This is the final part in a series of six columns from WTW’s Thinking Ahead Institute exploring a new risk management framework for investment professionals, or what it calls ‘risk 2.0’. See other parts of the series here. 

In previous pieces in this series, we looked at historical and forward-looking risk events. There are a number of instructive commonalities of risk events and resulting benefits of a risk 2.0 mindset that can be drawn out.

Primacy of the market is a key driver of risk

Under a risk 1.0 lens, the economy/market is assumed to have primacy and all other actions are determined so as to optimise market outcomes. However, one consequence of this from a risk 2.0 perspective is that the singular focus on economic optimisation can, over time, create fragilities within societal systems. The pursuit of efficiency at the cost of resilience can lead us deeper into systemic risk. In addition, in some cases it is the propagation of risk events through the social system that leads to the financial impact of these events. For example:

  • urbanisation has resulted in increased efficiency by concentrating populations in smaller areas but this has also resulted in concentrated exposures to physical climate risks and increased vulnerability to other dangers (e.g., disease)
  • globalisation of food supply chains has allowed a significant increase in efficiency and profits but has created significant vulnerability to weather events in the major global bread baskets. Hungry populations are likely to cause financial losses.

An important shift when moving to a risk 2.0 mindset is therefore to move away from the system as a hierarchy with the economy/market at the apex, to a ‘flatter’ view where the health of all parts of the system needs to be thought about simultaneously when making risk management decisions.

Limits to quantitative analysis / “narratives eat models for breakfast”

Another important observation is that historical data is of relatively little use in pricing/quantifying the risks that materialise(d). As a result, a risk 1.0 mindset assumes the scenarios are technical problems that can be solved with limited long-term adverse impact.

In contrast, a risk 2.0 mindset recognises that these events are the result of the build-up of pressures that are not easily observed in historical data and are triggered by the crossing of key tipping points that are not easily reversed. This said, in most cases the process for understanding the scenarios and the important causes and effects is reasonably intuitive and, in the case of the future scenarios, superior insight is not needed to establish a reasonably vivid narrative for what is likely to happen. This highlights the need for the use of softer/more qualitative measures as part of risk 2.0 practice.

Upward sloping term structure of risk / ”inevitability”

A final set of observations particularly in relation to the forward-looking scenarios is that the risk 2.0 mindset highlights that:

  • climate change is a ‘threat multiplier’, i.e. beyond the direct impacts of climate change it can be a key catalyst for other systemic risks that would be expected to materialise over a shorter time horizon than the longer-dated impacts of physical climate risks
  • assuming no change to current economic and social probabilities, the cumulative probability of any one of these events occurring will continue to increase over time, i.e. under ‘business as usual’, some version of these events appears inevitable at some sufficiently-long time horizon.

This both supports the upward sloping term structure of risk described in part 2 as well as challenges the risk 1.0 view that systemic risks like climate change are too distant in nature to be incorporated into the current definition of fiduciary duty.

Insights gained from adopting a risk 2.0 mindset

An important result of adopting a risk 2.0 mindset is a better understanding of the key drivers of a given risk event, the broader impacts of these and the associated feedback loops and interaction effects. This is set out at a high level below for the uninsurable futures scenario described in part 5:

[Click to enlarge] Source: WTW
Another benefit is a more effective approach to risk management with a focus on transformational approaches that directly address underlying risk drivers rather than the resulting impacts of the risks. This is illustrated below using the ADAT2 framework introduced in the UHU-EHS technical paper [1] on the topic of Uninsurable futures.

Risk 1.0 Risk 2.0
Adapt–Delay

•    Focus on coping with impacts after the tipping point has been crossed, eg

–       Community-Based Catastrophe Insurance: Local schemes that pool risk and reduce administrative costs.

–       Informal risk-sharing mechanisms: Traditional community-based approaches to managing climate risk.

•    Limitations:

–       These approaches do not reduce underlying risk drivers.

–       They may be overwhelmed by escalating damages due to climate change.

 Adapt–Transform

•    Prepare society to live sustainably within a changed risk landscape, eg

–       Managed relocation: Moving communities from high-risk areas to safer zones.

