Alan Bartlett of Goodhart Partners, sub-managers of the multi-asset Global Opportunities Trust, explains why the world’s changing investment landscape calls for radically different strategies.

The key forces that have shaped the global investment landscape for many years have passed tipping points which will have profound implications for society and how to invest successfully over the coming decades. In simple terms we believe that investment strategies must evolve to become more agile and flexible in order to navigate the shorter economic, industry and market cycles now evident around us. This also means that investors must be more willing to step away from benchmark indices and focus on specific investment opportunities. This is in contrast to the relatively inflexible broad index-oriented strategies and asset

allocation frameworks that have served investors well for many years now. The change required is a significant one.

The era of globalisation

‘Globalisation’ has been the dominant investment theme of the last three decades. It resulted from the benign alignment of four key forces.

Demographics

The industrialisation of emerging markets increased the amount of labour available to the global economic system, as did a step-shift in the proportion of women

entering the workforce.

Technology

The Japanese taught the world how to manufacture goods more efficiently in the 1980s with the advent of ‘just in time’ supply chain manufacturing. Then in the

1990s advances in technology made it logistically easier for companies to operate with extended global supply chains, able to manufacture goods in low-cost locations

and take full advantage of what economists call ‘comparative advantage’.

Security

When the Berlin Wall fell and the true weakness of the Russian economy became apparent, western democracies saw an opportunity. They reasoned that the Western approach to capitalism and democracy was now so obviously superior that all they had to do was remove the barriers and countries such as Russia and China would naturally evolve into capitalist democracies.

Buoyed by the additional benefits of the so-called ‘peace dividend’ from the end of the Cold War, globalisation became a geopolitical objective, not just an economic one. The taps were turned on to export physical and intellectual capital to encourage

and accelerate economic development in these traditional adversary countries.

Environment

For much of the 30 years preceding Covid, people were still arguing over whether global warming was actually man-made, and environmental issues were largely

seen as local, not global. Society operated as if the world’s resources were unlimited and maximising short-term consumption for the lowest direct cost possible was

more important than concepts like ‘sustainability’.

The forces that drove globalisation have been strongly deflationary. They meant developed market governments (and the US in particular) were able to suppress interest rates, which in turn created a strong period for asset price inflation. Companies took advantage of globalisation to ‘optimise’ their tax positions, moving operations to wherever taxes were lower, which increased profits.

In the background, however, many issues were brewing. Over the 30 years to Covid, global GDP growth averaged around 2.7% in real terms, which is a healthy

number by long-term standards, albeit lower than that seen during the 1950s and 1960s. Policymakers around the world wanted higher economic growth and tried

to stimulate consumption as the ‘engine’ to drive investment and increased supply. Whilst this didn’t really work, it did inflate asset prices (equities, bonds, property

etc.) without causing a problem for consumer inflation.

The future looks different

Three of the four forces that shape the world we live in have now passed tipping points that mean they have changed from being tailwinds for global economic

growth to headwinds. Outside Africa the world’s population is ageing quickly. Humanity has no choice but to recognise that it lives on a planet with finite resources and an ecosystem that we can destroy if we are not careful. Covid highlighted the risks of globally extended supply chains and the importance of security of supply in an uncertain world.

As these new powerful forces act to constrain ‘supply’, geopolitical tensions are inevitable. When nations cannot enrich themselves through co-operation, history

tells us they will seek to do it through force. Money spent on upgrading military capabilities is money not available for healthcare or to subsidise investment in

green energy. The lone remaining source of optimism is technology. While we are hugely positive on the potential for artificial intelligence (AI) to drive improvements in productivity over the long term, we believe that realism about what can be achieved in the shorter term is important.

People in the US and Europe that are in their 50s and 60s have been huge beneficiaries of asset price inflation. Many benefit from incredibly generous defined

benefit pension schemes and live in houses that are worth ten or even 20 times the most they have ever earned in a year. But taxes on their children must rise

to pay for the healthcare needs of older people, while they are saddled with debt from university, despite their parents receiving a free education. Unwinding the

inequities of society will be difficult, but the status quo is not viable.

