The “Economist Impact” report, supported by Xtrackers, examines the growing importance of geopolitical risks for institutional investors
- The report examines how institutional investors rethink their approach to risk in the face of the intensification of geopolitical tensions and how they reorganize their capital flows and the structure of their portfolios accordingly.
- The report is based on a global survey carried out in April and May 2025 with 300 institutional investors in North America, Europe and Asia, including pension funds, insurance companies, sovereign funds, foundations, family offices and government agencies.
XTRACKERS supports the report “Friendvesting: the new architecture of investment in a fragmented world” published by Economist Impact. This report stresses that geopolitical factors such as military conflicts, sanctions and long -term changes such as trade barriers have an increasing influence on investment decisions. Actions and obligations, in particular, react quickly to political developments, forcing fund managers and investors to rethink their old hypotheses in terms of risk and return. “Friendvesting”, that is to say the fact of investing jointly with allied geopolitical groups sharing common economic and strategic interests, will be a central strategy for institutional investors in 2025. You will find below the main conclusions of the report:
The era of “friendvestting”
Institutional investors no longer consider geopolitical conflicts as a simple background noise. The war in Ukraine and the Middle East, the tensions in the Taiwan Strait and the customs threats of Washington made geopolitics a central variable in the composition of the wallets. Our survey conducted with 300 global investors reveals an evolution of an episodic vision towards a structural vision of geopolitics, which redefines the flows of capital, their allowance and their management. The model that is emerging is that of “friendvesting”: directing capital to countries where geopolitics is less present and avoid – or at least protect itself – against growing risks.
Interdependence, not just location
“Friendvesting” begins with geography: two thirds of investors say that geopolitics has the greatest influence on their portfolios. For real assets – ports, pipelines or real estate -, the location is decisive. In most cases, however, investors are less interested in the location of an asset than in its exposure to geopolitical risks which run along the geographic borders. For actions, the important thing is not whether a company is listed in Boston or Beijing, but if it depends on suppliers, customers or activities located in unstable legal areas. The new geography of capital is less defined by proximity than by dependence.
Asset classes and the form of risk
If geography defines the limits of “friendvesting”, asset allocation gives it shape. Different assets have different geopolitical risks. Some transmit them openly, others hide them until problems arise. Obligations depend on their enforceable force, actions reveal operational interdependencies and real assets are vulnerable because of their physical immobility. The task of investors is to understand how each asset absorbs and transfers geopolitical tensions. This is made difficult by the lack of reliability of traditional risk indicators when international conflicts come into play.
Sectors in the sights
The geopolitical risks are unevenly distributed between the different sectors. Some are closer to fracture lines and are exposed to sanctions and regulatory obstacles. Our survey places technology, energy and defense on the front line, but the concrete risk contours vary from country to country. Investors question the meaning of each sector, the way in which it is perceived, politicized and potentially instrumentalized.
Bureaucratization of the unpredictable
Geopolitical risks are difficult to quantify. Almost half of investors cite the uncertainty of forecasts as their main challenge. Sanctions and customs duties are difficult to model, wars break out without warning. Institutional reactions are diverse: some companies set up interfunctional risk committees, others use consulting firms made up of former diplomats. Hybrid investment models, which combine passive commitments and dynamic covers, gain popularity because they offer both stability and responsiveness.
The Economist’s impact report can be downloaded in PDF format ici (in English).