–       Inclusive planning: Ensuring equitable outcomes for displaced populations, especially Indigenous communities.

•    Strategic value:

– Recognises that some areas may become permanently uninsurable.

–       Requires long-term planning, community engagement, and robust governance.
Avoid–Delay

•    Seek to maintain insurance availability through short-term fixes, eg

–       Government-backed reinsurance schemes.

–       Premium subsidies and affordability caps.

–       Improved data access and modelling using big data and remote sensing.

•    Limitations:

–       These measures are reactive and may not be sustainable as climate impacts intensify.

–       They address symptoms rather than root causes.

 

 Avoid–Transform

•    Target systemic change to prevent crossing tipping points, eg

–       Nature-based solutions: Restoring ecosystems to reduce hazard exposure.

–       Climate-resilient infrastructure and building design.

–       Insurance industry reform: Incentivizing adaptation, increasing transparency, and reducing support for fossil fuel producers.

–       Forward-planning: Red-zoning, land-use regulation, and climate risk commissions.

•    Strategic value:

–       Builds long-term resilience.

–       Reduces hazard, exposure, and vulnerability simultaneously.

–       Encourages cross-sector collaboration and innovation.

Source: UHU-EHS, TAI

A third benefit is that a risk 2.0 mindset starts by considering the system and systemic risk which means true risk management must include system stewardship. An investor with this mindset recognises that a current investment in the future public good can result in subsequent private gain and/or that reducing the likelihood or severity of systemic risks increases the value of all financial assets. This takes us from position T to U* or U in the figure below.

[click to enlarge]
Jeff Chee is global head of portfolio strategy at WTW.

[1] UNU Institute for Environment and Human Security. 2023. Uninsurable future

The Netherlands Central Bank, DNB, recently warned Dutch pension funds, insurers and investment institutions of the risk inherent in their large allocation to tech stocks. The regulator estimates institutional investors have doubled their equity investments in technology companies over the past five years, with invested capital amounting to €200 billion, over half of which (€95 billion) is invested in the Magnificent Seven.

“The value of tech stocks depends heavily on uncertain future profits, and there are growing doubts about whether these will materialise. Stock prices can also be strongly influenced by monetary policy interest rates. In addition, tech stocks are highly sensitive to factors such as geopolitical fragmentation, innovation, new regulation and antitrust cases,” warned the bank.

Against the backdrop of increasingly shrill warnings that the AI bubble could burst and puncture tech valuations, DNB warned of the risk to the country’s pension funds. At the end of July 2025, Dutch pension funds specifically had invested more than €150 billion ($177 billion) in tech companies, representing almost 43 per cent of their portfolios of listed shares and 8 per cent of their total balance sheet.

Notwithstanding the significant differences between the country’s diverse pension funds, DNB warned that “compared to January 2020, this represents an increase of almost 50 per cent. The weight of the seven large American tech companies in their share portfolio has risen even more sharply in recent years: from 7 per cent in January 2020 to 19 per cent in July 2025.”

DNB warned of the possibility of an “abrupt correction” and voiced its concern that investee companies are investing too much in AI. It also flagged concerns about the growing financial interdependence in the AI ecosystem whereby problems at one company can easily spread to others.

In response, PME Pensioenfonds, the €60 billion ($70 billion) Dutch pension fund for the Dutch metal and technology explained how it believes it is protected from the risk ahead.

Speaking in an interview on Dutch radio program ‘Money or your life’ broadcast on NPO Radio 1, Daan Spaargaren, senior strategist at PME, explained how PME safeguards its exposure by capping its individual weighting to tech stocks to 3 per cent. It means the share of tech companies in PME’s equity portfolio is currently about 25 per cent – not the DNB’s forecast 43 per cent.

“We’ve seen tech companies make up an increasingly large share of pension funds’ investment portfolios in recent years. And since those values ​​have risen dramatically, there’s also a risk that they could fall again if the promised returns fail to materialise,” Spaargaren said.

“We don’t invest more than 3 per cent of our equity in any one company – not even in any of these large companies. The Magnificent Seven currently represents about 4.5 per cent of our assets – equivalent to €2.7 billion of our assets are tied up in these companies. In a hypothetical scenario where the value of those Magnificent Seven companies to halve, we would lose approximately €1.4 billion of our assets.”

