As geopolitical volatility, rising tariffs and shifting monetary regimes challenge long-held investment assumptions, Jennie Byun, Head of the UK Multi Asset Investment Specialist team at HSBC Asset Management, outlines how financial advisers can help clients build resilient, forward-looking multi-asset portfolios. From the rethinking of the 60/40 model to the growing role of alternatives and tactical pivots in a fragmented global economy, she offers a strategic guide for navigating complexity in 2025 and beyond.
This article was featured in our Multi-Asset Fund Insights 2025, looking at the latest thinking and analysis into what’s going on within this key market segment. Readers can check out the full publication here.
Leading up to and following US President Trump’s April 2nd “Liberation Day” announcement, many clients have expressed concern on how global changes might impact their investment portfolios. As geopolitical tensions, economic realignments, and shifting monetary policies reshape the investment landscape, advisers are considering how best to recalibrate tactical and strategic asset allocation models.
Building Resilient Investment Frameworks
Markets are inherently uncertain. As Ray Dalio put it, “He who lives by the crystal ball will eat shattered glass.” With economic, geopolitical, and technological unknowns, predicting each twist and turn is dangerous. The real challenge is building resilient, adaptive investment processes. Portfolios should be robust enough to weather shifting sands yet flexible enough to pivot, across both tactical and strategic horizons.
Tactical Considerations in a Post-Tariff World
Recent tariff announcements, and even prior to this with Deepseek’s challenge to US tech dominance, have made tactical shifts in portfolios essential. These tariffs have forced a reassessment of global trade dependencies, especially around US-China supply chains. A key trend has been the broadening of returns—away from US mega-cap tech into other regions, sectors, and asset classes. We expect that to continue through 2025.
Valuations had been high for US companies, especially tech. So, some pullback was expected. As recession risks increase from policy shifts, we favour quality stocks that can better weather downturns. Financials, utilities, and communication services are other areas of focus. Outside the US, we believe parts of Europe offer compelling valuations and benefit from the potential increase in infrastructure and defence spending. Emerging markets, particularly those less affected by direct tariffs, could also benefit from capital rotation.
In fixed income, we see the higher-for-longer rate environment making short-duration bonds and floating rate instruments more attractive. Long-duration government debt, however, faces headwinds from persistent inflation and growing deficits.
Strategic Shifts Amid Structural Change
Strategically, deeper shifts are at play. The shifting tariff regime and geopolitical fragmentation may mark a structural pivot away from a unipolar, US-led global economy. Multi-asset investors may need to revisit assumptions—that US equities always outperform, that bonds hedge reliably, or that globalisation will suppress inflation and boost efficiency.
Emerging themes include sectors resilient to trade fragmentation and technological reshoring: industrials, energy, and localized tech infrastructure are seeing increased attention. While we believe it’s too soon to make radical changes in portfolios, small allocations into key thematic trends can lay the groundwork.
The Growing Role of Alternatives
The case for alternatives has grown stronger in 2025 in our view. Many investors are considering more resilient portfolios that diversify beyond the simple equity-bond split. In today’s volatile environment, portfolio construction may benefit from accounting for shifts in inflation, growth, and monetary policy regimes. Portfolios might evolve to include commodities, real assets, and hedge funds.
Real assets like infrastructure and commodities can offer inflation protection and potentially benefit from global re-industrialisation, energy security, and technological independence. Hedge funds, using style factor strategies, can offer defensive qualities complementing equity and bond exposure. Beyond conventional liquid alternatives, managers can consider strategies offering diversified protection, such as tail-hedge options and volatility instruments. Private markets can also provide differentiated returns less correlated with public markets. Still, due diligence, liquidity planning, and appropriate sizing are essential.
The Future of the 60/40 Portfolio
This brings us to the future of the 60/40 portfolio. For decades, a 60%/40% equity/bond mix offered growth and capital preservation. But when both equities and bonds fell together during inflationary spikes—as seen post-COVID—many questioned if 60/40 still works. In a world where inflation and interest rates rise together structurally, bonds may not diversify as they once did.
Does this mean the 60/40 is dead? Not necessarily. Bonds may no longer be the easy hedge they once were but, when managed as part of a diversified and actively managed portfolio, can still retain safe haven characteristics. Other tools could buffer portfolios such as tactical levers in safe haven currencies, defensive equity allocation, and granular bond investments. With active levers, we believe 60/40 remains a cost-effective way to manage core investments.
A Dynamic Approach for a Complex World
The bottom line for IFAs in 2025: we operate in a more complex, less predictable world. Tariffs are just one sign of deeper shifts—toward economic nationalism, reshoring, and strategic competition. These changes demand a dynamic approach to asset allocation. Tactical positioning remains key for capturing near-term dislocations but must fit within a coherent, resilient strategic framework. Diversification—in its truest, multi-dimensional form—has never been more critical.
Now more than ever, it’s not about predicting the future. It’s about preparing for a range of futures. As commonly paraphrased from Charles Darwin’s theory, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” In multi-asset investing, adaptability remains our greatest asset.
About Jennie Byun
Jennie Byun heads the UK Multi-Asset Investment Specialist team within HSBC Asset Management’s Multi Asset business in London and has been working in the financial industry since 1999. Her team is responsible for providing investment solutions for HSBC AM’s clients across institutional, wealth and intermediary client segments. Before joining HSBC in July 2024, Jennie worked as an Investment Director for Aviva Investors, where she covered liquid alternatives and global sovereign bond strategies. Prior to that, she worked in sell-side research at JPMorgan in their New York and London offices. Jennie has a BA in Management Science from the Massachusetts Institute of Technology (US) and an MBA from London Business School (UK).
