A new generation of investors are starting their careers with artificial intelligence on their side as not only an investment trend that offers immense return potential but also a critical portfolio management tool.   

At the Top1000funds.com Fiduciary Investors Symposium, professionals from Singapore-based global investors GIC and Temasek said both sovereign wealth funds are using AI extensively in portfolio management after taking significant steps to integrate it into their operations.  

One of the most common uses for AI in GIC’s investment team is summarisation, but vice president and quantitative strategist Kah Thong Loh said the team sometimes refers to it as “opinion mining”.   

“This really helps us to focus on the key insights in this information-overloaded world,” he told the symposium in Singapore. “For example, our public equity department typically uses it to interpret the annual reports, management call transcripts and other alternative data.  

“And some of our private strategy teams use it to draft the investment underwriting reports or use a list of AI-generated questions to assess the deal more thoroughly by asking tough question that generated by AI.”  

These exercises are done via the fund’s bespoke ChatGPT-like bot, ChatGIC, which ensures a secure environment that prevents its proprietary data from being used to train the underlying GPT model.  

GIC is also conducting research into various AI topics to explore their potential in portfolio optimisation in collaboration with Ortec Finance. For example, it is exploring reinforcement learning – where the algorithm learns to make optimised decisions based on reward or penalty signals in an environment – as a technique to help create investment strategies more adaptable to market volatility.   

“What we think is that reinforcement learning agents can potentially replace the traditional methods such as mean variance optimisation [and] Markowitz Efficient Frontier, by dynamically adjusting our portfolio allocations through different paths using more complex portfolio objective, different reward function, and most importantly, dynamic constraints that can be scenario driven,” Loh said.   

Loh said that reinforcement learning can help an investor capitalise on short-term opportunities, and that the investment approaches it generates can often provide returns on par or higher, with lower risks compared to traditional models.     

Temasek vice president of artificial intelligence strategy and solutions Wei Chin Tang said the fund has a centralised program called AI@Temasek which helps to align thinking across the organisation on AI.  

This includes internal considerations like what the technology means for workflow management and investment decision-making, but also what it means externally for Temasek’s portfolio companies.   

“We work very closely with our portfolio development group. These are the guys that look after the large Singapore-based holdings we have, [which is] roughly half of our portfolio,” Tang said.   

“How can we identify and mitigate against the risks that AI could arise, but also what are some of the opportunities that our portfolio companies should perhaps be moving a bit faster [on].”  

Tang said Temasek’s portfolio companies under the AI thematic can be broadly put into four buckets. The first three are AI enablers, which create the technological infrastructure like chips; AI adopters, such as SaaS companies that incorporate AI to generate revenue uplift and product loyalty; and AI natives, which are the new companies that this technological era will eventually create.   

But Tang said the fourth and final bucket is one that holds great potential value. 

“That is, how can our existing incumbent companies benefit from AI? We do think that a lot of the value will come from the application of AI within some of these businesses,” he said, adding that Temasek is working with them to drive productivity and a competitive edge with AI adoption.   

“By adoption, it’s not just how many POCs (proof of concept) we’re putting out, or how many GenAI applications we have.  

“It’s really looking inward at which domains within the business could potentially be transformed and going through that…change management process.” 

The volatility triggered by making major decisions and then “changing your mind a day or two later” doesn’t work for pension funds. In a sharply critical address of the Trump administration, CEO David Bronner, whose tenure at the $48.7 billion Alabama Retirement Systems stretches back over 50 years, highlighted how the investor is already seeing the consequences of Trump’s strategies manifest in the portfolio.

“Big institutions don’t work well with instability,” he said, speaking during a recent board meeting and report on three month returns at the Montgomery-based pension fund.

“When you got 21 per cent returns for the previous 12-months of the fiscal year and you are now getting negative, and the only thing you can hang you head on is that you are less negative than others [it shows] we have a whole new game that I’ve never seen in my lifetime. Nothing compares to what is bouncing balls right now. We are flying blind in my opinion.”

Bronner highlighted key areas where the government’s “sledgehammer” policies are triggering instability because of the ripple of unthought consequences. For example, dramatic cuts in US International Agency for Development, USAID, the largest provider of humanitarian food aid in the world, will have a profound impact on US farmers whose corn, wheat and rice is sold in bulk to the government for the program.

“You can’t stop the food you are buying [to give away] without effecting every farmer in the country, because you will effect the prices,” he said.

In another example, Bronner reflected on the impact of firing Yosemite National Park employees will have on the experience of visitors to the popular vacation destination in California’s Sierra Nevada. “There has been no study of how it effects the public that want to go to park,” he said, citing potential impacts like long queues if the number of entrances to the park are reduced.

