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Business Times
14-07-2025
- Business
- Business Times
Wealth funds warm to active management – and China – to weather volatility: report
[LONDON] The world's sovereign wealth funds are turning to active fund management and investments in China, while central banks are diversifying reserves to weather a volatile global environment, an Invesco survey of sovereign funds and central banks managing US$27 trillion in assets showed. Still, the US dollar reigns supreme, with the bulk of central banks saying it would take two decades to dethrone it, if ever, as the top reserve currency despite growing concerns. 'Institutions with greater than US$100 billion, so the pretty large institutions, those are the ones that were most interested in moving more to active management,' said Rod Ringrow, Invesco's head of official institutions. Whereas funds liked passive management in predictable market conditions, predictable was 'no longer the case', he added. 'I think that frames the whole approach... in this move to active management'. On average, wealth funds made returns of 9.4 per cent last year, the joint second-best performance in the survey's history. Nevertheless, market volatility and de-globalisation concerns have spiked, and over the 10-year horizon, big worries centre around climate change and rising sovereign debt levels. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Over 70 per cent of the 58 central banks polled, for example, now believe rising US debt is negatively impacting the US dollar's long-term outlook. Nevertheless, 78 per cent think it will take more than two decades for a credible alternative to the greenback to emerge. That is a jump from 58 per cent last year while just 11 per cent of central banks now view the euro as gaining ground compared to 20 per cent last year. China Fomo The survey was carried out between January and March, before US President Donald Trump's 'Liberation Day' tariff announcements and at the peak of excitement around DeepSeek AI's emergence in China. Wealth funds are seeing a major resurgence in interest in Chinese assets with nearly 60 per cent intending to increase allocations there in the coming five years, specifically the tech sector. That number jumps to 73 per cent in North America despite the worsening US-Sino tensions, whereas in Europe it sits at just 13 per cent. Wealth funds, the survey said, were now approaching China's innovation-driven sectors with the 'strategic urgency they once directed towards Silicon Valley'. 'There's a little bit of a Fomo,' Ringrow explained, a view that 'I need to be in China now' as it shapes up to be a global leader in semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy. Private credit has also emerged as a key focus for funds seeking alternative sources of income and resilience. It is now adopted by 73 per cent of wealth funds, up from 65 per cent last year, and with half actively increasing allocations. 'This represents one of the most decisive trends in sovereign asset allocation,' the report said. There is also growing interest, especially among emerging market wealth funds, in stablecoins – a type of cryptocurrency that is most commonly pegged 1:1 to the US dollar. Almost half of the funds said that stablecoins were the type of digital assets they were inclined to invest in, although that was still behind the likes of bitcoin, where the share was 75 per cent. REUTERS
Techday NZ
04-07-2025
- Business
- Techday NZ
eflow Global launches sandbox to help reduce false positives
eflow Global has launched a sandbox feature for its TZTS Trade Surveillance system, providing compliance teams with a secure environment to test and adjust alert thresholds without affecting live systems. Responding to regulatory pressure The new Sandbox functionality offers compliance teams a dedicated replica of their surveillance system in which they can simulate and refine alert parameters using real historical trading data. This development comes as compliance teams continue to grapple with high volumes of false positives and intensified regulatory scrutiny. Recent research from eflow Global indicates that 43% of regulatory professionals cite managing the volume of false positive alerts generated by their trade surveillance systems as a major concern. These false alarms can distract teams from real threats, making it harder to prioritise meaningful alerts and comply with regulatory expectations. Traditionally, financial firms have found it challenging to experiment with their trade surveillance configurations due to concerns over compliance risks when making changes to live systems. The Sandbox aims to address this gap by enabling secure, risk-free experimentation. Functionality details The Sandbox provides a ring-fenced replica of a firm's trade surveillance setup. Compliance professionals can stress-test and simulate parameter alterations using historical trade data, analyse the resulting alert outcomes, and then export their preferred settings seamlessly into production systems. This tool supports efforts to reduce false positives, improve audit readiness, and adjust to changing market dynamics. "The ability to stress-test your surveillance strategy with real-life trading data in a no-risk environment is a game-changer," said Ben Parker, CEO of eflow Global. "Firms need the confidence that their alert thresholds are both appropriately stringent and operationally manageable. The Sandbox gives them that confidence - backed by real data and a clear audit trail." This new feature is available to all users of the TZTS Trade Surveillance system, and it comes at a time when regulatory activity is rising sharply. In the first quarter of 2025, global regulatory enforcement produced over $150 million in financial penalties across six jurisdictions. Enforcement actions in 2024 increased by 863% year-on-year, highlighting the urgency for compliance functions to operate with reliable and defensible surveillance methods. Changing market conditions Market volatility has added to the compliance burden. Ben Parker noted recent events that have led to rapid spikes in alert volumes, including technological and geopolitical developments. "Recent market shocks, such as the release of DeepSeek AI and its ripple effect across