Global investors shift to infrastructure and emerging markets for stability

The world’s largest institutional investors are redirecting capital into real assets and growth markets as geopolitical tensions force them to rethink their portfolios. A Marsh survey of 430 asset owners—collectively overseeing $5.76 trillion—reveals that more than half (50.7%) plan to increase infrastructure allocations in the coming year, while 46.9% will boost exposure to emerging market equities. These moves reflect a broader effort to manage risk amid inflation, geopolitical instability, and shrinking returns in developed public markets.

Infrastructure is the top priority, with net allocation intentions jumping to +42.3%—the highest increase among all asset classes in the Marsh 2026 Global Asset Owner Barometer. This upward trend has persisted across three consecutive studies, signaling a lasting structural shift rather than a short-term adjustment. The appeal lies in its long-term income potential, alignment with energy transition projects, and inflation-linked returns—all of which become more attractive when monetary policy remains unpredictable.

A chief investment officer at a health foundation told Marsh they had doubled their infrastructure exposure, focusing especially on AI data centers in the U.S., which they describe as “materially underinvested.” Advisors increasingly recommend private infrastructure, particularly in power, data centers, and grid projects, as a way to diversify beyond traditional public equities.

Emerging market equities are also gaining traction. Net allocation intentions for the asset class rose by 30.8 percentage points year-over-year, reaching +33.5%, as investors reassess value and reduce concentration in developed markets. This shift follows 2026’s outperformance: the iShares MSCI Emerging Markets ETF climbed 37% over the 12 months to February, compared to 12% for the S&P 500 in the same period.

Geopolitical risks are a primary driver of these adjustments. Nearly three-quarters (75.1%) of asset owners surveyed cite geopolitical instability as a significant influence on their portfolios, more than concerns about inflation (72.8%) or AI disruption (72.6%). Almost half (48.4%) have already adjusted geographic exposure in the past year, while 37.2% reduced overall portfolio risk and 36.7% increased cash or liquidity holdings.

Private markets grow selective amid valuation hurdles

Private markets now feature in nearly all portfolios, 96.3% include some private allocation, up from 80.0% in 2025. However, the approach is becoming more selective. Forty-four percent describe their strategy as “greater selectivity” rather than expanding commitments, with valuations cited as the main constraint (46.6%). More than a quarter (27%) have slowed, delayed, or reduced private market investments over the past year.

Canadian asset owners are particularly cautious about U.S. equities. Fifty-two percent plan to reduce allocations, well above the North American average (40%) and the global average (34%). Unlike many U.S. peers, Canadian investors prefer rotating within private markets (27% vs. 8%) over cutting commitments entirely (7% vs. 20%). Valuation discipline is a defining factor: 52% of Canadian respondents cite valuations as a primary deployment consideration, compared to 38% in the U.S. and 47% globally.

In portfolio construction, Canada leads all regions. Nearly half (47%) use a fully integrated model, combining asset-class and total-portfolio decision-making, versus 32% in the U.S. and 29% globally. The report attributes this to Canada being “at the forefront of the shift to integrated models.” The sophistication extends to AI: only 3% of Canadian respondents say they are not assessing AI exposure across portfolios, compared to 12% in the U.S. and 7% globally.

Garvan McCarthy, Marsh’s Global Alternatives Chief Investment Officer, describes the private markets environment as demanding “underwriting discipline” and an understanding of how each exposure affects portfolio liquidity and aggregate risk. The next phase, he says, will favor those who can “pace commitments” carefully.

The survey highlights how asset owners are refining their private market approach beyond simple exposure. While 96.3% now include private allocations, the methodology has grown more precise. A majority, 58.2%, now prioritize direct investments over fund-based strategies, driven by concerns over fee structures and alignment of interests. This preference is strongest in Canada, where 64% favor direct deals, compared to 52% globally.

Canada’s push for transparency reshapes private deals

Transparency in valuation methods has become a key differentiator. Canadian asset owners, in particular, demand rigorous frameworks: 52% rank transparency as a primary consideration when evaluating private market opportunities, compared to 27% among U.S. peers. The report notes that Canadian investors are more likely to conduct third-party valuations, used by 68% of respondents, compared to 51% globally.

Geopolitical fragmentation is further shaping private market strategies. Forty-two percent of asset owners have adjusted their private market geographic focus in the past year, often tilting toward regions perceived as more stable or less exposed to trade tensions. Infrastructure and energy transition projects, particularly in solar, wind, and battery storage, are leading the way, with 39% of respondents citing these sectors as core priorities. The shift is most evident in Europe, where 56% of asset owners report increased allocations to greenfield infrastructure, compared to 43% globally. Meanwhile, data center infrastructure remains a standout opportunity, with 32% of U.S.-based respondents identifying it as a top target for new commitments.

The survey’s findings on emerging market equities show a subtle geographic breakdown. While Asia-Pacific remains dominant, accounting for 62% of emerging market equity exposure, Latin America has seen the sharpest year-over-year increase, with net intentions rising by 18.5 percentage points. The shift is partly attributed to commodity-linked economies, where asset owners are betting on sustained demand for copper, lithium, and agricultural products. Meanwhile, Africa, long overlooked, now attracts 12% of emerging market equity allocations, up from 8% in 2025, as investors target renewable energy projects and digital infrastructure in countries like Egypt and Kenya.

Liquidity buffers replace idle capital as safety net

The survey’s final section on portfolio construction reveals that liquidity management is becoming as critical as asset selection. A growing share of asset owners, 38%, now maintain dedicated liquidity buffers of 5% or more of their total portfolio, up from 29% in 2025. These buffers are often deployed in short-duration fixed income or private credit, where yields have risen alongside risk premiums. Canadian investors lead this trend, with 47% holding such buffers, compared to 31% globally. The strategy reflects a shift away from traditional “dry powder” approaches, where capital sits idle, toward pre-positioned liquidity that can be redeployed at short notice.

Marsh’s data also shows that AI-driven portfolio optimization is no longer experimental. While only 3% of Canadian respondents claim to have no AI exposure assessment, the tools are most frequently used for risk scenario modeling (61%) and private market valuation adjustments (49%). The report highlights that Canadian asset owners are more likely to employ AI for sector-specific analysis, such as evaluating the impact of AI on data center demand, than for macroeconomic forecasting.

This targeted use suggests a pragmatic approach: AI is seen as a tool to refine decisions, not replace them. The survey concludes that the most resilient portfolios will combine disciplined underwriting with flexible liquidity management, ensuring that shifts in geopolitical or market conditions do not create unintended concentrations.