Challenging Long-Held Assumptions About Investing

I've been reflecting on this title for a while because I think it has quietly become one of the golden threads running through almost every conversation I’m having about RAOEurope26. Six months ago I suspect this article would have been about ESG or responsible investment. Today, I don't think it is. It's about questioning some of the assumptions that have underpinned investing for decades and asking whether they remain fit for purpose in an increasingly fragmented world.

For decades, institutional investing has been built on a series of assumptions that have served investors remarkably well. Diversification reduces risk. Markets are broadly efficient. Asset allocation drives returns. Fiduciary duty is clear. Economic growth is largely predictable and portfolio construction is principally about balancing risk and reward across a defined set of asset classes.

Many of those assumptions remain true. Yet the world in which they were developed looks very different from the one investors find themselves navigating today.

Geopolitical fragmentation has replaced decades of increasing globalisation. Artificial intelligence is reshaping infrastructure requirements faster than many anticipated. Climate change, biodiversity loss and resource constraints are no longer specialist environmental concerns but material investment considerations. Ageing populations are placing increasing demands on pension systems whilst simultaneously requiring long-term investors to think differently about resilience, productivity and economic growth.

Perhaps most importantly of all, institutional investors are increasingly finding themselves operating in a world where competing priorities are becoming the norm rather than the exception.

How do we simultaneously deliver attractive returns, finance the energy transition and maintain consumer affordability? How do we build resilient portfolios without sacrificing innovation and growth? How should investors distinguish between short-term volatility and long-term structural opportunity? And what responsibilities do institutional investors have, not only to today's beneficiaries but to future generations?

These aren't simply new questions. They are challenges to some of investing's longest-held assumptions.

Take portfolio construction as an example. For many years, conversations have largely revolved around optimising allocations across individual asset classes. Increasingly, however, some of the world's largest institutional investors are beginning to ask whether portfolios should instead be viewed as integrated systems designed to deliver long-term outcomes. The debate is shifting from "How much should we allocate to infrastructure?" towards "What role should infrastructure play in delivering resilience, growth and long-term value creation?"

It may sound like semantics, but it represents a profound shift in thinking.

Similarly, we continue to describe investments as either public or private, growth or value, sustainable or traditional. Yet the challenges facing investors refuse to sit neatly within such categories.

Artificial intelligence isn't simply a technology story. It is simultaneously an infrastructure story, an energy story, a labour market story and a capital allocation story. Geothermal energy isn't merely a climate solution. It raises questions about long-term infrastructure investment, technological innovation, energy security and the financing mechanisms required to support its growth. Biodiversity is no longer simply an environmental concern but increasingly a conversation about systemic risk, resilience and long-term economic value.

The labels remain useful, but perhaps they are becoming less important than the questions that sit beneath them.

The same could be said of fiduciary duty itself.

For many years, responsible investing was often presented as something separate from good investing – an additional consideration sitting alongside traditional investment disciplines. Increasingly, however, that distinction feels outdated. Organisations as diverse as pension funds, asset managers, policymakers and regulators are beginning to ask whether questions of resilience, stewardship and long-term value creation are not additional considerations at all, but fundamental components of delivering good investment outcomes.

What if responsible investing isn't a category of investing? What if it simply becomes investing?

Equally, what assumptions are we continuing to make about risk itself?

Historically, institutional investors have become exceptionally sophisticated at measuring market risk, credit risk and liquidity risk. Today's investment landscape demands that we think more broadly. Cybersecurity, geopolitical instability, supply chain resilience, energy security and nature-related risks all have the potential to create material financial consequences for portfolios. They also create opportunities for those willing to take a genuinely long-term view.

Increasingly, resilience may prove to be one of the defining investment themes of the coming decade.

Financial resilience. Portfolio resilience. Energy resilience. Infrastructure resilience. Economic resilience.

They are all different conversations and yet, in many respects, they are exactly the same conversation.

The challenge facing institutional investors is no longer simply deciding where to allocate capital. It is deciding how to allocate capital in a world characterised by increasing complexity, competing demands and accelerating change.

This presents both challenges and opportunities.

Perhaps one of the most interesting developments of recent years has been the willingness of organisations to challenge assumptions that would previously have gone unquestioned. Questions around Total Portfolio Approaches, transition finance, stewardship, productive capital, biodiversity, long-duration investing and systems thinking are increasingly finding their way into mainstream discussions amongst senior investment leaders.

There is, however, another assumption that perhaps deserves challenging.

For too long, important conversations within financial markets have often taken place in silos. Responsible investment conversations happened over here. Infrastructure discussions happened over there. Private markets occupied another room entirely. Policymakers, pension funds and asset managers frequently found themselves discussing interconnected challenges in relative isolation.

The reality is that the world's most pressing investment challenges do not recognise such boundaries.

The future of investing is unlikely to belong exclusively to any one asset class, investment philosophy or political ideology. It will belong to those willing to embrace complexity, challenge orthodoxy and think differently about the role long-term capital can play in creating resilient portfolios, economies and societies.

The assumptions that have served investors well over previous decades should not be discarded lightly. Many remain as relevant today as they have always been. Yet progress has never been driven by accepting that existing frameworks are beyond challenge.

Perhaps the most important question institutional investors should now be asking themselves is not simply where they should allocate capital next, but which assumptions about investing still deserve to be challenged.

Because in an increasingly fragmented world, yesterday's certainties may not always provide tomorrow's answers.

Join the conversation at RAOEurope26, Oct 29th, London.