Many of the rules that have guided investment decisions for decades are undergoing profound change. That became clear at the INN8 Invest Summit in Joburg on September 10, when 26 leading global and local asset managers told 1,200 financial advisers how they are rewriting decades-old thinking about risk and return in a market reshaped by AI, shifting dynamics in emerging markets and heightened volatility.
The new normal
The seismic changes under way are being driven by a confluence of factors. AI capital expenditure is redirecting capital and reshaping which assets create value, outpacing investors’ ability to keep up. Markets have grown more volatile and, in downturns, more correlated, undermining diversification assumptions built for a more predictable era. The line between “emerging” and “developed” markets, once a reliable proxy for risk, is blurring as companies and economies decouple from their geographic labels. And clients themselves have changed: comfortably challenging advice with their own AI tools, curious about instruments that barely existed a decade ago and increasingly unwilling to accept fragmented service from providers still organised in silos.
“Markets have remained volatile amid heightened macroeconomic uncertainty,” said Duncan Wattam, Head of Standard Bank Group Investments, in his closing address at the Summit. Wars, oil price spikes, equity market swings, climate change and geopolitical instability are weighing on client confidence — and clients are looking for answers. These uncertainties are increasing demand for a single, holistic financial partner rather than siloed banking, insurance and asset management relationships. Clients are curious about private markets, the impact of AI, cryptocurrencies and ETFs. Increasingly, they are using AI tools to interrogate the advice they receive, and they are pushing back on fees.
“The historical financial services structures, in which banks, insurers and asset managers work in silos, are not effective any more,” Wattam said. “Clients are starting to demand a holistic approach, where providers can deliver on clients’ end-to-end financial needs.”
What hasn’t changed
Amid all this disruption, one thing has stayed constant. “The one thing that hasn’t changed is that investors want consistent outperformance,” said Leigh Kohler, INN8 Invest Head, opening the Summit. What has changed is where that outperformance is being found. “Investors are looking for pockets of performance within our industry,” Kohler said. “We’ve seen investors focusing on technology and using artificial intelligence to eke out additional performance or even provide an extra edge in the investment process.”
AI’s next phase has specific winners
The Summit’s panels were united on where the next stage of the AI cycle will create value — and where it won’t. AI spend may prove inflationary in the short term as energy demand and construction bottlenecks bite, but productivity gains should make it deflationary over time. Valuation risk and falling token prices are already reshaping which companies benefit. Asian currencies and emerging markets, rather than US hyperscalers alone, were flagged as the biggest beneficiaries of AI-related capital expenditure — a claim borne out by Taiwan Semiconductor Manufacturing Company’s (TSMC) increase to a 15% weighting in the MSCI Emerging Markets Index. In the US, data centre investment continues to accelerate sharply. Closer to home, asset managers themselves are using AI to sharpen research, rebuild data architecture and lift operational productivity — proof that the technology is reshaping the investment industry from the inside, not just the companies it invests in.
Emerging and developed markets no longer behave as expected
Perhaps the most thought-provoking theme of the Summit was the diminishing usefulness of the traditional labels “emerging market” and “developed market”. Economies once grouped together geographically no longer move in lockstep. TSMC — one of the world’s best-performing companies — is based in Taiwan, technically an emerging market. The numbers further complicate the old assumptions: the MSCI All Country World Index, which includes 23 developed and 24 emerging markets, is 90% weighted towards developed markets by market cap, yet half of its companies are from emerging markets. Meanwhile, US growth is increasingly concentrated in just three sectors — defence, health and technology — an underappreciated concentration risk within what many still see as a “safe” developed-market investment.
South Africa’s growth window
Closer to home, the Summit made a pointed case for South Africa’s own potential. While a sustainable increase in fixed investment from 13.2% of GDP to between 20% and 30% is needed for growth, the delegates raised a key point: the domestic economy “is not a rising tide that lifts all boats”. An asset manager’s job is to find the individual companies growing despite a sluggish broader economy.
AI technology is already helping South African miners explore and develop assets faster, reviving a sector too often dismissed as being in terminal decline. As one industry expert at the Summit put it, mining’s “sunset” narrative — specifically with respect to gold — is “one of those northern sunsets where the sun never goes down”. Township economies, too, were identified as an underexplored growth pocket, with rising internet access unlocking education and opportunity, provided the right safety conditions are in place.
Asset allocation, not stock picking, is driving returns
The summit’s data on portfolio construction was striking. For decades, the prevailing investment view has been that strategic asset allocation drives between 60% and 90% of portfolio returns. Yet over the past decade there have been nine “top asset class” rotations, and in eight of those nine periods, a different asset class claimed the top spot. The classic 60/40 equity-bond portfolio, long relied on for diversification, has been undermined by equities and bonds increasingly correlating during downturns, as seen clearly in 2022.
Fixed-income positioning has shifted decisively towards emerging-market duration, currencies and credit and away from core developed-market bonds, while South African fixed income has outperformed South African equities by a considerably wider margin than global bonds have outperformed global equities.
Stock picking’s role, meanwhile, has fundamentally changed. Only 6% of South African active stock pickers have outperformed the market over the past 10 years, reinforcing why allocation — not security selection — has become the primary driver of returns. And the old passive vs active divide is falling away as recognition grows that choosing an ETF, selecting a benchmark and managing concentration are all themselves active decisions. Actively managed ETFs are the new growth frontier, with around 30% of the trillion-dollar flow into US ETFs over the past three years going into actively managed vehicles. Still, delegates were reminded, no algorithm replaces the human judgment qualitative decision-making demands.
The case for partnership
Wattam closed the Summit by tying these threads back to Standard Bank Group’s own strategy. “It’s all about giving our advisers capabilities which allow them to deliver on client needs,” he said, pointing to the Group’s consolidation of its investment businesses into Standard Bank Investments and Asset Management, following its acquisition of minority stakes in Liberty four years ago. “Standard Bank offers an integrated financial services proposition, enabling us to meet our clients’ banking, investment and insurance needs through a co-ordinated approach to advice, product solutions and distribution.
“By combining our banking relationships, internal investment and insurance capabilities, and access to leading third-party partners, we can deliver more relevant solutions across the client’s lifecycle, deepen client relationships and identify opportunities across the Group. Our scale and partnership ecosystem enable us to broaden product choice, improve access to specialist expertise and deliver more seamless, competitive and tailored client outcomes.”
That, in essence, was the Summit’s overarching message: technology is accelerating, and the investment industry is being reshaped in real time. But human judgment and critical thinking remain paramount, and the managers who will win are the ones building holistic, technology-enabled partnerships rather than defending old silos.
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