Bronner also called out Elon Musk’s comments in an Oval office press conference in February when he said 150-year-old people still claim social security benefits. “It’s just nonsense,” he said, adding that checking processes around this was a key role of the Alabama organisation. “This is part of what we do here. We check.”

He also noted the impact of geopolitical instability triggered by America no longer sticking with long term allies. Countries that don’t have nuclear weapons now question if they can trust the US to support them. Meanwhile it will take Europe time to rebuild its depleted military.

“My point is, countries that don’t have nuclear weapons are going to be hell bent on getting some,” he said.

Cash pays in the current environment

CIO Marc Green explained that the fund is prioritising a large allocation to cash (8 per cent) in the current environment, and ensuring diversification. Although the pension fund “has bullets to shoot” Green said he wasn’t ready to pull the trigger by adding more to the 62 per cent equity allocation.

One trade that has performed well is put spread collars. The substantial position is now “maxed out” on the downside. “It is a good tactical trade, I wish we had more out but usually we do it over time and it has all happened so fast.”

He warned that in a climate where “nobody knows the rules of the game” investors are starting to see some earnings estimate revisions.” For example, Delta Air Lines has just revised its first-quarter profit estimates downward in a reflection of people retrenching.

“People need certainty to make informed decisions,” said Green.

He reflected that the Trump administration “will start to feel the heat” from corporate America. The President is planning to meet CEOs of Fortune 500 companies.

Green warned off untraditional assets like crypto playing a role in the current volatile market, saying the digital currency is best viewed as a trading vehicle. Alabama has no direct exposure in digital currencies.

“Our view is that it is a leveraged risk asset. It wasn’t a good hedge in 2022 and in trying times does not diversify very well.”

“There’s nothing behind it,” concluded Bronner. “It’s based on somebody else thinking they are going to sell to somebody else at a higher price.”

Staying diversified is the best way for Canadian pension funds to navigate the impact of US tariffs and the looming trade war that has just ratcheted up since US President Donald Trump announced tariffs on Canadian steel and aluminium exports to the US.

Policy might be reversed instantly; it’s difficult to know if tariffs will benefit the US at the expense of Canada or where the impact will be most keenly felt in the global economy, said Peter Lindley, president and chief executive of $26 billion OPTrust, which invests and administers an Ontario-based defined benefit plan with 114,000 members.

Lindley said that from an economic perspective, Canada’s manufacturing sector looks particularly vulnerable to tariffs. At least on the assumption that the Trump administration is using trade barriers to encourage onshore manufacturing and energy production. But he warned against inefficient tactical positioning in an environment where things can change quickly and the rationale for tariffs is unclear. It’s also possible that tariffs offer opportunities for Canadian corporates to think differently and diversify so they are less reliant on the US.

The right level of diversification

Ensuring the right level of diversification is central to strategy at OPTrust which has just reported its latest results of 9.6 per cent and a fully funded status for the 16th consecutive year. The portfolio is constructed to ensure a “goldilocks” level of risk that both meets the fund’s objectives (investment returns account for more than 70 per cent of the benefits paid to members) and ensures the right level of diversification so that no one element of the portfolio dominates.

Strategy is shaped around three key elements Lindley likens to the legs of a stool comprising a core allocation charged with generating returns and a liability hedging portfolio tasked with reducing overall risk in the portfolio. An allocation to risk mitigation that has included a significant, return-driving overweight to gold over the last year is designed to reduce negative tail events that can unexpectedly bite.

The pension fund also runs a Total Portfolio Approach, TPA, whereby public market allocations can be dialled up or down in relation to how other elements of the portfolio are performing. For example, if an allocation to an Australian asset is performing strongly, TPA allows the team to reduce exposure to Australian equity.

OPTrust is also supported by a tactical approach. For example, the investment team will change the liability hedging ratio depending on the level of interest rates – it was decreased significantly during the pandemic when interest rates went to zero. “This is one area we are actively tactical,” he says.

Another area of the portfolio where tactical moves pay off is currency hedging where the team currency hedge back to Canadian dollars. But strategy is not dogmatic and only done if it makes sense depending on the value of the Canadian dollar. The team might decide to leave more in the US dollar account in the risk mitigation portfolio as a precaution in times of stress when there is a flight to the dollar, for example.

Private markets pay

Like other investors, OPTrust has benefited from returns in US public equity where tech stocks have powered the index higher.

