The second Trump administration has so far brought a lot of things: market shocks, volatile trade policies, and turbulent foreign relationships. But beyond the chaos, renowned geopolitics expert Stephen Kotkin said Trump has an unwitting role to help the world rebalance and reach a “new equilibrium” in the global order.

Professor Kotkin, who is a senior fellow at the Hoover Institution at Stanford University, said the initiatives Trump set in motion signals that the US is retreating from the world, but it is not about the world’s largest economy giving up its position as the world leader.

“This is about a rebalancing of the costs and benefits, and it’s happening, and it’s a mess, and Trump’s version of it is going to maybe even fail to produce a new equilibrium, but it’s going to break the current equilibrium that needed to be broken.”

In this live recording from the Fiduciary Investors Symposium, hosted by Top1000funds.com in Singapore in March 2025, Professor Kotkin unpacks what’s next for the US and the world in conversation with Conexus Financial founder and managing director, Colin Tate.

In the week since ‘Liberation Day’, and the mounting of prolific and many large tariffs, markets have witnessed volatility not seen for five years. 

The VIX, a popular measure of the stock market’s expectation of volatility, closed on Monday up 209 per cent on a year ago, a five-year high. In the past 20 years it has only been higher two other times, October 31, 2008 and March 20, 2020.  

While some of the success of American capitalism in the past has been due to the process of creative destruction, it hasn’t typically been at this scale, or inside government, observes Andrew Palmer, CIO of Maryland’s state retirement fund. 

“It definitely reduces confidence,” he says in relation to the volatility in markets. “It is going to impact the behaviour of consumers, businesses and investors, just because of the uncertainty.” 

In Palmer’s state, where there is a high concentration of federal government jobs, he says there is already anecdotal evidence of waning retail and traffic activity on the streets.  

A bigger concern according to Palmer is a potential seismic shift among long-term investors to retreat from a US-concentrated portfolio. 

“The bigger picture is that we have gone through a decade or more where the US has been the destination of choice for capital – that might be unwinding. There is a lot of money that is still here that might decide to go home,” he says. 

“This is undoing the benefits of diversification because it’s forcing investors and business to be more geographically focused so that [diversification] utility is not there. So we may have to lower return expectations or accept higher risk.”  

The dollar question

Others reflect that although the impact of tariffs is very distracting in the short term, a much longer-term issue is also in play around the future role of the dollar in global commerce.

“Tariffs feel like a short-term issue we can likely look through; longer-term I am focused on whether this signals a possible rewiring of the financial system and global economy. Is this part of a bigger shift to de-dollarisation and a change in the role of the dollar in the global financial system?” asks Richard Tomlinson, chief investment officer of the UK’s LPPI.

If trends that are already visible continue, such as the US becoming more isolationist, or uptake in the digital RMB in cross-border settlements, or the use of other digital currencies, it could lead to a devaluation of the dollar and threaten its role as the world’s reserve currency. The long-term implications for investors could include more appetite for hard assets or even a reappraisal of the extent to which US government bonds are a haven asset, he suggests.

At Railpen, the £34 billion fund for the members of the UK railways pension schemes, ensuring liquidity on hand and looking for opportunities are key priorities, explains Mads Gosvig, chief officer, fiduciary and investment management.

“We are trying to make sense of what is going on and figure out if there is a bigger plan around, say, depression of the dollar. It’s also conceivable there isn’t a plan. In the short term, we are focusing on how our portfolio is running and ensuring we have enough liquidity so that we can meet payments. In a second step we are watching for any exposure that is particularly struggling in this context, and finally identifying any opportunities which may arise. If we have the liquidity and the risk levels are right, we will consider deploying money into this.”

The Malaysian sovereign wealth fund Khazanah Nasional has traditionally had an Asian emerging market focus, with offices on the ground in China and India among others. However, in the past few years it has been upping its developed market exposure to look more like western allocators and now has around 40 per cent allocated to the US. 

“But I think this whole discussion…makes us take a pause,” says Wei-Seng Wong, head of strategy at Khazanah. “Is that the right way to think about it? Probably not anymore. So we really have to relook, not necessarily from a China exposure or US exposure, but really understand, what are the trends? What are the return streams that we want to look at vis-à-vis this bifurcated world.” 

While the volatility in stock markets continues to confuse traders, it’s also an opportunity for prudent investors, many of which have abundant liquidity.  

CIO of Canada’s OPTrust James Davis says managing risk is critical and has to be the centrepiece of the fund’s investment philosophy. This comes with close portfolio monitoring and the ability to move quickly, which is enabled by the fund’s total portfolio approach and a huge benefit in volatile environments. This flexibility allows it to allocate in an absolute sense and not relative to a benchmark. 

“Right now we have an abundance of liquidity,” he says. “That is important given the uncertainty in this current environment.  

“This kind of environment in the public markets can create opportunities. Volatility and uncertainty allows for bargain hunting, and more differentiation.” 

OPTrust was an early mover into gold, and last year had more than 6 per cent allocated. Davis says it also dialled down credit exposure quite significantly at the end of last year due to tight credit spreads and made geographical weight decisions in the equities market. 

“They [the TPA group] have been concerned with the US, especially the concentration risk and exploring opportunities outside of the US,” he says. 

