Europe has been shaken by three shocks in the shape of three presidents – Putin, Xi and Trump, said Timothy Garton Ash, Isaiah Berlin Professorial Fellow and Professor of European Studies at the University of Oxford.

In the decades after WW2, Europe was reconstructed, created a European Community and had a solid security guarantee from the US under the NATO umbrella. It also steadily expanded.

Between 1989 to 2007, in a series of extraordinary achievements after the fall of the Soviet Union, former communist European countries transitioned to market economies and liberal democracies. Standout stories include Poland (now a trillion-dollar economy), the Czech Republic, and the Baltic states, which did not exist on the political map of Europe in 1989 and are now flourishing democracies and part of the EU and NATO.

“In Eastern Europe, the joke at the time was we know that you can turn an aquarium into fish soup, but can you turn fish soup back into an aquarium? And we did. In all these countries, we turned fish soup back into an aquarium. Some pretty odd aquariums, I grant you, as you look across post-Soviet Europe, but [aquariums] nonetheless,” Garton Ash said at the Fiduciary Investors Symposium at Oxford University.

The European Community became the European Union and rolled out huge projects like the euro, Schengen free movement and ongoing enlargement.

But a turning point came in 2008, at the beginning of the GFC, when Vladimir Putin seized two chunks of Georgia by force, beginning a cascade of crises. The GFC segued into recession and the Eurozone crisis; Putin conducted military seizures in Crimea that led to a full-scale invasion of Ukraine that continues today. Meanwhile, Europe continues to reel from a refugee crisis, Brexit, and a surge of support for populists.

“Now, shockingly, we are well into the fourth year of a major interstate land war in Europe, which has cost at least one million killed and wounded and untold suffering,” he said.

The Russian shock

Putin is a story of the Empire Strikes Back: it’s what declining empires do, said Garton Ash.

What was exceptional was that the Soviet empire, softly and suddenly vanished away in just three years between 1989 and 1991 with hardly a shot fired in anger. In historical terms, Russia’s invasion of Georgia, Crimea and Ukraine was predictable.

“Our mistake was not to be prepared for it when it happened,” he said. “There is still tremendous energy behind Putin and Russia’s effort to recover as much as possible of its empire and sphere of influence.”

And although Europe is waging war with Russia, most of the rest of the world has been quite happy to go on having good relations with Russia. Not just China, but India, Turkey, Brazil and South Africa. “All of them continue to see Russia as an entirely acceptable partner in a transactional great power world. Russia remains either an ally or a necessary partner, and you can see that in the diplomacy.”

What’s more, these powers have sufficient wealth and power to counterbalance the West. In 2024, the BRICS, measured at purchasing power parity, have economies $10 trillion larger than the G7. For the first time in well over 200 years, there’s sufficient wealth and power outside the West.

“We’re in a post-Western world,” he said.

The Trump effect

The election of President Trump has resulted in the crumbling of the West as a single coherent geopolitical actor. Trump has accelerated a long-term trend already underway, which questions about whether a stronger, more united Europe is in the interests of the US, given its pivot to Asia and focus on nation-building at home.

“We can no longer rely in the way we did for all those years on the US security guarantee,” said Garton Ash, arguing that the cooling relationship today is no different to historical periods when the US has withdrawn from Europe and been indifferent to Europe.

What the future holds

Garton Ash said the future of Europe rests on a number of key issues, amongst which the most important is the outcome of the war in Ukraine.

But the war won’t be decided in a single moment, rather via a process over a number of years. It depends on Ukraine, with the help of Europe, building up sufficient power to deter Putin or any likely successor. It will also depend on the extent to which the economy has been reconstructed and if young Ukrainians return to the country.

Success will also depend on the extent to which democracy has been integrated, and if Ukraine is on a path to membership in the European Union.

“The fact that Ukraine has been accepted as a candidate for membership, remarkable in itself, means nothing at all. Turkey has been a candidate since 1999.”