Alongside praising the role of the Central Bank in highlighting the risk, Spaargaren also stressed the importance that investors take a long-term view on key underlying trends like technology.

“The bubble is really mainly about whether those promised profits will materialise in the very short term, or whether they will actually be realised,” he said.

In other news, PME recently terminated a $5.9 billion equity mandate with BlackRock, the world’s biggest asset manager, because of PME’s different view on ESG alignment.

PME began defining its key ESG themes and ambitions in 2022.  Using this framework it constructed an ESG index portfolio in 2024 consisting of approximately one thousand companies in developed markets. Together with a focused portfolio of about 250 companies, this forms a “Portfolio of Tomorrow” in which every company is selected based on deliberate choices aimed at achieving solid returns and supporting a livable world.

“Implementing this strategy also means we carefully select and evaluate our external asset managers,” said the investor in a statement.

PFZW, the Dutch pension fund for the care and welfare sector, also terminated BlackRock in September.

Kevin Warsh’s strong views on economic governance, and his precocious nature, will hold him in good stead as he takes the reins of the US Federal Reserve at a time where concerns over cost of living, inflation and upward mobility are a test of President Trump’s second term. For investors, his views on the conflating of monetary and fiscal policy are key considerations to watch. 

Standing tall with a swagger befitting the youngest ever member of the Federal Reserve Board Kevin Warsh took the stage of the Top1000funds.com Fiduciary Investors Symposium at Stanford University last September.

A confident and powerful communicator, he spoke to the audience for an hour in a session for global institutional asset owners held at the elite university under the Chatham House rule.

In his more public addresses, however, Warsh has been critical of the Fed, and other central banks, for blurring the line between monetary and fiscal policy, calling it out as a looming threat and making the economy more vulnerable to shocks.

“Each time the Fed jumps into action, the more it expands its size and scope, encroaching further on other macroeconomic domains. More debt is accumulated…more capital is misallocated…more institutional lines are crossed… risks of future shocks are magnified…and the Fed is compelled to act even more aggressively the next time,” he said in an April speech to the G30 reinforcing the comments he gave in September.

Warsh was speaking at the Top1000funds.com Stanford event thanks to Conexus Financial’s longstanding relationship with Professor Stephen Kotkin, a leading historian and the Kleinheinz Senior Fellow at the Hoover Institution.

Warsh, who among other appointments, is the Shepard Family Distinguished Visiting Fellow in Economics at Hoover and a colleague of both Professor Kotkin and Condoleezza Rice who leads the Hoover Institution.

“Kevin cuts an impressive figure. And he has his work cut out for him. Forget about interest rate controversies: the challenges for the Fed, which Kevin and others have pointed out, are far deeper, from its non-statutory mission creep to its ballooning balance sheet and besieged models for how the economy operates,” Kotkin told Top1000funds.com following Warsh’s appointment as President Donald Trump’s nominee for Federal Reserve chair on Friday.

“And then there’s the matter of how banking regulations perversely incentivise the very systemic risk they are supposed to limit. Godspeed!”

Kevin Warsh and Amanda White

In his work and public comments Warsh stresses the importance of credible monetary policy, clear rules, honest communication with the public, and institutional accountability.

At the core of Warsh’s comments on stage at Stanford, and in speeches since, is economic governance.

In his widely touted G30 speech in April he said that strengthening economic performance requires significant improvement in the government regime. And that means new ideas and reforming key economic institutions.

“Changes in the role of the US central bank have been so pervasive as to be nearly invisible. The Fed has assumed a more expansive role inside our government on all matters of economic policy. And moved into matters of statecraft and soulcraft, too. In my view, forays far afield for all seasons and all reasons have led to systematic errors in the conduct of macroeconomic policy. The Fed has acted more as a general purpose agency of government than a narrow central bank,” he said in the speech.

“Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending.

And the Fed’s outsized role and underperformance have weakened the important and worthy case for monetary policy independence.”

A student of the late free market economist Milton Friedman while completing his undergraduate degree at Stanford, Warsh went on to work at Morgan Stanley, served as special assistant for economic policy to the president and as executive secretary of the White House National Economic Council for George W Bush.