Portfolio dynamism 

Bernard Wee, group head of markets and investments at the Monetary Authority of Singapore (MAS), says history shows that asset owners have to be mindful of different regimes. 

“If you look back at the decades that were horrible, 1970s and the 1940s, they were characterised by a lot of political uncertainty, a lot of conflict, and those are exactly the same forces, the same things that are happening right now,” he told delegates at the Top1000funds.com Fiduciary Investors Symposium in March. 

“So if we think that our strategic asset allocations are something that we can just set and forget, that’s something that I would not presume to be true for the coming few years.” 

The key, he says, is to be more granular in asset allocation and look for more differentiated characteristics in countries and sectors within asset classes. 

Multiple investors, including Canada’s BCI and Singapore’s MAS indicated in conversations with Top1000funds.com that uncertainties from trade wars and deglobalisation are impacting their scenario analysis.  

BCI’s base case is a recession, and MAS is doing scenario analysis for stagflation, an environment in which few assets do well. 

Meanwhile, Mubadala Investment Company said uncertainties caused by trade wars and political populism mean investors need to change their mindset to recognise that “volatility is the new norm”.  

The Abu Dhabi sovereign wealth fund is weatherproofing its portfolio for multiple macroeconomic scenarios.  

“Whereas in the past we would look at two scenarios, a base case, [and] a downside case just to have a plan B,” deputy chief strategy and risk officer Marc Antaki said at a Hong Kong conference last month. “We cannot afford that binary view [anymore]. The scenarios are not that obvious, so we look at five, 10 scenarios.”  

“We need the portfolio to be able to be resilient under all types of scenarios and be dynamic.”  

In this regard, dynamic asset allocation is becoming more important both for portfolio adjustments on the up and downside, and also for the information short-term movements might give about the long-term direction. 

Antaki said it also highlighted the rising importance of investor partnerships as a way to share risks and create common value, adding investors need appropriate and perhaps different resources to navigate more complex underwriting, due diligence and regulatory requirements in the investment process.  

The most important thing for Mubadala as a long-term investor is “staying risk-on” despite this period of turbulence, Antaki said.   

“At the end of the day, you cannot make money, shape the world or participate in transformation by sitting on the sideline. But at the same time, you don’t put all your bets on in one year,” he said.    

“So stay consistent, deploy to the cycle, and be dynamic.” 

APG Asset Management is bullish on Asia’s growth prospects, with local CEO Thijs Aaten saying he would like to eventually see half of the Dutch pension fund’s real assets invested in the region. 

The fund’s Asia operations are mainly conducted out of its Hong Kong office, and investors can reach countries representing almost half of the world’s GDP and around 80 per cent of the global GDP growth within six hours of flight from the city. Aaten referred to the zone as “the Hong Kong circle”.  

“There’s a lot of growth in the region. Another statistic is that [among] the 100 largest cities globally, 69 are in that Asian circle,” he told the Fiduciary Investors Symposium in Singapore.  

 “Also in that circle there’s probably a billion people moving towards the middle-income level. That’s very different in Europe. 

“Given that so much is in this in this Asia circle… That’s why I struggled to understand why you would follow a market index and invest 70 per cent of your money – if you look at the MSCI World – in the US.” 

The benefit of being geographically diversified will only be more pronounced during uncertain times, Aaten said.  

“It’s very difficult to predict what’s going to happen. The only thing that I know is if I spread my eggs over a bit more baskets, then I’m less exposed to idiosyncratic risks,” he said.  

But while the overarching trends in Asia are interesting, Aaten said APG has a granular view towards investing in specific countries. For example, the demographics of Japan and Indonesia are vastly different and so are the investment opportunities that come with them.  

The fund has a culturally and linguistically diverse workforce who can tap into these nuances within Asia, Aaten said.

“That’s also important when you do private investments – building that network where the opportunities come from. [Because] you’re not going to an exchange and clicking on your order to get it executed.” 

Several global pension funds have retreated from Asia this year, including Canada’s AIMCo, which shut down its Singapore office for cost reasons, and Ontario Teachers’ Pension, which is winding down its Hong Kong operations in the next 18 months. The latter still has offices in Singapore and Mumbai.  

APG’s Hong Kong office has operated for close to two decades, and Aaten said being in the region shows APG’s portfolio companies of its commitment.  

“[It shows] that we’re more than an institutional investor that steps in and out, that we’re there for the long term, and that we’re very much thinking as an owner of the company or the project that we invest in],” he said.  

APG Asia is not immune to cost scrutiny from its clients, as Aaten acknowledged that “you constantly need to justify why you are in the region and what is the added value that you bring to your client back home”. 

 The regional office needs to be conscious of the types of activities it is undertaking and recognise that its existence is expensive and its function is not index investing or back-office administration, Aaten said. He added that the fact that not all the value it generates is measurable in the form of financial returns only adds to the challenge.  

“We do have examples of investment opportunities that would have been impossible to do out of an Amsterdam office, but it’s very difficult to come up with metrics and say, ‘the office here has delivered us 60 million euros extra this this year’,” he said. 

“So it [the regional office’s value-add] is partly a belief, as well.” 

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