Read: Uncertain market conditions pushing institutional investors to fixed income, international equities: expert

Managing uncertainty

The current level of economic and geopolitical uncertainty will likely persist in 2026, as evidenced by the recent developments with Greenland.

Managing this uncertainty is the No. 1 priority for pension investors. Their portfolios need to be agile and resilient to withstand shocks to the world economic order.

This means revisiting the funds’ decision-making processes that aren’t designed to handle regime shifts. Scenario analysis is a promising tool to model complex scenarios and simulate their impact on the portfolio. The main weakness is that scenarios are often subjective and ad hoc — and if investors focus too much on negative scenarios or design overly conservative strategies, they lose their ability to generate returns and stay afloat over the long-term.

Becoming more agile also requires revisiting the funds’ governance processes. Most institutional investors use the strategic asset allocation framework. This often sets up rigid decision-making processes where asset allocation targets are set by the board and reviewed annually, leaving management teams with little bandwidth to maneuver around these........

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