He was appointed by President Bush to serve on the Fed board in 2006, aged only 35, making him the youngest member in the history of the Federal Reserve.

“Kevin is the definition of precocious, having studied with Friedman, George Shultz, and Condoleezza Rice as an undergraduate at Stanford University, before earning a degree at Harvard Law School, working on Wall Street, serving in the George W. Bush White House, and initially joining the Federal Reserve for a term at just 35 years old,” said Kotkin.

In a piece published by the Hoover Institution on Saturday, Rice – who has also spoken at the Top1000funds.com Stanford event the past three years – praised Warsh’s leadership, saying:

“We will benefit from his steady, principled leadership. Kevin is a dedicated public servant with the intellect, experience, and judgment to lead the Federal Reserve. He understands the central bank’s key role for the United States and our allies around the world.”

Reforming economic institutions

Warsh has long been critical of the Fed for being involved in the “messy political business” of fiscal policy, putting his money where his mouth is and resigning from the Fed board shortly after the QE2 announcement in 2010, a decision he publicly disagreed with.

Of that time, he has said that cutting interest rates to near zero in response to the 2008 crisis and seeking new ways to make monetary policy looser and bring liquidity to illiquid markets, was an appropriate “crisis-time innovation” that he strongly supported.
But he criticises the Fed for not correcting the position and continuing with QE, now a feature of central banks around the world.
“It’s no longer obvious whether monetary policy is downstream or upstream from fiscal policy. Irresponsibility has a way of running in both directions,” Warsh said in his April speech to the G30.

“Fiscal dominance – where the nation’s debts constrain monetary policymakers – was long thought by economists to be a possible end-state. My view is that monetary dominance – where the central bank becomes the ultimate arbiter of fiscal policy – is the clearer and more present danger.”

In a 2022 paper with Hoover colleague John Cogan, Warsh set out an economic governance framework that “befits the country’s new challenges”.

The paper, Reinvigorating economic governance: A framework for American prosperity, outlines potential economic reform and questions whether extreme action – such as constitutional reform – are necessary to help restore fiscal prudency and limit federal spending.

The proposed framework advocates for putting the creation and diffusion of ideas at the centre stage, including subjecting monetary policy to strict scrutiny. In particular, the paper calls for an assessment of the Fed’s regime change where it has extended the scale and scope of its activities, all the while running inflation far outside the Fed’s price-stability objective.

The paper says that a chasm between the current economic regime and a sound economic governance plan is large and growing, and recent Warsh speeches have reinforced the view that strengthening economic performance requires significant improvement in the government regime. And that means new ideas and reforming key economic institutions.

“Some may believe the biggest threat to our economy comes from outsiders who seek to change the status quo…I don’t agree…I believe the predominant risk comes from choices made inside the four walls of our most important economic institutions,” he said in the April speech to the G30.

“[In] my view, strengthening economic performance requires significant improvement in the governance regime. That means new ideas.”

 

Photos by Jack Smith

Kevin Warsh and Stephen Kotkin; Kevin Warsh and Amanda White at the Fiduciary Investors Symposium, Stanford University, September 2025.

 

For more information on the Fiduciary Investors Symposium series click here.

 

Efficiency, cost savings and less direct investment in private equity are key tenets of investment strategy at C$182 billion ($133 billion) Alberta Investment Management Corporation (AIMCo) under the leadership of new chief investment officer, Justin Lord.

Lord has been at AIMCo for 14 years, climbing the ladder to lead the public markets division before he was promoted to the helm in July last year, tasked with steadying the ship after a tumultuous 2024 when the provincial government of Alberta terminated the entire 10-member board and its CEO Evan Siddall citing underperformance and rising costs. [See Chaos at AIMCo as politicians take control].

In an interview from AIMCo’s Edmonton offices, Lord tells Top1000funds.com that centralising the investment process has been a key focus in his first six months as CIO, particularly around liquidity management in a quest to boost efficiency across the platform, add value and increase investment performance for the pension funds, endowments and insurers AIMCo serves.

“Sometimes efficiency is the easiest form of alpha,” he says.

