Survey of firms managing US$72 trillion in assets reveals a flight to diversification and active management
Investors are overhauling how they construct portfolios as geopolitical instability and growing concentration risk in equity markets combine to shake confidence in traditional allocation models, according to new research from Schroders.
The findings come from the asset manager's annual Global Investor Insights Survey, published this week, which polled more than 1,000 institutional investors, wealth managers and other intermediaries representing combined assets under management of US$72 trillion. Fieldwork was conducted in April and May 2026.
Conflict in the Middle East was cited as the top geopolitical concern by 69% of respondents, with uncertainty over US foreign policy and global leadership close behind at 67%. More than half pointed to commodity and energy price shocks (53%) and further geopolitical escalation (52%) as the scenarios most likely to hit portfolios, while economic slowdown or recession was flagged by 50%.
Against that backdrop, 85% of those surveyed said they expect market volatility to increase over the coming year, with diversification (84%) and downside protection or capital preservation (83%) rising to the top of the agenda. Nearly half of all respondents (47%) said they are actively broadening geographic exposure beyond the US.
Active management conviction holds firm
Despite the turbulent environment, investor confidence in active management remains strong. Eighty-five percent said they believe active strategies can help them meet their investment objectives over the next 12 to 18 months, with key reasons including the potential for outperformance, the ability to navigate uncertainty with greater agility, and the management of concentration risk in equity markets. More than a third (38%) said they are specifically raising their active allocations to reduce index concentration exposure.
Johanna Kyrklund, group chief investment officer at Schroders, said: "In an increasingly volatile world, investors are reshaping portfolios to put diversification and resilience front and centre, while also juggling geopolitical risk. It is telling that in these circumstances, an overwhelming 85% of investors expressed confidence that active managers can help achieve those objectives in the next 12 to 18 months.
"In recent years we have moved from a globalised world prone to deflationary shocks to a geopolitically fragmented world, where restructuring of supply-chains can contribute to inflationary shocks. The ability to be selective, manage risk and respond dynamically to fast-moving market conditions is our active edge to navigating these choppier waters."
Active ETFs are also gaining traction within this trend. Investors highlighted diversification (49%), satellite or tactical positioning (42%) and risk management (33%) as the main reasons for incorporating them. Lower costs compared with active mutual funds were cited by 70% as the primary draw, alongside intraday liquidity and trading flexibility (51%). Small and mid-cap equities (37%), emerging market equities (35%) and thematic or sector strategies (34%) were identified as the areas where active expertise adds most value within an ETF structure.
Public and private equities assessed as one
One of the more significant structural shifts the survey reveals is a move toward viewing public and private equity as part of a single framework rather than separate allocation decisions. Half of respondents (50%) said they now evaluate opportunities across both simultaneously.
Active fundamental equity (71%), small and mid-cap strategies (65%) and large-cap buyout strategies (62%) were seen as most important for long-term growth, while dividend or income-focused equities (74%) were ranked highest for income generation. Within private equity, 61% pointed to growth capital and venture capital as routes to long-term capital appreciation.
Geopolitical uncertainty is creating friction in regional equity allocation decisions, with 60% of investors using geographic equity strategies saying macro and political factors are complicating their choices.
Across asset classes, the survey found investors' top five sources of risk-adjusted income over the next 12 to 18 months are clustered closely: equity income (43%), diversifying government bond exposures (38%), public corporate bonds (35%), high yield (32%) and asset-backed or securitised credit (32%).
Credit markets draw broader interest
Within credit, more than half of respondents (55%) identified investment grade corporate bonds as attractive for reliable real income. Distressed and special situations credit was viewed primarily as a source of alpha by 62% of investors, while 61% each said the same of high yield bonds and emerging market debt.
In private credit, direct lending was seen equally as a source of reliable income and alpha potential, each at 44%, while investment grade private credit was favoured for dependable yield by 48%. For real estate and infrastructure debt, capital resilience was a key draw, cited by 39%.
Kyrklund added: "Investors are adapting portfolios to a more complex and fragmented market. Diversification across regions, asset classes, investment styles and wrappers is becoming increasingly important in managing risk and building resilient portfolios. A holistic approach to public and private assets is also reshaping portfolio construction, with investment objectives looking through a Total Portfolio Approach lens taking precedence over traditional benchmarks."
