Navigating Investment Risk

How are Family Offices navigating global trade wars and geopolitical tensions? Family Offices globally are reshaping investment strategies in response to increased global trade tensions and geopolitical uncertainty. According to the UBS Global Family Office Report 2025, 70% of Family Offices rank global trade wars as their top investment risk, with major geopolitical conflicts (52%) and inflation (44%) also significant concerns. Over the next five years, geopolitical issues are projected to become even more critical. To manage these risks, Family Offices increasingly favor active management, selecting skilled managers to maintain stability during market volatility. About 40% prioritize active management, while 31% rely on hedge funds known for mitigating downside risks. Additionally, 27% are boosting their holdings in illiquid assets for market resilience. Precious metals have also regained popularity, now chosen by nearly 20% of Family Offices. Asset allocations have shifted notably toward developed market equities, currently averaging 29%, while developed market bonds have gained attention for their stable returns during uncertain periods. Interest in emerging markets like India and China remains cautious due to geopolitical unrest (56%) and political instability (55%). Additional concerns such as currency volatility and regulatory challenges further complicate investment decisions in these regions. Private market allocations are adjusting as well. Typically strong in private equity, Family Offices are moderately reducing their exposure from 21% to a projected 18% by 2025, driven by rising interest rates and slower exit opportunities. Regionally, investments continue to favor North America and Western Europe, while exposure to Asia-Pacific and Greater China is modestly declining, reflecting evolving perceptions of risk. Succession planning is another key area for Family Offices. While over half (53%) have formal plans, significant challenges remain in tax efficiency (64%) and preparing the next generation effectively (43%). These strategic adaptations offer broader considerations for investors of all types. How might Family Office strategies inform individual and institutional approaches to investing? Could these strategic changes reshape overall market dynamics? Most importantly, how will ongoing geopolitical developments shape future investment opportunities?

Diversification can't save you if the whole system is stressed. That's the argument I make in my first column as a new guest columnist for Sustainable Times, and it's one investors are only just beginning to confront. For decades, we built portfolios on the assumption that the natural systems underpinning the economy were stable. Reliable water. Predictable weather. Infrastructure that could cope. Those assumptions are breaking down. The early warning signs are already showing up in places most investors rarely look, such as insurers withdrawing from flood-exposed regions, property markets quietly repricing climate risk, and supply chains under pressure from droughts and extreme weather. When the system itself becomes unstable, diversification doesn't solve the problem. It just spreads exposure to the same underlying risk. That's why natural capital, forestry, regenerative agriculture and nature-based infrastructure are earning their place in long-term portfolios. More than impact investing, but as resilience. These are real assets that restore ecosystems while strengthening the economy they sit inside. Nature isn't just a backdrop to the economy. It's the infrastructure that supports it. How are climate and nature risks showing up in the investment conversations you're having today? Full column below 👇 https://lnkd.in/ekYHYr4b

Interest Rate Risk: Why It Matters Even When Rates Are Stable Interest rate risk often hides in plain sight. When rates are volatile, it is top of mind. But when they stabilise — or appear to — many assume the worst is over. This assumption can be costly. Understanding interest rate risk requires more than tracking central bank decisions. It requires recognising that repricing mismatches on the balance sheet do not disappear just because the market quietens. In fact, those mismatches often deepen during calm periods, masked by stable net interest margins or temporary accounting gains. There are two main types of interest rate risk that every bank must manage: Repricing Risk (or Gap Risk): This arises when assets and liabilities reprice at different times or on different terms. For example, fixed-rate mortgages funded by short-term customer deposits create exposure if rates rise — the funding cost increases, but the asset yield does not. Basis Risk: This emerges when two instruments reprice from different benchmarks. For instance, a bank might hedge SONIA-based assets with 3M LIBOR derivatives (historically) or hedge variable-rate loans using swaps indexed to a different benchmark than the underlying cashflows. These risks are rarely symmetrical. A bank might be positioned to benefit in one scenario but be significantly exposed in another. And while earnings-at-risk models can show the short-term impact, economic value measures often reveal the longer-term story — particularly for banks with large maturity mismatches. So why does this matter today? Because balance sheet positioning over the past five years has shifted dramatically. In the ultra-low rate environment, many institutions leaned into fixed-rate lending, chasing margin through duration. Now, as central banks hold at higher levels or begin to ease, the embedded rate sensitivity in those positions becomes more apparent. Here are three reasons interest rate risk still deserves attention: 1. Lagged Effects: Interest rate risk is often slow to materialise. Hedging costs roll off, floors expire, and behavioural assumptions (like early repayments) shift when rates stay high for longer than expected. 2. Policy Uncertainty: Central banks are not done yet. Rate cuts may not come as quickly or deeply as markets expect. Any surprises — especially on inflation or employment — can quickly change the path and catch institutions off guard. 3. Capital and Liquidity Impact: Earnings volatility affects capital. Rate risk also interacts with liquidity risk, as seen in 2023 when deposit outflows coincided with unrealised losses on securities portfolios. These are not isolated risks. They compound. Managing interest rate risk is not about predicting rates. It is about being prepared for multiple scenarios. This includes regularly stress testing key assumptions, assessing both short-term and long-term exposures, and ensuring risk appetite aligns with strategy, even when rates are steady.

