Investors are navigating what many describe as an “Age of Upheaval”, shaped by accelerating technological change, geopolitical uncertainty and climate change. Paul Niven, Fund Manager of F&C Investment Trust, explains how these forces are reshaping the investment landscape:
Investing through disruption
“We are living through a period of unusually compressed change. Artificial Intelligence is diffusing across the economy at a pace rarely seen in previous technology cycles. What makes this period unusual is that several major waves of technological change are happening simultaneously, rather than sequentially.
“One reason for this is the speed of adoption. Unlike earlier technologies that required entirely new infrastructure before they could scale, much of AI arrives as software that can be deployed quickly across devices and platforms that already exist.”
“However, behind this adoption sits an intensive physical investment cycle. The largest technology companies are committing enormous sums of capital to build out data centres and computing infrastructure to support AI systems, which in turn is reshaping demand for power, equipment and is re-ordering industrial supply chains. AI is often framed as a digital revolution, but it is also triggering a significant infrastructure build-out across the global economy.”
“History shows that general-purpose technologies tend to follow a familiar pattern. Early expectations can overshoot, practical bottlenecks emerge, and only gradually do the productivity benefits become visible across the economy. For investors, patience and selectivity amongst opportunities remain important.”
Market concentration and the search for winners
“Another defining feature of today’s market backdrop is concentration. A relatively small number of companies now account for an extremely large share of developed market indices, which can leave portfolios heavily exposed to a handful of dominant names.
“At the same time, long-term returns within equity markets are highly skewed. A small minority of companies generate the majority of wealth creation, while many businesses fail to compound value over time.”
“This creates a challenge for investors. Identifying those outliers consistently in advance is extremely difficult, but relying solely on index exposure can leave portfolios overly dependent on a narrow group of companies, which may not prove to be the winning companies of tomorrow.”
Building resilience
“Resilience is not about predicting short-term market moves, but about ensuring portfolios can withstand shocks and remain positioned for long-term growth.
“In investment terms, resilience means three things: having liquidity when it is needed, participating in long-run growth, and mitigating against the permanent loss of capital. Reslience also creates opportunity and requires diversification across credible growth paths and the flexibility to act when others are constrained.”
“Structure plays an important role here. The closed-ended nature of an investment trust allows us to take a long-term view without being forced to sell assets during periods of market stress, giving us the ability to hold high-conviction investments through volatility and to rebalance when dislocations arise. Our long-dated, fixed-rate borrowings also provide a stable funding base, which can support long-term investment decisions.”
Positioning for a broader opportunity set
“While AI has driven a significant portion of recent market performance, the opportunity set is widening.
“As innovation spreads beyond a handful of companies, we expect returns to broaden across sectors and regions. Productivity gains, if realised, can support corporate earnings and potentially strengthen economic resilience more broadly.”
“In this environment, diversification is not a defensive afterthought but a strategic advantage. Investment trends will ebb and flow, technological leadership will shift and economic regimes will change. Our task is not to forecast every twist and turn, but to build a portfolio that can adapt and compound through them. In an age of upheaval, diversification, discipline and a robust investment structure remain the most reliable tools that investors have.”
