Even before the echoes of explosions in Iran, geopolitical tensions were at the heart of the global agenda and have been increasingly shaping the considerations of investment managers worldwide.
A clear indication of this was revealed on my recent visit to the Super Return investment conference in Berlin, which offered new trends, sharpened existing strategies, and highlighted one key takeaway: In a world of uncertainty, there is only one way to manage investments.
As Israeli managers accustomed to operating under pressure and security crises, we found ourselves not only attending the Super Return conference – one of the most influential events in the private investment world – but also becoming a point of interest for international players seeking insights into how security events impact economic activity and financial markets.
In these discussions, we also received praise for the resilience and robustness of the Israeli economy.
These interactions underscored a growing realization among global investment leaders that geopolitical tensions are no longer “background noise” but central factors influencing investment decision-making.
There’s a clear understanding that the era of globalization and near-zero interest rates has given way to a new world in which security priorities and dynamic financial conditions are inseparable from the investment landscape.
Delivering stable returns
Let’s start with the conclusion. Senior figures at the conference repeatedly emphasized one sharp message: The traditional portfolio structure – based on a split between equities and bonds – can no longer fulfill its role in protecting capital and generating consistent, above-average returns in today’s volatile economic environment. This reality requires investors to aim for deeper and more effective diversification by integrating private and alternative assets.
There are several reasons for this shift:
Alternative markets offer sophisticated strategies capable of performing during economic turmoil and geopolitical tensions; Public markets lack exposure to sectors and assets that are at the core of global economic trends; Private markets react more slowly to developments and are less influenced by the fluctuating sentiments of public markets; High correlations within public markets mean effective diversification must extend beyond them.
Depth, not momentum
Broadly, private equity (PE) funds have demonstrated adaptability in the face of complex events and financial conditions. These funds increasingly adopt active approaches to managing portfolio companies, implementing practical measures to unlock value through operational efficiency, cost control, and the initiation of new business initiatives.
Within PE strategies, contradictory trends are emerging. While overall fundraising has slowed, secondary funds continue to accelerate, leading global fundraising in 2024 with $101.5 billion raised.
Particularly noteworthy is the rise of secondary infrastructure investments.
As a senior executive at Ardian – the world’s largest secondary manager – explained, capital is flowing rapidly into infrastructure driven by transformative forces such as AI, quantum computing, and the energy transition. This creates a deep market rich with opportunities.
A major advantage in this space is the ability to acquire stakes in active infrastructure assets that produce stable cash flows secured by long-term contracts with governments and corporations.
Another prominent trend is the expansion of evergreen funds, which offer a resilient solution amid uncertainty.
According to PitchBook, this segment is projected to grow at an average annual rate (CAGR) of 10.5%, reaching $4.4 trillion by 2029.
Mid-market funds – those managing assets between $1 billion and $5 billion – also attract attention for their consistent performance and competitive advantages: sector focus, managerial flexibility, sub-sector expertise, and a broad range of investment strategies including asset-backed lending and distressed debt. These areas stand to benefit from the looming “maturity wall,” where massive loan volumes are approaching repayment deadlines, prompting a search for new financing sources.
Unsurprisingly, defense has also moved center stage. The reprioritization of national security and massive government budgets directed at technological arms races provide a powerful tailwind. This isn’t limited to defense systems but encompasses a broader revolution: intelligence, command, and communication systems transforming battlefields into data-driven, connected environments. This trend thrives on partnerships between defense industries and start-ups, supported by significant public funding.
In an era when rapid developments and turbulent events are shaking markets, the ability to trade some liquidity for exposure to private investments is proving to be a powerful advantage over public market volatility. These strategies present investors with access to thriving sectors but also require patience – a trait that is no longer just a virtue and may well be the key to success in the coming period.
The writer is CEO of Value Advanced Investments. The content should be considered neither as investment advice nor a recommendation.