How to build a resilient investment portfolio amid global geopolitical shifts

In a world marked by increasing economic interdependence and market volatility, wealth diversification remains an indispensable strategy for investors.

By balancing risk, seeking new opportunities and staying ahead of market trends, individuals can build resilient portfolios.

Geographic diversification

Allocating investments across global markets helps mitigate risks associated with regional downturns.

Emerging markets in Asia, Africa and Latin America continue to show promise due to rising consumer bases, technological adoption and infrastructure investments. For instance, India and Southeast Asia have become hotbeds for innovation and manufacturing. Diversifying into these markets not only spreads risk but also captures growth driven by urbanisation and digital transformation.

Developed markets, such as Europe and Japan, provide stability with sectors like renewable energy, pharmaceuticals and industrials leading the charge. These markets offer lower volatility and serve as a counterbalance to high-risk regions.

The tech touch

Artificial intelligence and machine learning are revolutionising how portfolios are managed. Automated platforms analyse massive data sets in real time, helping investors optimise allocations, identify emerging trends and mitigate risks.

As we head into 2025, expect these technologies to play a more prominent role, offering precision and cost efficiency previously unattainable through traditional advisory models.

Rise of ESG investments

Sustainability has become a significant driver of investor behaviour. Portfolios aligned with environmental, social, and governance (ESG) principles not only meet ethical standards but also deliver strong returns.

For example, funds focusing on renewable energy, clean water technologies and sustainable agriculture are gaining traction globally. In the next year, ESG is expected to transition from a niche to a mainstream investment strategy.

Where to invest in 2025

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Appeal of alternative assets

Beyond equities and bonds, alternative assets provide diversification and unique growth opportunities. Commodities like gold and silver act as a hedge against inflation and currency devaluation.

Private equity and venture capital offer exposure to high-growth sectors, including biotech and green technology. Additionally, infrastructure projects, such as smart cities and renewable energy installations, are expected to deliver steady returns in the long term.

The allure of high-risk, high-reward ventures is undeniable, particularly in sectors like blockchain, FinTech and AI. The global blockchain market size is projected to grow to $248.9 billion by 2029 from $20.1 billion in 2024 at a compound annual growth rate (CAGR) of 65.5 per cent during the forecast period, according to a July report by research firm MarketsandMarkets.

While these investments carry volatility, allocating a small percentage of a portfolio can yield exponential returns. A balanced approach, with a mix of traditional assets and speculative ventures, ensures both security and growth.

Key strategies for 2025

1. Sector-specific focus: Technology, health care and renewable energy are poised to be key drivers. Global IT spending is forecast to reach $5.74 trillion by 2025, according to Gartner, while health care advancements, particularly in telemedicine and wearables, are also recording strong growth. Meanwhile, the International Renewable Energy Agency has called for annual investment in renewable capacity to triple from a new record high of $570 billion in 2023 to $1.5 trillion every year between 2024 and 2030 to keep 1.5°C target within reach.

2. Understanding global policy trends: Policies like the European Green Deal, which aim to promote sustainable funding, will reshape investment landscapes. Interest rate policies in the US and Europe are expected to influence capital flows, requiring vigilant monitoring.

3. Hedging against inflation: Inflation rates are expected to stabilise about 3 per cent to 4 per cent globally. Assets like Treasury inflation-protected securities and real estate are forecast to deliver great returns, acting as reliable hedges.

4. Utilising currency diversification: Holding assets across major currencies, such as the euro, yen and Swiss franc, reduces risks associated with foreign exchange volatility. The eurozone economy, for example, is expected to grow at 2 per cent annually, offering a stable counterbalance to riskier regions.

Risk management

While diversification reduces the impact of individual market downturns, it does not eliminate risk. Key practices include:

● Regular portfolio rebalancing: Regular rebalancing helps maintain the target asset allocation, ensuring portfolios align with evolving market conditions. In 2025, financial advisers recommend reviewing portfolios annually or after major market shifts to optimise performance and reduce risk.

● Due diligence: Understanding the economic, political and regulatory risks of investment regions is crucial for informed decision-making. Markets like Asia and Latin America offer growth but require careful evaluation of political and economic stability.

● Behavioural discipline: Maintaining discipline during market volatility helps avoid emotional reactions, which can lead to poor investment decisions. Studies show investors who stay calm during downturns often achieve better long-term returns.

As we prepare for 2025, investors must adopt a dynamic and informed approach to wealth management. Combining traditional principles of diversification with emerging trends provides a robust framework for success. Staying proactive and adaptable will be critical in navigating the complexities of the global financial landscape.

Jose Thomas is director of wealth management at Elixir Wealth Private

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”