However, if these criteria are met, he said it is possible to say Ukraine has effectively won despite the huge loss of territory. But he warned against another future where Russia is seriously tempted to have another go because the deterrence is not credible enough.

Europe’s future also depends on the continent building up its defence sector.

Encouragingly, European countries (apart from Spain) are beginning the process but the industry is still fragmented and there will still be a minimum of European security that can only come from the US, like top-level intelligence, and extended nuclear deterrence.

Mario Draghi’s celebrated 400-page report, commissioned by the European Commission to provide a roadmap out of the continent’s ills, also needs implementing.

The EU is a slow-moving animal, and so far only 11 per cent of recommendations have been implemented.

Success will rest on Germany – a country that flourished on the back of exporting to China – cheap energy (from Russia) and security (from the US) driving the changes Draghi lays out.

“In a sense, Germany is right at the heart of this sense of crisis, but at the same time that gives Germany the incentive to be the driver of change.”

Other factors that will impact Europe’s future include the success or failure of the UK outside Europe. The continent must also solve cultural and economic discontent, and integrate essential policies like affordable housing. Failure to do so will open the door to populists in the swathe of elections due across the continent in the next five years.

But Garton Ash said “there is an argument” for having populists win elections to get them off the sidelines. Their political fortunes in Hungary and the Netherlands show that populists aren’t very good at governing either.

The US has been an unparalleled driver of portfolio returns for decades, but investors are increasingly concerned that US-dominant portfolios are jeopardising precious diversification.

Like Canada’s C$86 billion ($61 billion) Investment Management Corporation of Ontario (IMCO), which recently reassessed how it will approach the US, placing a 50 per cent portfolio limit on the allocation for the first time even although US treasuries and dollar investments have been a great diversifier, and America’s public and private markets have produced stella returns.

IMCO’s new target is close to where the allocation currently sits, so the reduction will only be marginal, explains Rossitsa Stoyanova, chief investment officer of IMCO, speaking during a panel session at the Fiduciary Investors Symposium. The strategy, she adds, isn’t a consequence of IMCO believing the US is poised to underperform in the future but is driven by diversification.

“We think we’re too exposed to the US, and we think there’s a risk of the US dollar and US treasuries not being the source of diversification they used to be,” she told the symposium at Oxford University.

She said strategy at IMCO will focus on investing more in Canada, and in private markets IMCO is looking at opportunities in Europe and the UK where external managers are starting to bring more co-investment opportunities.

Fredrik Willumsen, global head of strategy research at Norges Bank Investment Management (NBIM) said the giant oil fund has an overweight to European equities compared to a market-cap-weighted equity benchmark in a strategy that has been in place for decades.

In recent years, this underweight to the US has contributed to “a very, very meaningful underperformance” to the market-cap-weighted alternative as returns and earnings growth for US companies have outstripped European companies.

In 2021, Norway appointed a Government Commission to look at how the next 20 years could be very different from the past 20 years when it comes to the fund’s returns, he explained. Now, a new expert group appointed by the Ministry of Finance is looking to see the extent to which geopolitics should have an impact on NBIM’s investment strategy, and will publish its first findings in January.

Willumsen said that the fund uses a large share of its active risk on real estate and renewable infrastructure, and hopes to reap benefits from that. Historically, external manager strategies in listed equities in emerging markets have also proved profitable investments for the fund.

“We have had a phenomenal performance from the managers that we have chosen in emerging markets,” he said.

Currency conundrum

At the UK’s £76.8 billion ($100 billion) Universities Superannuation Scheme (USS) strategy is focused on scenario analysis that highlights inflection points in energy, technology and geopolitics.

For example, USS explores how President Trump’s policies might impact capital flows and the global trade system, and how AI will reshape productivity growth and markets. Another analysis is exploring to what extent AI will lead to very concentrated gains where the key stakeholders are the primary winners, or if the technology creates winners across sectors.