In a world where disruption is constant, the value is no longer just in providing an insurance cover, it is infact in helping clients navigate and structure risk intelligently. What we are witnessing today across the Gulf and key global trade corridors is not a temporary spike in volatility. It is a reset. We have seen versions of this before. During the Gulf War, disruptions to oil supply and shipping routes led to a sharp repricing of risk across marine and energy markets. Capacity tightened, war-risk premiums surged, and insurers were forced to rethink their exposure to geopolitical hotspots. The playbook changed not just for a season, but for years that followed. Today, the overall situations do feel familiar but the interconnectedness is far greater. Geopolitical tensions are no longer isolated events; they cascade across markets, supply chains, and ultimately into the balance sheets of insurers and reinsurers. The result is clear: tighter capacity, sharper underwriting, and a more disciplined approach to where and how capital is deployed. But this moment is also redefining the role of a broker. We are seeing a clear shift, from placement to partnership. When traditional capacity tightens, the answer is not just to secure coverage; it is to rethink how risk itself is structured. This could mean redesigning layered programs, blending sovereign-backed solutions with commercial cover, or helping clients reassess routes, exposures, and contractual safeguards. Even tools like force majeure, once treated as standard clauses, are now central to building resilience into trade and energy agreements. The conversation, therefore, is no longer about transferring risk. It is about engineering resilience. Because, ultimately, the real exposure lies not just in the premium paid, but in the Total Cost of Risk, where uninsured losses, business interruption, and supply chain disruptions often far outweigh the cost of insurance itself. Those who recognise this shift and act on it will be better positioned for what lies ahead. #Insurance #Reinsurance #RiskManagement #GlobalTrade #Energy #Leadership

Trade wars used to be something you read about. In 2026, they're something you budget for. The US-India deal in February dropped tariffs from 25% to 18%. Goldman Sachs upgraded India's GDP forecast to 6.9%. Markets rallied 2.5% in a day. Sounds like good news. But zoom out. The World Economic Forum's latest survey of corporate economists named trade disruption the top force driving global uncertainty this year. Some Indian exporters still face total tariff loads up to 50% on specific goods. And deals can reverse as fast as they're announced. If your income, investments, or career sit in a tariff-exposed sector, geopolitics belongs in your financial plan. Right now. What I'm seeing across India: - People in IT services, textiles, and pharma exports are asking if their job security and portfolio should be in the same sector. Good question. Usually the answer is no. - People wondering whether to go to cash. Data says that's almost always wrong. Investors who went to cash during the 2025 tariff sell-off missed the full recovery. - People aren't checking currency exposure. If you hold investments, earn income, or carry debt in multiple currencies, you've got a risk most people don't even name. A few things worth doing now: → Build a bigger cash buffer. 6 months minimum. 12 if you want peace of mind. Keeps you from selling long-term positions at bad prices.  → Separate employment risk from investment risk. If your industry is tariff-exposed, your portfolio shouldn't be concentrated there too.  → Don't go to cash entirely. Full cash feels safe but carries real compounding cost over time. Stay diversified with a buffer. PROTECT in SOAR UP is built for this. Financial flexibility means your plan absorbs shocks without falling apart. Has trade uncertainty changed your financial plan? What did you adjust? Share below. ♻ Repost so others see this too. Follow me for more posts on financial flexibility.