NVIDIA and the wider NASDAQ, as well as the renewed volatility following President Trump's recent tariff announcements, have shown how quickly alert volumes can spike," added Parker. "The Sandbox gives firms a way to replay these periods, refine parameters in response, and ensure robust controls are in place." Given this context, compliance teams are increasingly required by regulators to demonstrate that their surveillance parameter tests are based on real evidence and robust processes. The capability to playback historical data and visibly adjust controls provides them with the audit trail necessary to validate their surveillance procedures during regulatory reviews. The system's audit support is designed to help financial firms demonstrate regulatory compliance, improving their readiness for inspections and inquiries. Firms can trace decisions regarding alert configuration changes directly to historical data events, helping to prove that their controls are suitable for evolving market and regulatory conditions. Availability and industry implications The Sandbox is now included for all users of TZTS Trade Surveillance. It is positioned to support both immediate adjustments arising from current market movements and ongoing strategy reviews aimed at reducing false positives and demonstrating compliance diligence. Follow us on: Share on:
Mint
11-06-2025
- Health
- Mint
Brave Chinese voices have begun to question the hype around AI
Against the odds, some in China are questioning the top-down push to get aboard the artificial intelligence (AI) hype bandwagon. In a tightly controlled media environment where these experts can easily be drowned out, it's important to listen to them. Across the US and Europe, loud voices inside and outside the tech industry are urging caution about AI's rapid acceleration, pointing to labour market threats or more catastrophic risks. But in China, this chorus has been largely muted. Until now. Also Read: Parmy Olson: The DeepSeek AI revolution has a security problem China has the highest global share of people who say AI tools have more benefits than drawbacks, and they've shown an eagerness to embrace it. It's hard to overstate the exuberance in the tech sector since the emergence of DeepSeek's market-moving reasoning model earlier this year. Innovations and updates have been unfurling at breakneck speed and the technology is being widely adopted across the country. But not everyone's on board. Publicly, state-backed media has lauded the widespread adoption of DeepSeek across hundreds of hospitals in China. But a group of medical researchers tied to Tsinghua University published a paper in the medical journal JAMA in late April gently questioning if this was happening 'too fast, too soon." It argued that healthcare institutions are facing pressure from 'social media discourse" to implement DeepSeek in order to not appear 'technologically backward." Doctors are increasingly reporting patients who 'present DeepSeek-generated treatment recommendations and insist on adherence to these AI-formulated care plans." The team argued that as much as AI has shown potential to help in the medical field, this rushed rollout carries risks. They are right to be cautious. Also Read: The agentic AI revolution isn't the future, it's already here It's not just the doctors who are raising doubts. A separate paper from AI scientists at the same university found last month that some of the breakthroughs behind reasoning models—including DeepSeek's R1, as well as similar offerings from Western tech giants—may not be as revolutionary as some have claimed. They found that the novel training method used for this new crop 'is not as powerful as previously believed." The method used to power them 'doesn't enable the model to solve problems that the base model can't solve," one of the scientists added. This means the innovations underpinning what has been widely dubbed as the next step—toward achieving so-called Artificial General Intelligence—may not be as much of a leap as some had hoped. This research from Tsinghua holds extra weight: The institution is one of the pillars of the domestic AI scene, long churning out both keystone research and ambitious startup founders. Another easily overlooked word of warning came from a speech by Zhu Songchun, dean of the Beijing Institute for General Artificial Intelligence, linked to Peking University. Zhu said that for the nation to remain competitive, it needs more substantive research and less laudatory headlines, according to an in-depth English-language analysis of his remarks published by the independent China Media Project. These cautious voices are a rare break from the broader narrative. But in a landscape where the deployment of AI has long been government priority, it makes them especially noteworthy. The more President Xi Jinping signals that embracing AI technology is important, the less likely people are to publicly question it. This can lead to less overt forms of backlash, like social media hashtags on Weibo poking fun at chatbots' errors. Or it can result in data centres quietly sitting unused across the country as local governments race to please Beijing—as well as a mountain of PR stunts. Also Read: AI as infrastructure: India must develop the right tech Perhaps the biggest headwind facing the sector, despite the massive amounts of spending, is that AI still hasn't altered the earnings outlooks at most of the Chinese tech firms. The money can't lie. This doesn't mean that AI in China is just propaganda. The conflict extends far beyond its tech sector—US firms are also guilty of getting carried away promoting the technology. But multiple things can be true at once. It's undeniable that DeepSeek has fuelled new excitement, research and major developments across the AI ecosystem. But it's also been used as a distraction from the domestic macro-economic pains that predated the ongoing trade war. Without guard-rails, the risk of rushing out the technology is greater than just investors losing money—people's health is at stake. From Hangzhou to Silicon Valley, the more we ignore the voices questioning the AI hype bandwagon, the more we blind ourselves to consequences of a potential derailment. ©Bloomberg The author is a Bloomberg Opinion columnist covering Asia tech.
