Asset manager flags the big trends shaping client portfolios
The decoupling of developed and emerging markets and the spread of artificial intelligence (AI) from the cloud into everyday life are among the shifts likely to shape asset allocation decisions and portfolio returns over the coming years.
Human-robot Kungfu
Hildegard Wilson, Managing Director at Glacier International, set the scene for the brand’s five-event national roadshow by playing a video of a human-robot martial arts demonstration held at China Media Group’s 2026 Spring Festival. She commented on how difficult it was going to be for humans to trust AI-backed robots through the early deployment stages. “In a world driven by AI and algorithms … the trust that we have in the financial services industry is what really matters,” she said.
Wilson told the group of advisers attending the Johannesburg roadshow that their clients needed someone they could trust, and that advisers added value by interpreting reams of economic and financial market data in the context of each client’s circumstances. One of the most valuable roles advisers perform is to help clients interpret and respond to short-term market noise, thus protecting long-term portfolio returns. Glacier International illustrated the impact of this market noise using various indices.
As an example, the one-year rolling return on the MSCI Emerging Markets index, starting in 2010, ranged from -5% to 25%. The spread narrows over longer rolling return periods of three, five and 10 years. “If we focus on the long term, the noise disappears, and our growth assets actually become less risky,” Wilson said, before vacating the podium for Richard Garland, MD Global Advisor at Ninety One. His task was to consider decoupling or rebalancing portfolios amidst soaring financial market volatility.
AI bubbles, conflict and volatility
Garland, who has been working with financial advisers for just over four decades, asked the audience to use the conference’s digital platform to share a phrase or word that was ‘top of mind’ as the second quarter of 2026 drew near. The word ‘volatility’ emerged as a clear winner domestically, but a word cloud drawn up by the asset manager a few weeks prior included phrases like AI bubble risk; market concentration; Middle East conflict; oil supply shock; and Trump.
The presenter promised to share a global perspective on what advisers were doing with client portfolios, but first turned to some geopolitical issues. He said President Donald Trump was becoming a bigger issue, with decisions taken in the United States (US) spilling beyond its borders and affecting economies and financial markets globally. The turmoil was such that The Economist recently ran a cover under the headline “Operation Blind Fury” above an editorial that was sharply critical of the war in Iran and Trump’s role in it.
Investors will have to make sense of US policymaking in the context of the upcoming mid-terms, set for November 2026. According to Garland, the Iran-Israel-US conflict and resulting inflationary pressures could have a big influence on that election, possibly delivering a House and Senate majority to the Democrats. “Gas prices have gone up, inflation pressures are building and the US Federal Reserve did not bring rates down,” he said. South Africans will be painfully aware of the first point, as April 2026 fuel price increases tear into household budgets.
Concentration and valuation risk
These geopolitical and macro factors are feeding into financial markets that already exhibit heightened concentration and valuation risk. The top ten companies in the S&P 500 and the MSCI ACWI (All Country World Index) represent 40% and 25% of the indices respectively. “Just look at these valuations; these markets are expensive,” Garland said, sharing a graph of the 12-month forward PE ratio of the MSCI ACWI showing 19 times presently versus an average of around 15 times.
Adopting an investment style is one way fund managers navigate equity selection. Growth and value stand out as the primary styles alongside quality, but in practice asset managers might use creative multi-factor frameworks that blend these styles. Examples include Ninety One’s four-factor approach or PSG Asset Management’s 3M approach, which combines moat, management and margin of safety.
Garland said advisers and institutional investors who were fed up with volatility were asking for core equity exposure through a balanced, less style-driven approach. “Investors want to get an excess return, but they do not want a huge tracking error against the index,” he said, explaining why this desire could not be met by passive index trackers.
As luck would have it, Ninety One’s four-factor approach fits that core brief. Last year was good for both growth and value styles, with growth holding ground year to date to 31 March 2026, despite a sell-off among some of the big technology counters. Two further charts illustrated the implausible outperformance of value versus the implausible underperformance of quality over 25 years. Garland argued that style-based funds should not be at the centre of clients’ portfolios, but rather serve as satellites to the core.
Achieving geographic diversification
At this point, the presentation segued into the geographic make-up of equity portfolios, and some musings on whether US equities were at a peak. The first observation was that foreign holdings of US equities, mutual funds and money market funds had reached the highest level since 1968, at around 32%. Garland warned that US equities had outperformed for 15 years versus the long-term market cycle average of just eight years, but added that investors discount the US market at their peril.
Rather than abandon the world’s largest economy, investors were encouraged to rebalance their portfolios to improve their exposure to opportunities in international and emerging markets (EM). In fact, European, international and EM equities have produced materially higher returns than the US market in 2025, with 2026 promising more of the same. The ongoing trend of the US dollar weakening against a basket of trade-weighted currencies is among the compelling arguments for considering offshore equities at this time.
Recent fund manager surveys show that global investors are going underweight the US while increasing exposures to commodities, EM and Europe, and Ninety One expects this trend to continue. US investors, in contrast, are typically overweight US equities and underweight international. “They still have this crazy home bias,” Garland explained. Typical US wealth manager equity portfolios have over two-thirds in US equities, with around 18% in international developed markets and just 9% in EM.
Should you invest more in the US of A?
Advisers were encouraged to discuss international investment exposures with their clients. The big question, as always, is whether they should invest more funds into the US or be looking to allocate away from the US into commodities, EM and Europe.
“Our very strong recommendation is you take this opportunity, with markets selling off, to reallocate your clients,” Garland concluded. “Because once this war in Iran ends, you are going to see a market rerating; the dollar will weaken; and you will probably see EM and Europe coming back strong.”
Writer’s thoughts:
Geopolitics, valuation stretch and volatility are pushing advisers to look beyond style bets and think harder about portfolio balance. How are you adjusting your clients’ equity allocations in response to US concentration and valuation risks? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