Liquidity management supports both efficiency and the ability to allocate capital when attractive opportunities arise, he continues.

Positioning the portfolio

Lord is comfortable with AIMCo’s current liquidity levels in the context of today’s valuations and does not view markets as broadly overvalued. Still, he notes that the rapid evolution of AI presents both significant opportunity and emerging risk, and is an area the investment teams are monitoring closely alongside inflation, geopolitical volatility and trade uncertainty.

These risks aside, he believes three main factors will support asset values and markets in 2026.

AI and the proliferation of technology across industries will continue to drive capital expenditure and support growth and earnings expectations in large cap equities; a shift in monetary policy as the Federal Reserve moves to cut rates will impact asset values and fan favourable fiscal and regulatory conditions that support global economic activity.

“These factors – AI, lower rates and favourable fiscal and regulatory conditions – will ensure the continuation of earnings growth, certainly in public equities,” he reflects, adding that tactically, AIMCo remains close to home in its target asset mix.

“Where we see opportunities to deviate from our target asset allocation include infrastructure, pockets of private credit in respect to current credit spreads, and also, to some extent, real estate over the next couple of years.”

Perhaps one of the most significant changes is underway in private equity where AIMCo will increasingly chip away at direct investment in favour of fund and co-investments in a strategy designed to better tap the benefits of collaboration with private equity partners. In 2023, around 36 per cent of the private equity program was in direct and co-investments and around 64 per cent in funds.

Direct investment requires AIMCo’s own due diligence yet leading private equity firms have developed sophisticated operating platforms with expertise in areas like digitisation, supply chain management, AI applications and nurturing talent that help create value in the underlying portfolio companies on the platform, he says.

“Through fund and co-investment, we can tap into GP management capabilities that successfully operate the underlying business.”

Lord believes the diversification benefits of private equity are particularly pronounced today given private equity has underperformed public markets and benchmarks. “We view private equity as a diversified return generator in the portfolio but even more so today given the backdrop of concentration and current valuations in large cap, liquid public markets.”

He’s also bullish on opportunities and returns picking up as liquidity returns to private equity in general.

Like in private equity, he believes private credit represents a significant growth opportunity but given tighter spreads and increased competition, is being selective in this key driver of long-term value.

While other Maple 8 institutions develop a total portfolio approach, Lord explains that AIMCo’s key objective is to meet the management of individual client portfolios. Because each one has a unique and different objective, risk appetite and nuance to consider, it makes TPA challenging.

“If anything, TPA is at a client level at AIMCO where we are focused on portfolio management for individual clients to reflect their circumstances regarding risk, portfolio construction and strategies like rebalancing and hedging,” he says.

Costs were also at the heart of the decision to scale back AIMCo’s international expansion and close recently opened offices in Singapore and New York. [See AIMCo sheds more costs with NYC, Singapore offices the latest casualties]

Lord maintains that AIMCo can provide value to its clients and access to opportunities without boots on the ground in these locations. Offices in Edmonton, Calgary, Toronto and London secure the coverage and access to the curated relationships AIMCo seeks in the US, Europe and Asia, he says.

“A geographical footprint divided between Calgary, Edmonton, Toronto and London is optimal to continue to deliver opportunities.”

He does float the idea, however, of “additional internalisation” of AIMCo’s public markets operations in Alberta and Toronto. London primarily houses private asset class teams.

Lord points to high client satisfaction scores as proof that AIMCo’s investment strategy and refreshed governance is delivering for client funds.

The recent confirmation of former Alberta civil servant Ray Gilmour as CEO is a force of stability rather than symbolic of the asset manager being drawn closer to the government and political pressure.

“With the board and executive positions filled, including the recent announcement of Ray Gilmour’s permanent appointment as our CEO, there is certainly a sense of optimism within the organisation to start the year.”

Lord is also quick to rebuff any suggestion that the asset manager will bow to political pressure to invest more in Alberta: risk and return priorities must be met before investing more in AIMCo’s backyard.

“AIMCo is operationally independent from the government through all aspects of our business. Particularly as it relates to our autonomy over investment decisions which are guided by our internal processes, sound financial principles and our clients’ long-term objectives,” he concludes.

