be a global leader in semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy.

Private credit has also emerged as a key focus for funds seeking alternative sources of income and resilience. It is now adopted by 73% of wealth funds, up from 65% last year, and with half actively increasing allocations.

"This represents one of the most decisive trends in sovereign asset allocation," the report said.

There is also growing interest, especially among emerging market wealth funds, in stablecoins - a type of cryptocurrency that is most commonly pegged 1:1 to the dollar.

Almost half of funds said stablecoins were the type of digital assets they were inclined to invest in, although that was still behind the likes of bitcoin, where the share was 75%.