But Lindley singles out private equity, real estate and infrastructure as enduring champions of long-term success in the core allocation. Something he attributes to fact it is possible for investors to add value in these allocations by managing the asset directly. “When we invest, we take an active role to help them become a better company,” he says.

The allocation also provides valuable diversification as different elements provide different exposures to inflation, interest rates and return-type characteristics.

OPTrust targets zero portfolio emissions by 2050 and achieved an 11 per cent reduction in emissions intensity last year. Sustainability reporting is one area the fund takes an active role in portfolio companies, engaging to encourage companies to improve their reporting so the team can better understand the risks. “I feel we can add a lot of value for companies in the mid-market segment and growing stage to help them understand their carbon exposures and physical and transition risks. We can make a difference here.”

But Lindley say TCFD reporting is only part of the story. He is also mindful that the policy direction could change in Canada after the election. Even in Europe he notices more of a focus on business development and growing the economy than protecting the environment.

Green investments have seen good returns including star performing renewable energy investments in Spain and green bonds, he concludes

A private market equivalent benchmark is superior to either peer group benchmarks or a public market equivalent in measuring private equity and infrastructure manager outperformance, according to Frederic Blanc-Brude, director of Scientific Infra & Private Assets at EDHEC Asia Pacific.  

Speaking at the Fiduciary Investors Symposium in Singapore, Blanc-Brude said using a combination of private market benchmarks, the relevant cash flows and net asset value, and a well-established methodology known as direct alpha, can reveal a new perspective on manager outperformance. 

Referring to new research, Do private asset funds generate alpha, he showed that on average private asset managers do not deliver alpha if they are benchmarked against the appropriate index.  

It shows that private market risk is the primary driver of returns in private asset funds. Further asset allocation alpha is positive or in other words fund managers create value by taking contrarian bets on specific sectors. 

The paper looks at how to measure alpha in a way that will greatly improve how private markets managers are selected, according to Blanc-Brude, with the current method inferior due to a forced trade-off between a robust peer group and granularity. 

EDHEC estimates that the private asset market is made up of millions of companies across 150 countries with combined assets of $65 trillion, and Blanc-Brude argues “a more prudent approach to selecting these managers” would be to use a benchmark for this market made up of the underlying companies. EDHEC has derived two benchmarks – the private2000 and infra300 indices – which are based on a robust asset pricing model that reprices one million companies monthly. 

“Because so far, we have been looking at our peer group of funds, we’ve been conflating two things, the beta of the fund, in other words how much is exposed to this private asset market, and the alpha of the manager, how much they beat the market,” he said. “It’s all mixed together because you can’t tell which is which. And the prudent investor should try to select fund managers that can at least deliver the market, deliver the beta of private equity, and ideally do better.” 

Blanc-Brude dismissed the idea of using a benchmark made up of a public-market equivalent, saying “the only information that gives you is if you’re better of investing in an ETF versus private equity”. 

“Which is interesting, it’s not zero information, but that’s all it’s going to tell you. It’s certainly not going to help you to find the best manager.” 

“So in order to select the best managers that are the most likely to create value, you should be using an index which allows you to distinguish between their exposure to a market, which is the market they invest in, this private market, and which part of what they do is outperformance.” 

The study also segments managers into four categories according to positive or negative alpha and positive or negative beta, noting there are those that are “quite special” who have negative beta but positive alpha. 

These are really those who are managing to create value without getting too much market risk exposure.  

After years of underperformance the Chinese stock market had strong gains at the beginning of 2025, giving investors confidence that the country might be getting some of its pre-COVID mojo back.  

While underlying concerns about the world’s second-largest economy such as weak consumer demand still persist, the A$170 billion Aware Super said China is too significant a market to not invest in. 

“It’s really hard for any global investors to completely ignore China,” head of equities Agnes Hong told the Top1000funds.com Fiduciary Investors Symposium in Singapore.  

“I do think, though, that there’s been a bit of a shift recently in investment sentiment.  

“In late last year, we are seeing a lot of inflows back into China, especially with the ADRs (American depositary receipt) list in the US away from some of those EM ex-China products.” 

Hong also made the distinction between the Chinese market rallies in last November and this year. While the former was driven by top-down stimulus policy announcements, the latter is related to bottom-up factors where investors are re-evaluating Chinese companies after DeepSeek launched its breakthrough AI model.  

In February, Chinese president Xi Jinping also met with business leaders in the country – including Alibaba’s Jack Ma, who has been away from the limelight in 2020 – in a signal that the nation is shifting to a friendlier stance towards the private sector.  

That was followed by more supportive economic policies, announced in the nation’s top annual political and social meetings the Two Sessions in March, to boost consumer spending and stabilise risky areas including real estate and local government debts.  