Mirko Cardinale, head of investment strategy at USS said that scenario analysis is a powerful tool to try and navigate complexity and something the investor has used before when it worked with the University of Exeter to build narratives and a framework around the energy transition.

The current investment climate has led the investment team to think about its exposure to currencies and dollar assets. USS, like IMCO, has a large exposure to growth assets. The investor also manages liability risks through a hedging programme with a top-down currency programme.

“We think currencies should be looked at in the context of the overall portfolio,” said Cardinale, detailing a strategy that involves exploring the interaction between foreign currency exposures, equities and growth assets.

He explained that sterling tends to fall at times of market stress, which means foreign currency is a useful diversifier. The US dollar has been an important source of diversification and has historically behaved as a very safe currency. But now that could change.

“We are taking the view that the defensive property of the dollar will be slightly less than it used to be.”

USS has reduced its dollar exposure in favour of other currencies with defensive properties including the euro, the Swiss franc and the yen.

In another approach, the investor is also considering trimming some of its US duration exposure, and titling the allocation to the UK instead.

However, USS’s allocation to inflation via US TIPS  remains very attractive because of the impact of tariffs on inflation. Similarly, IMCO is also exploring the benefits of moving some of the allocation to US treasuries into allocations offering more diversification and inflation protection in assets like commodities or gold.

Investors reflected on the importance of diversification between fast-growing companies and companies with more stable cash flows. European stalwarts like Nestle and Diageo are not overvalued, and these types of companies also hold up reasonably well in volatile times.

But they questioned if a non-US dominant portfolio would be able to achieve the same resilience and innovation that investors have historically found in US markets. They said it is difficult to reallocate to innovative companies in China, and Europe needs to reform to become a more compelling destination for capital, including simplifying the listing rules.

Ensuring a sustainable income in retirement is an enduringly knotty problem and one that continues to preoccupy national pension systems and their asset manager partners the world over. At the Fiduciary Investors Symposium Oxford, panellists explored how different countries are innovating to ensure their pension systems’ sustainability.

Like NEST, the UK’s biggest defined contribution (DC) master trust, which plans to enter the bulk annuity market as part of a new, post-retirement solution and is about to partner with an insurance provider to provide longevity protection for older retirees.

“We’re in the final stages with two insurance companies that will co-design a deferred annuity product,” said Mark Fawcett, chief executive officer of NEST Invest, who articulated the challenge many savers face in balancing the financial needs of retirement.

“It’s just really hard to make sure that you don’t run out of money before you die or leave a big pile of money on the table when you could have had a better lifestyle in retirement,” he said.

The annuity will pay out a level income from 85 for the rest of a person’s life, “whether they live to 86 or 106,” said Fawcett. NEST’s strategy is a default option, but requires member engagement because the annuity is not fully redeemable if they change their mind.

Majdi Chammas, head of procurement and product strategy at the Swedish Pension Fund Agency, explained the role the agency plays in selecting, managing, and monitoring the investment funds offered to Swedish savers under the Premium Pension. It is a part of the national pension system where individuals can choose how their savings are invested.

It has replaced an open fund marketplace, which once allowed hundreds of funds, with a curated, quality-controlled platform.

Specialised life insurance group Athora, part of US asset manager Apollo, recently bought UK insurer Pension Insurance Corporation (PIC) in its latest growth surge. The alternatives manager saw an opportunity to enter the retirement savings market in the US after the GFC and is now finding rich pickings in Europe too.

“We had the view that there was a demographic trend that would require significant demand for products that could give people guaranteed income and the innovation on products to allow people to plan better for retirement. We didn’t see an insurance company having the asset management capabilities to provide those products,” said Alex Humphreys, partner at Apollo Global Management.

He argued that buyout options support corporates de-risk, and help provide guaranteed income to pensioners and retirees through diversifying from the public markets and using, predominantly, investment-grade private credit to generate spread over the cost of funds.