A recent visit by Top1000funds.com to Apollo Go’s robotaxi operation in Wuhan offered a ground-level view of how China is building a parallel technology system in response to US-led restrictions. The opportunity set across technology and especially AI adjacent industries is expanding exponentially, but governance and geopolitical constraints could make it hard for foreign asset owners to participate in the upside. Darcy Song reports. 

On the bustling streets of Wuhan, a white SUV looks slightly out of place. Not only because it’s diligently following the road rules in a city known for having some of the most unpredictable drivers in China where sudden lane changes and other high-risk manoeuvres are regular occurrences, but also because there’s no one behind the wheel.  

A closer look reveals two passengers lounging in the massage-enabled backseats experimenting with the in-car karaoke function. Later, the vehicle pulls into a designated parking spot near a dental clinic, its automatic door slides open to let the riders out before merging smoothly back onto the road to meet its next customer.  

The vehicle is a part of the latest generation of driverless fleet from Baidu’s autonomous driving subsidiary, Apollo Go. It hosts close to 1,000 robotaxis on the road servicing consumers of Wuhan, which was picked strategically as a major testing hub due to its extensive car parts manufacturing capacity.  

This latest model (RT6) is equipped with an in-house developed artificial intelligence model and cost less than 230,000 yuan (around $33,000) to make due to domestically-sourced automobile parts and radars. This is about one-sixth of the cost to produce a Waymo vehicle, Alphabet’s robotaxi that services the citizens of Austin and San Francisco, as Top1000funds.com learnt during a recent visit to Apollo Go’s factory. 

Each RT6 is equipped with seven sensors for environment detection, which were previously imported from the US for $100,000 per piece, says a Baidu staff member at Wuhan who requested anonymity. While there has been a significant drop in price for imported sensors, Chinese-produced ones are still cheaper and could cost as low as 1000 yuan ($143) each.  

The factory visit to Apollo Go is a keyhole to the microcosm of a parallel, self-sufficient ecosystem that China is building in the technology arms race with the US, with the ultimate purpose of freeing itself from relying on the US for crucial hardware or algorithms.  

For asset allocators, it could mean the chance to invest in an attractive thematic in a less-concentrated and richly-valued market compared to the US, as Chinese technology companies seek private partnerships to fuel expansion.  

The result is a bifurcated investor landscape. For some asset owners, governance and mandate constraints will continue to place opportunities in China out of reach. For others with fewer limits, the pressing question will be whether staying on the sidelines of investing in China carries its own risk as the next generation of tech champions mature largely outside of the Western institutional portfolios. 

The decoupling 

Signs of two parallel innovation ecosystems began to emerge between the US and China when it became clear technological dominance was crucial to the next global order.  

The battleground has been focused on advanced chips, with a slew of measures aiming to control US exports to China rolled out during the Biden administration and only accelerated under President Trump. International relations analysts suggest three critical objectives behind these measures: choking off China’s access to high-performing chips, preventing China from domestically producing alternatives, and mitigating US corporations’ losses by allowing China’s access to less cutting-edge chips.  

China, meanwhile, wants businesses to look inward for solutions. Despite Trump stepping back from the Biden-era export ban of Nvidia’s second-most advanced chip, H200, the government has reportedly asked tech companies to halt purchasing the chips as it decides under what conditions access will be allowed. It was also reported that Beijing is looking to mandate domestic chip purchases from providers like Huawei.  

A further injection of $48 billion last year announced by the Chinese government alongside major state finance institutions to the National Integrated Circuit Industry Investment Fund (better known as the Big Fund) to foster semiconductor supply chains and address critical bottlenecks, like high-bandwidth memory, is evidence that tech self-sufficiency has become an urgent objective.

The market is pushing tech companies which may aid this ambition into new heights. Moore Threads, a chipmaker touted as ‘China’s Nvidia’, surged 425 per cent in its first day of trading after a stunning IPO in December 2025.  

Appetite for foreign capital 

But outside of semiconductors, the race is wider-ranging – companies like Elon Musk’s Neuralink and robotics company Boston Dynamics are spoken about in the same breath alongside Chinese counterparts like BrainCo and Unitree Robotics.  

