The past few years have witnessed a profound transformation in market dynamics, prompting wealth and asset managers to fundamentally rethink their strategies. Gone are the days of stable, predictable returns shaped by a decade of ultra-low interest rates and dependable correlations.
Instead, we face a more volatile, less correlated and geopolitically uncertain environment shaped by shifting economic regimes, deglobalisation and rapid technological change. Understanding these key drivers is essential for portfolio resilience and future growth.
A defining feature of today’s markets is the end of the ultra-low interest rate era. A prolonged period of minimal rates kept volatility subdued and returns steady, but the sharp rise in base rates after Covid introduced a new level of market turbulence.
This shift has profoundly altered the traditional return profiles across asset classes and challenged many long-standing assumptions about risk and reward. The behaviour of correlations between assets – not least, of those between bonds and equities – are also breaking down, stripping the managers of traditional hedging strategies.
Geopolitical uncertainty
All eyes are on geopolitical uncertainty. Rising trade tensions, tariff unpredictability and political developments such as US fiscal policy shifts are changes injecting fresh risks and opportunities.
The fragmentation of global trade networks, is also prompting a shift towards regionalised opportunities and risks. Companies and countries alike are restructuring supply chains to bolster resilience – as reflected in strategic moves, such as Apple shifting substantial production from China to India.
Technology itself also remains a catalyst for change. The rise of artificial intelligence and rapid innovation in technology sectors – particularly in China – heralds new avenues for growth but also structural shifts in market leadership and competitive dynamics. These forces accentuate the need to rethink traditional asset allocation and sector focus.
“Investing in a range of asset classes that are largely uncorrelated mitigates drawdowns in any single pocket of the market, providing more stable, risk-adjusted returns.
Risk management itself has become much more sophisticated in light of correlation-based hedging ceasing to be as effective.”
In this complex environment, wealth and asset managers must evolve beyond old paradigms. The resurgence of multi-strategy hedge funds illustrates how allocators are preferring strategies that span many asset classes, geographies and risk profiles. According to research by Citco, multi-strategy hedge funds had some of the highest inflows of any hedge fund asset class in the first six months of 2025 – a trend that seems primed to continue in the second half of the year.
Investing in a range of asset classes that are largely uncorrelated mitigates drawdowns in any single pocket of the market, providing more stable, risk-adjusted returns. To do this, it is essential that portfolio managers have the agility to pivot quickly, cutting losses, locking in profits and reallocating capital among strategies as conditions evolve. The current environment favours relative value approaches, balanced risk profiles and high-quality carry strategies that emphasise risk control alongside return.
Quantitative and qualitative
Risk management itself has become much more sophisticated in light of correlation-based hedging ceasing to be as effective. It is crucial to leverage both quantitative data and qualitative insights to navigate uncertainty. For example, tariff-driven volatility, as seen in steel markets, can create rapid winners and losers with knock-on effects downstream.
Continued geopolitical uncertainty has created a need for a global perspective. US corporate exceptionalism continues to deliver earnings growth, fuelled in part by tech innovation. At the same time, there is increasing merit in shifting allocations towards emerging markets, Europe and Asia in order to capture growth and diversification benefits.
Rather than operating in silos, successful multi-strategy funds foster collaboration and cross-pollination of ideas among portfolio managers.”
Emerging economies in particular may benefit from the rerouting of trade flows due to tariffs and deglobalisation pressures, alongside positive influences from moderating US rates and prospects for a dollar-bearish regime. China’s AI and technology sector stories remain a compelling growth area, despite geopolitical headwinds.
Elsewhere, European markets offer potential upside in the shape of anticipated fiscal spending around energy transitions and security. Japan also presents niche opportunities – for example, the outperformance of some investment-grade telecoms providers. Today’s uncertain markets call for a multi-strategy approach – and this does not begin and end with allocation.
Alpha opportunities
Rather than operating in silos, successful multi-strategy funds foster collaboration and cross-pollination of ideas among portfolio managers, allowing for more flexible and responsive capital allocation aimed at capturing alpha opportunities wherever they arise.
Given the world in which wealth and asset managers operate has fundamentally changed, embracing diversification through multi-strategy approaches, emphasising active and agile management, enforcing rigorous risk oversight and adopting a truly global investment perspective provides a robust framework to navigate ongoing global complexities.
Investors who adapt accordingly stand to benefit not only from the mitigation of risks but also from capturing evolving growth opportunities in a fragmented and fast-changing world.
Findlay Franklin is a multi-asset credit portfolio manager at RBC BlueBay Asset Management