“We’re the number one annuity provider in the US today,” he said.  “At the heart of it, it’s still all about being a spread business, providing attractive products to policyholders and generating a spread through diversifying away from the public markets. There’s £1.2 trillion of defined benefit schemes in the UK today. About £50- £60 billion of those go to buyouts every year, so it’s a huge addressable market.”

Panellists reflected that during the accumulation stage, people should be less focused on liquidity and prepared to tie their money up longer term. Beneficiaries also need a diversity of asset classes that should include private markets like infrastructure and other assets that are tied to inflation and throw off income.

Sustainable pensions require savers tapping into the “full economy” – even more important today in thinning public markets. Innovative products that give people a breadth of access to a broader range of asset classes could include drawdown funds, semi-liquid funds, or more ETF-type strategies, for example, said Humphreys.

Successful pension systems also need to balance conflicting goals like a stable income for life and capital preservation with long-term growth, low costs, and the flexibility to allow members to change course.

Fawcett said that NEST is cash-flow positive because it takes in £6 billion in contributions every year. It has allowed the investor to create an internal market for its private market holdings, whereby when liquidity is required for older members, there are always new people coming up to take on the assets.

Panellists concluded with reflections on the challenge of communicating about pensions.

“Pensions aren’t that interesting to most people, right? They spend more time planning their holiday than thinking about that,” said Fawcett.

President Trump has ushered in a more transactional world that makes it challenging for European businesses seeking relationship-based partnerships, but news headlines don’t necessarily reflect US policy, and America continues to provide the most durable source of excess returns in private markets, thanks to thriving underlying ecosystems of capital, talent and risk-taking, according to HarbourVest Partners.

In a wide-ranging discussion at the Fiduciary Investors Symposium, John Toomey, chief executive officer of the Boston-based firm shared his key views of the current investment landscape, including his observation that US tariffs have been lower than originally feared.

“Tariffs were intended to encompass much larger percentages and a much wider swathe of goods, but even the more recent data from the US government shows that the receipts are a lot lower and the effective tariff rates are a lot lower,” he told the symposium at Oxford University.

HarbourVest has invested in Europe since 1984, putting capital to work across primaries, secondaries, co-investments, private credit, infrastructure and real assets, said Toomey.

Typically, capital flows first to country-specific funds which then grow to become pan-regional funds, and he noted that investors worldwide are becoming more expert, with deeper resources and more confidence in their ability to execute.

Still, some Eastern European countries remain challenging for private market investors because they are illiquid and thin so that even though the manager, industry opportunities and local returns are strong, investment options are crimped because investors can’t trade in and out. “What we have found is the market depth isn’t there,” he said.

Investment opportunities in Europe are also impacted by the lack of an ecosystem. Although Europe has developed tech champions like Revolut, Karna and Spotify, the market faces a shortage of seed capital flowing to start-ups plus sufficient returns from that capital to attract future capital.

In contrast, the US has a thriving ecosystem of plentiful capital, talent and people prepared to take risks, as well as an early customer base to prototype.

Building a culture that takes root overseas too

Toomey started in finance from “ground zero” when he joined HarbourVest in 1997 as an analyst, after deciding that a career in finance “sounded way more interesting” than being in a lab using his Harvard science degree.

He said that HarbourVest’s partnership model has nurtured teamwork, open ideas and inclusion in a culture that puts people first. “We’re in the human capital business. Of course, we are entrusted with capital, and we make investments and build portfolios and create returns that are important to the beneficiaries of those programmes. But at the end of the day, our team is responsible for this important work, so nurturing talent is a core part of our strategy.”

A significant proportion of his time is spent thinking about how to help people work together and become better organised, as well as developing talent and ensuring HarbourVest is a place where everyone’s voice is valued and heard.

A hiring sweep at the company has seen as many as 250 hires a year across 15 offices. Scaling the culture of the business and building expert leadership centred on core principles like always putting clients’ interests first, displaying a sense of urgency and operating with integrity at all times is more challenging away from head office.