For 20 years, investors lived off a gift. When stocks fell, bonds rallied. The “golden relationship” made 60/40 feel bulletproof. But that was luck, not law. In the 1970s and 1980s, stocks and bonds sank together. Bonds didn’t hedge—they hurt. Today feels closer to that world. Inflation shocks, weak policy credibility, and supply risks flip the math. When inflation dominates growth, stocks and bonds move the same way. The chart says it all: if stock–bond correlation shifts from –0.5 to +0.5, portfolio volatility jumps ~20%. Downside risk rises nearly 30%. To hold risk steady, equity allocations would need to be cut—taking return potential down too. Here’s the friction: diversification isn’t free anymore. 60/40 is creaking. Bonds don’t guarantee protection when inflation bites. Commodities, liquid alts, and smarter style exposures matter more. Energy and industrials fight inflation. Utilities and staples don’t. Ignore this, and portfolios carry hidden concentration risk. Bottom line: the golden relationship isn’t dead—but it’s fragile. Fragility isn’t a strategy. Would you cut equity to preserve risk if correlation flips? Do you see commodities as core allocation or just hedge? If bonds fail to hedge equities, what’s the third pillar? How do you stress-test for stocks and bonds both down? For more see our Nomura CIO Corner: https://lnkd.in/e4TCax_g #Diversification #Stocks #Bonds #Alternatives #Commodities #Macro #Nomura #CIO #Markets

There are subtle risks sitting in US equities that may not be fully apparent using the traditonal equity factor frameworks. Currently, those risks are growing. 👉 US small caps are more dependent on easy financial conditions relative to big caps than in more than a decade (see chart) There is a widening gap between the “haves” (big caps with pricing power, scale and thus easy access to capital) and the “have nots” (subject to tariff uncertainty, low interest cover and exposed to higher rates and tighter credit conditions).   This means that if you have small cap vs big cap exposure, then you have rate exposure . It may well be significant depending on your names. The impact of the exposure also depends on whether financial conditions actually move significantly in the months ahead. Given the amount of uncertainty over tariffs, recession, inflation and the Fed, all sorts of shifts are possible.   This is a good example of how a macro risk model can help equity investors be more aware of some non-traditional factor risks. PMs with small cap or big cap vs small cap exposure will also want to understand returns, and if we do see a shift in US financial conditions then returns will be hard to understand without this insight. 📈 The chart below 👇 shows the exposure of the S&P500 and the Russell2000 indices to a shift in "financial conditions". 👉 “Financial conditions” comprises rates, the US Dollar (a stronger USD => tighter US financial conditions) and HY credit spreads (the spread over US Treasuries that low rated corporates need to pay to borrow money for 5 years). Chart courtesy of Quant Insight   #riskmanagement #equities #factorinvesting #mferm

What happens to a company’s financial health when the economy takes a turn for the worse? Imagine: A business starts the year with a healthy cash reserve and manageable debt. But As the market shifts, they’re forced to dip into their revolving credit line. The cash cushion starts to shrink, and by the end of the forecast period, it’s gone. Meanwhile, current liabilities and short-term obligations that must be paid within a year remain high, putting added pressure on their liquidity. Now, Here’s where it gets tricky. Even though the company was paying dividends every year, their retained earnings were growing thanks to steady profits. But under this downside scenario, profits turn into losses. Retained earnings reverse course, and equity erodes. The balance sheet starts to tilt: liabilities rise, equity falls, and the company edges closer to breaching financial covenants. The lenders aren’t blind to these risks. They lower the loan-to-value (LTV) ratio meaning the company can borrow less against its capital expenditures. In the best-case scenario, they could secure 75% financing. But as the risk climbs, the LTV drops to 65%. Lenders also shorten the debt repayment period, ensuring they get their money back faster. This shift in capital structure is a stark reminder of how quickly financial stability can unravel. It underscores the importance of scenario planning in financial modeling preparing not just for growth but also for the storms that might come. According to a recent survey, 77% of CFOs identify liquidity management as their top priority during economic downturns. And yet, many companies still underestimate how quickly their cash position can deteriorate under pressure. This is why building a robust forecast, stress-testing your financials, and maintaining a proactive dialogue with lenders are more critical than ever. Have you experienced a shift in your company’s capital structure during challenging times? How did you navigate it?