The presence of foreign investors can offer global visibility and facilitate knowledge sharing for Chinese companies. The latter has become more important as the state government turns conservative around protecting domestic IPs in critical technology industries.  

Apollo Go’s Wuhan branch frequently receives requests from foreign investment firms to tour its showroom, but it’s rare that the company get approvals from the local government to accommodate such trips. 

“The ideal partnership model for us in the future, should we launch our service in a new trial city, is to attract third-party investors who can bring in capital and together lobby the local policymakers,” a Baidu staff member says.  

“While the capital is important to us, we value the knowledge-sharing aspect in foreign partnerships more these days.” 

Robotaxi is another nascent yet attractive sector for investors due to its place at the nexus of AI, electric vehicle manufacturing and energy industries. While Apollo Go’s 250,000 weekly ride figure is short of Waymo’s reported 450,000 weekly trips, China is a deep market waiting to be explored.  

A taxi fare in Wuhan currently costs an average of 1.5 yuan per kilometre thanks to cheaper electricity powering the vehicles but could fall under one yuan per kilometre after robotaxi is popularised, cutting out the human cost, says the Baidu staff member. There is still huge room for growth before that objective becomes a reality.  

At the same time, Apollo Go has already launched trials of its service in Switzerland and Abu Dhabi and planned entries into the UK and Germany in 2026 through partnerships with Uber and Lyft and more overseas trial destinations like Australia and Southeast Asia in its sights.  

Investor reality 

With that said, the reality for foreign investors to tap into the well of opportunities in China is complicated due to significant government presence.   

State capital accounted for 52.5 per cent of the LP investments in Chinese private equity in 2024, according to figures from Chinese alternatives data platform Zerone, which would make a huge portion of innovative Chinese companies out of bound for allocators like US public funds which have country investment restrictions. 

Politicians from US states including Indiana, Florida, Texas, West Virginia and many more have forbidden their public funds from investing in companies where the Chinese government owns a large stake, or in the country altogether.  

Asian and Middle Eastern asset owners, though, have a different approach: Singapore’s S$434 billion ($337 billion) Temasek has 18 per cent of its portfolio allocated to China and 24 per cent to Americas, according to its 2025 annual report.  

Abu Dhabi-headquartered Mubadala Investment Company invests 13 per cent of its $330 billion portfolio in Asia, of which China accounts for half with more than 100 investments in the country. This month, the city’s other SWF Abu Dhabi Investment Authority ploughed into a $770 million China-focused multi-asset continuation fund as the lead investor, establishing itself as a secondaries buyer while others in the market look for exits. 

These investors are acutely aware of the delicate geopolitical environment as well as the need to spread their investment bets. As Qatar Investment Authority’s technology, media and telecommunications head Mohammed Al-Hardan said at a Doha conference last May, it was trying hard to “avoid situations that potentially jeopardise relations with the US” while actively seeking deals in China.  

And soon, all allocators have to decide on whether the risk of being left out of China may outweigh the risk of leaning in.  

Norges Bank Investment Management’s focus over the next three-years will target performance, technology and talent, and operational robustness. Monitoring portfolio managers, increasing trading efficiency and improving returns in real estate are also key priorities ahead for Norway’s NOK21 trillion ($2 trillion) oil fund, Government Pension Fund Global.

“The strategy sets out how we will work to become the best and most respected large investment fund in the world. We look forward to putting it into action over the next three years,” said chief executive Nicolai Tangen.

Strategy in equities will hone in on boosting trading efficiency and securities lending.

Equities comprise 70 per cent of the benchmark index and the strategy is shaped around market exposure and security selection (mostly managed internally) via enhanced indexing to systematically exploit inefficiencies and liquidity imbalances, and fundamental investing.

Trading the portfolio less, “better and smarter,” will help limit transaction costs. The renewed focus on trading will prioritise managing more trading flow internally before going to market, and extending holding periods when appropriate. It will also focus on closer collaboration between traders and portfolio managers, and taking advantage of new technologies and AI to further increase trading through automated algorithms. [See Inside NBIM’s AI playbook to hone investment edge and NBIM on AI cultural and organisational integration].