Culture is also instilled by performance reviews now, including “the how,” he said.

Employees are now also asked to name a few things that they did that were outside their job description that helped a client or helped a peer “where they weren’t required to do it but instead went above and beyond their normal duties.

“We don’t want people creating a lot of success, but ultimately really doing that at the expense of our values,” Toomey said.

Many asset owners are hesitant to invest fiduciary capital into cryptocurrencies due to their perceived volatility and uncertain fundamentals, but allocators who have bought into digital assets made the case that they could be an emerging store-of-value asset comparable to gold.  

This is the thesis of the A$60 billion ($39 billion) AMP Super in Australia, which made a “small” allocation to Bitcoin futures last year via its dynamic asset allocation (DAA) program, which includes commodities. 

The move, when publicly announced, was overwhelmingly supported by its members, according to the fund’s head of portfolio design and management Stuart Eliot. 

“The phones in the superannuation contact centre rang off the hook. People were asking ‘which of your funds have Bitcoin in them, I want to move my superannuation there’. And ‘do you have a standalone Bitcoin option’, which we found quite interesting,” he told the Fiduciary Investors Symposium at Oxford University. 

When assessed with common properties of a store-of-value asset, such as scarcity, durability, portability and liquidity, AMP Super’s analysis suggests Bitcoin fits into the definition better than gold or fiat money.  

Store-of-value assets broadly have a role in the superannuation or pension context to maintain the real value of portfolio assets, hedge against monetary debasement and event risk, and improve portfolio returns and Sharpe ratio, Eliot argued.  

“The thing that’s really holding asset allocators back [from investing in store-of-value assets] is the lack of a capital market forecasting framework, for gold in particular,” he said.  

When trading Bitcoins in its DAA program, AMP Super worked with signals including price momentum, investor sentiment, and measures of liquidity and inflation. 

“If you look at how both Bitcoin and gold have responded to inflation, particularly since 2020, it’s not actually the level [that matters], it’s rather the change. If consumer measures of inflation expectations change or realised inflation is increased, that tends to be positive for the price of these assets,” he said. 

More recently, the fund started exploring on-chain analytics, which examines public blockchain information such as transaction patterns to determine cryptocurrencies’ potential price movements. 

“You can actually see the price at which every unit of Bitcoin last moved and compare that to the current valuation, that turns out to give really good trading signals,” Eliot said.  

Technology developments like cryptocurrency or tokenisation – which refers to the process of turning rights to financial assets into digital tokens on a blockchain – have significant investment implications. Robert Crossley, global head of industry and digital advisory services at Franklin Templeton, said assets of the future will be programmable and dominated by wallets instead of non-interoperable accounts. 

“What all technology does, from steam power to blockchain, is it fundamentally changes the fixed and variable cost structure of the industry. New things become possible and previously impossible things become possible,” he said.  

The UK is one of the latest countries looking to enable tokenisation in its asset management industry, with its Financial Conduct Authority giving the nod to a “direct to fund” model in a consultation paper in October, where end investors can directly buy into a fund, streamlining the investment process without the fund manager acting as a principal.  

There are a lot of big concepts when it comes to digital assets, but Crossley said one concrete step allocators can take right now is educating internal teams and stakeholders.  

“The dirty secret of this industry is we talk about tokenisation all the time, but what’s really happening in nearly every case is we’re creating duplication. We have the legal book of record that we reconcile the sort of on-chain ‘pretend book’ of record to at the end of the day, that’s why you can’t pay intraday interest,” he said.  

“[Education helps to] be able to separate where there is material progress, and the technology is being used in a way that’s pushing things forward, and then from that, you start to understand the investment part of it. But don’t put the cart before the horse. 

“The biggest risk that we all run collectively is really that the world is changing faster than we’re updating our beliefs about it.”