For decades, institutional investors constructed global portfolios with a primary focus on economic fundamentals-growth prospects, sectoral trends, and market efficiency. Geography mattered, but mainly as a source of diversification: emerging versus developed markets, Asia versus Europe. Geopolitics, when considered at all, was the preserve of sovereign wealth funds and the occasional risk manager. That era has ended. The past several years have witnessed a succession of shocks: the war in Ukraine, renewed conflict in the Middle East, simmering tensions in the Taiwan Strait, and a proliferation of sanctions and tariffs emanating from Washington and Beijing alike. These events have not only unsettled commodity markets and bond yields but have also forced a fundamental reappraisal of risk itself.

An Economist Impact survey of 300 institutional investors across North America, Europe, and Asia reveals a decisive shift: geopolitics is now viewed as a structural, not episodic, variable in portfolio construction. An emerging pattern is friendvesting — aligning capital with jurisdictions where geopolitics is less intrusive and avoiding, or at least hedging against, rising risks. Two-thirds of respondents cite geography as the principal channel through which geopolitical risk shapes their portfolios. Yet this is not geography in the traditional sense of physical location; rather, it is a matter of political alignment and strategic exposure.

Read the full ‘Thought Leadership’ article at the link below