The World Economy Is Changing - Is Your Pension Keeping Up? As a global investor, I always ask one question before making any decision: Is my money aligned with where the world is going - or stuck where it’s been? According to new forecasts, the world economy will hit $124 trillion by 2026, driven largely by Asia and emerging markets. Yet most pensions remain heavily concentrated in slow-growth Western economies. That misalignment could be the single biggest threat to long-term retirement security. This isn’t about predicting markets. It’s about recognising economic gravity - and ensuring your pension grows in line with the world you’ll actually retire into. The Hidden Risks Most Pension Holders Ignore Longevity Risk: We are living longer than ever - many will spend 30+ years in retirement. Your pension cannot simply preserve capital; it must grow over time. Inflation Risk: Even a 3% inflation rate can halve your purchasing power over 20 years. A pension growing at 4% is not “safe” if real-world costs are rising at nearly the same pace. Global Growth Gap: Over 70% of pension investments remain focused on domestic markets, while the most significant growth opportunities are global. ✅ Why Growth Investing Matters This isn’t about taking on more risk – it’s about avoiding the silent risk of falling behind global economic growth. If the world is growing at 3–4% a year, your pension must keep pace just to stand still. That’s why I believe pensions must be positioned to benefit from long-term global trends like: - Digital transformation and AI - Green energy and infrastructure - Healthcare and ageing demographics - Emerging market consumption My Mission with the Great Investments Programme I created the Great Investments Programme to empower everyday investors to think globally, act strategically, and grow their pensions with confidence – not speculation. You can also access free pension growth tools at https://lnkd.in/eZTDGdF7 to explore your personal retirement trajectory. Final Thought Your pension is not just a number - it’s your future quality of life. In a changing world economy, staying still is the biggest risk of all.

"How to Play Data Centers Without Betting on AI Magic" Earlier this week I asked: What if JLL's "no bubble" thesis is wrong? Not because I'm rooting for a crash. But because professionals plan for scenarios others ignore. Here's how smart capital is playing data centers without betting the farm on AI revenue. Strategy 1: Infrastructure Over Hype Buy land near existing power substations and fiber backbones—not speculative "future tech corridors." The infrastructure doesn't disappear if AI underdelivers. It just gets repriced. Patient capital wins when assets reset to replacement cost instead of hype value. Strategy 2: Approved Beats Aspirational Focus on sites with entitlements in place and power studies completed, not land that requires rezoning, variance hearings, or four-year grid connection waits. If the market softens, approved sites with confirmed power capacity hold value. Aspirational dirt gets repriced to zero. Strategy 3: Exit Before You Enter Know your buyer before you buy the dirt. Is this a build-to-suit for a creditworthy tenant? Or are you building on spec, hoping a data center developer shows up? Hope isn't a strategy. Strategy 4: Stress-Test the Revenue If your pro forma depends on AI companies tripling revenue while spending five times more on infrastructure, you're not underwriting—you're gambling. Here's what real stress-testing looks like: Look at your anchor tenant. Not their press releases, their financials. For example: OpenAI is paying Oracle $60 billion annually for data centers while generating $13 billion in revenue... That's your tenant. Now model what happens if: They need to renegotiate lease terms in 3 years Their next funding round doesn't materialize Nvidia (their primary investor) stops writing checks Ask yourself: Can they afford the rent if revenue growth stalls? What's their runway if they keep burning cash? Who's next in line if they can't renew? That's not pessimism. That's how you avoid being the landlord stuck with a stranded asset when the music stops. My Take: The data center opportunity is real. The infrastructure build-out is happening. But the difference between making money and losing your ass is planning for what happens if the revenue story doesn't deliver. I've been through enough cycles to know: the guys who win aren't the ones who just bet on the upside. They're the ones who prepare for and survive the downside. What's your downside protection on data center deals? Sources: "Here's why JLL says concerns of an AI bubble are overblown" by Randyl Drummer, CoStar News, October 7, 2025; "Inside the circular nature of OpenAI's blockbuster data center deals" by Rachel Scheier, CoStar News, October 19, 2025