“You’ve got one hand, the bottom-up rally, and then the other hand supported by the government policies. So that’s why I think there’s a lot of sentiment that [in] this rally, the momentum could have room to grow,” Hong said.  

But due to the complexity of the Chinese market, Hong said it is critical for allocators to recognise that how they gain access to it is just as important as the capital allocation. Choices like onshore vs offshore equities, active vs passive, and state-owned enterprises or the new economy including service-led sectors, all matter.  

Aware Super was one of the first Australian super funds to receive a QFII license in 2016, which allows foreign investors to participate in mainland China’s stock market. Its public equity exposure is far greater than its private equity exposure and is mostly managed by EM and global active managers both onshore and offshore.  

“We have to go down to the granular level [when investing in China],” Hong said.  

“It’s very dangerous to paint a whole country or even a whole sector with a broad stroke. So what we are all about is selectivity over broad beta. As long-term investors, we are looking at some of those security selection opportunities.” 

UK investor Coal Pension Trustees, which oversees about £20 billion of investments in Mineworkers’ Pension Scheme and the British Coal Staff Superannuation Scheme, is an equity investor in China but also has exposure to liquid credit.  

Chief investment officer Mark Walker said it is somewhat an “unusual” fund, in the sense that it has a mature profile but the British government is its guarantor. It still takes a lot of investment risk, and in 2018 China was the perfect place to get it.  

Today, around 12 per cent of Coal Pension Trustees’ private equity portfolio is still in Chinese funds, but it stopped committing new capital three years ago.  

“We pay out in pensions about £1.6 billion a year, so our payout ratio is about 8 per cent. Cash flows are absolutely critical,” he said.  

“The biggest issue with China, and actually legacy private equity more generally, for us, is not whether we still think we’ve got good investment, but when we actually get the cash back. 

“We have to sell over a billion pounds of assets every year just to pay pensions, so if we don’t get the cash flow from Chinese private equity, in this case, then we have to get it from somewhere else.” 

Despite the uptick in anti-ESG sentiment that’s come with Donald Trump’s return to the White House, large institutional investors are certain that innovations in transition technology will continue and that the broader world has not changed course on the journey to decarbonisation.  

“It’s odd, and certainly you get mixed signals,” said T. Rowe Price’s US-based investment director of private equity, Orlando Gonzalez, at the Top1000funds.com Fiduciary Investors Symposium in Singapore.   

“You get a lot of messaging around increasing drilling, increasing the use of fossil fuels, reducing subsidies for individual taxpayers for electric vehicles, and we’ve seen that for some time across some of the red states in our country. 

“But then you are also seeing…a Tesla dealership being set up on the South Lawn of the White House.” 

T. Rowe Price’s private equity unit has significant investments in late-stage venture capital – firms that are two to four years to an IPO. Its sustainability-related private investment is US-centric and includes areas like battery storage. 

But despite the uncertainties stemming from politics, Gonzalez said the US is slowly but surely increasing its EV adoption rate, while in other areas of the world like China and some parts of Europe the adoption rate has surpassed 50 per cent.  

“We’re heading in that [electrification and decarbonisation] direction, albeit it’s going to be a bumpy ride for the next just under four years,” he said.  

The C$473 billion Caisse de dépôt et placement du Québec (CDPQ) is also firm in its position that all significant investments need to pass through its sustainable investing approach.  

The Canadian pension investor has a target of investing C$54 billion in low-carbon assets by this year, which it is on track to meet. Managing director and head of Asia Pacific Wai Leng Leong said there has been no shortage of sustainability-oriented opportunities for CDPQ to meet its commitments, with a focus on decarbonising the real economy. 

One example is réseau express métropolitain (REM) which is a public-private partnership between CDPQ’s subsidiary – CDPQ Infra – and the governments of Quebec and Canada to design, build and operate a 67km light speed rail system across greater Montreal. It is entirely electrified and automated and is reportedly the least expensive new public transit system built in North America. 

“A lot of us are here sitting in Asia thinking ‘what’s the big deal’? But it is a very big deal in Quebec, because that’s the largest public infrastructure project in over 50 years,” Leong said.  

T. Rowe Price’s Gonzalez observed the needs for similar kinds of public-private partnerships in the US, especially across water, transportation and electric infrastructure.  

“[Infrastructure] has really been an area where we’ve under invested for decades,” he said. “One, it creates lots of jobs in the [US] economy – which is doing well, but could certainly do better.” 

“[Secondly], it’s an area where we’re bleeding a lot of resources. By improving the infrastructure, we could really have an important climate impact as well.”