Securities lending is also a priority in the coming years. The team will continue to lend equities responsibly, seeking to capture more income from optimised collateral management and further diversification of counterparty relationships.

“Securities lending is countercyclical in nature, and we must be ready and willing to scale up when spreads widen,” states the fund.

Active security selection based on long-term thinking, better assessments of management quality, more knowledge sharing, and using AI to strengthen competitive advantages will become even more of a priority.

Expect NBIM to reduce exposure to companies it expects to underperform through a negative selection strategy, and integrate new mandates in developed markets to target managers with more flexibility to express negative views on companies in the benchmark index.

NBIM, which uses external managers in segments and markets where it believes they will enhance returns through specialised and local expertise it can’t replicate internally, will continue to search for the best external managers in emerging and developed markets.

“We will be disciplined and structured in internal capital allocation, prioritising investment mandates where we have high confidence that the decision-making process will continue generating excess return,” states the fund.

More automation in fixed income

In fixed income, the strategy will focus on automating fixed-income trading for all low-cost markets to increase efficiency and add value. NBIM will also boost investment in selected segments outside the benchmark to enhance return such as emerging market debt.

Fixed income accounts for 30 per cent of the benchmark and NBIM invests in a broad range of bonds issued by governments and related institutions, as well as companies, in a portfolio that seeks to dampen fund volatility, provide liquidity, and enhance returns via market exposure and security selection.

In the corporate bond portfolio strategy will focus on actively managing the portfolio to enhance return through issuer and sector tilts, while avoiding companies it expects to underperform. Strategy involves taking short- to medium-term positions based on fundamental research and temporary price differences of similar bonds.  NBIM also invests selectively in fixed-income segments outside the benchmark index as part of its allocation strategy.

Strategy in bonds and equities will continue to take allocation positions when abnormally large market dislocations create attractive opportunities. Such dislocations can occur when other investors are forced to act due to behavioural factors, regulatory requirements, or funding problems – exactly when NBIM argues its patient capital becomes most valuable.

Real estate to blur listed and unlisted allocation

In real assets, where NBIM is allowed to invest up to 7 per cent of the fund in unlisted real estate and up to 2 per cent in renewable energy infrastructure, the fund will focus on sector diversification.

It will increasingly delegate the operational management of the real estate portfolio, and gradually invest more through indirect structures.  Strategy will also blur the line between the listed and unlisted real estate portfolios to systematically evaluate whether listed or unlisted real estate provides the most attractive risk-adjusted return. NBIM will continue to invest in office and logistics, but also gradually invest more in newer and higher-growth sectors.

In energy and infrastructure, it will focus on expanding the portfolio to include a broader set of technologies and geographies. It will continue to invest directly in wind and solar power, and increase investments in distribution and storage as investment opportunities arise

Technology and data

Using data and AI to make better investment decisions will remain a key focus.

“We are all-in on AI, while recognising that success depends on teamwork not technology alone. Technology will augment our judgment, not replace it,” states the fund.

For example, NBIM will continue to develop its Investment Simulator to enhance investment decisions and provide feedback to portfolio managers. The tool will increasingly be used to make portfolio managers aware of their behavioural strengths and weaknesses.

NBIM seeks to cut manual processes in half  and will establish digital colleagues for routine tasks.

AI solutions will increasingly execute complex analytical tasks, and provide insights to enhance decision-making. Automation in real asset investment will also use AI tools to reduce manual burdens; speed up operations, and reduce the risk of potential errors.

Strategy over the next few years will also focus on culture. Staff must feel safe to go against the crowd and create mechanisms to challenge consensus thinking. Teamwork, feedback, intellectual honesty, and long-term thinking will be prioritised in a lean organisation, characterised by clear roles and collaboration to enable decisive action.

Direct engagement with companies will focus on governance, sustainable value creation, responsible business conduct, and robust risk management to enhance shareholder value, prioritising NBIM’s largest holdings and companies which hold the most significant risks.

NBIM will also continue to be the world’s most transparent fund.

“We place particular emphasis on increasing knowledge among the fund’s owners, the Norwegian people, to support informed public debate. This means being clear on what the fund is – and what it is not,” it states.