Covid brought forward the earnings of large tech companies that empowered the ‘work from home’ phenomenon. But it also accelerated the wider issues facing society as the tailwinds of the 1990–2012 period fade away. Governments are creaking under huge debt loads that are becoming increasingly expensive to service as inflation and interest rates prove stubbornly higher than we have been used to

in recent years.

Viewed from the perspective of the four forces, it is clear these issues are not going away, and will only get worse. Such analysis provides a useful prism through which to view much of what is happening around the world. Witness President Trump wanting to ‘acquire’ Greenland, secure the Panama Canal and cut the fiscal deficit through tariffs. It helps explain the political opportunity that the Reform party sees in the UK and other new parties are capitalising on across Europe.

If economic growth cannot be fast enough to pay down debt and rebalance fiscal deficits, taxes must rise and public spending must be cut. That isn’t going to be a

popular political message, and so we are set for a long period of deeper and shorter cycles, as governments battle economically and potentially militarily with each

other and the new realities.

Implications for investors

Over the decades leading to Covid, investors were perfectly rational when they dramatically increased focus on index returns and passive investing. Given the

benign global environment, it was also rational to lock capital away for long periods in private equity and use leverage to increase returns. But on a forward-looking

basis things now appear rather different.

We expect economic, industry and market cycles to be shorter and probably deeper. Overall market returns will be lower and volatility higher. Against this background

agility is going to be key. A willingness to navigate the cycles and step away from indices and focus on specific opportunities rather than broad market returns is required.

The shift required by the asset management industry is huge. The median openended global equity fund1 has had a correlation to the MSCI World index over

three years of +0.89.2 Perhaps more shockingly, the median multi-asset fund3 over the same period had only a slightly lower correlation of +0.83. Investors would be forgiven for thinking that a high correlation with broad market indices is inevitable if you invest in a diversified portfolio, but it just isn’t true.

The median correlation of all possible equally weighted 30-stock global equity portfolios4 to the MSCI World over the three years to 31 May, 2025 was much lower

at +0.78. Global equity and multi-asset strategies deliberately ‘track’ benchmark indices because historically stepping away from them has been risky. But the forces that underpinned this have now changed, and it is time for the investment industry to change as well.

This will only happen if clients demand it – that is, if they start to value the ability to produce attractive returns that are not driven by market index returns. An

investment trust is an ideal vehicle for agile investment strategies, benefitting from more stable capital and greater investment flexibility than typical open-ended cousins. The opportunities to differentiate positively over the coming years will be enormous.

The way that the portfolio of Global Opportunities Trust is managed is designed to prosper in this new world. Since the investment policy was amended in late 2021

its net asset value has had essentially zero correlation to global equity indices, whilst still generating a real return for investors.

It does not benchmark itself against any index. When opportunities are abundant the trust is tolerant of market risk and volatility in search of higher returns. But

during periods of elevated valuations in which genuinely attractive opportunities are scarce (as in recent years) it is more focused on capital preservation. We call the

approach ‘agile investing’.

Source: Goodhart Partners

1 Median global equity fund within the combined Morningstar fund sectors of global large-cap growth equity, global large-cap value equity, global large-cap blend equity and global equity Income.

2 Correlation of monthly total returns of funds to MSCI World GBP monthly total returns (net of dividend withholding tax) from 31/05/2022 to 31/05/2025.

3 Median Multi-Asset Funds with the combined Morningstar Fund Sectors of GBP Allocation 60-80% Equity, GBP Allocation 40-60% Equity and GBP Flexible Allocation.

4 Based on 10,000 simulations of equally-weighted 30-stock portfolios with randomised stock selection from a universe of 7,119 North American and European equities (as included in UBS Holt dataset).