Globe and Mail
04-06-2025
- Business
- Globe and Mail
3 surprising market winners in 2025
Investors brave enough to peek at their account statements know that it's been a rocky 2025. Even before tariff-related volatility, DeepSeek AI's launch clouded the major technology theme that powered the market in 2023 and 2024, as AI stocks entered a bear market in March. But there have been equity gains to be had in 2025. When I look at year-to-date returns across indexes, I notice a few surprising stars: European stocks, Latin America, and real estate investment trusts. The common thread that connects the three? All had been underperformers in prior years. European stocks have been made great again Morningstar's European stock index is riding high this year, as the macroeconomic environment has been improving. The financial-services sector, in particular, is a key beneficiary. Then there's Germany's newfound interest in deficit spending and the continent's focus on military self-sufficiency, spurred by the Donald Trump administration. US tariff announcements caused sharp selloffs in Europe, but the recovery has been V-shaped. A weakening US dollar has magnified European equity gains for unhedged US investors. It doesn't hurt that the European Central Bank and the Bank of England have actually been cutting interest rates. My research and investment colleagues have called Europe 'the most attractive developed-markets region globally,' making European stocks worthy of inclusion in a diversified portfolio. Latin America: Can the revival last? South of the US border, stocks are rallying. Morningstar's Latin American equities index is up more than 22% so far in 2025, thanks to Brazil, Mexico, and the smaller markets of Colombia and Chile. Here, too, a weakening dollar has boosted equity returns for unhedged US investors. This marks quite a turnaround from losses of more than 25% in US dollar terms in 2024. Brazil, for its part, faces serious fiscal challenges. In Mexico, sentiment was dented by election results on both sides of the border. Coming into the year, my colleagues on Morningstar's research and investment team identified Brazil as the highest potential global equity market for the coming 10 years. Latin American stocks are volatile but could hold more upside. REITs, especially those outside the US, outperform Real estate investment trusts are also up double digits this year outside the US. Property sectors in many geographies are vibrant, bolstered by low or falling interest rates. What about the US? The Morningstar US REIT Index is well behind the Morningstar Global Markets ex-US REIT Index in 2025, but it's in positive territory, ahead of the broad US equity market. US interest rates that appear to be staying higher for longer are seen as a negative for real estate. That said, REIT yields are attractive, and property is a 'real asset' that can act as an inflation hedge. Diversification assures exposure to unloved asset classes US mega-cap technology-oriented stocks did so well for so long that many investors thought they were the only game in town. Coming into 2025, it was hard to envision how the Magnificent Seven could ever be knocked off their perch. The rise of artificial intelligence, widely viewed as 'bigger than the internet,' seemed inexorable. No one saw DeepSeek AI coming, and few predicted the degree to which tariffs would disrupt. Gravity is a powerful force in investing, too. US stocks, especially on the growth side of the market, posted returns in 2023 and 2024 that far exceeded their historical levels. Their losses in 2025 can be seen as a reversion to the mean, or a return to long-term averages. The surprising winners of 2025 show that investment performance is dynamic. Contrarian bets can be profitable, though they can also take time to pay off. Investors who diversify by geography, style, and market capitalization are also well placed to benefit from leadership change. ___
The Hill
04-06-2025
- Business
- The Hill
3 surprising market winners in 2025
Investors brave enough to peek at their account statements know that it's been a rocky 2025. Even before tariff-related volatility, DeepSeek AI's launch clouded the major technology theme that powered the market in 2023 and 2024, as AI stocks entered a bear market in March. But there have been equity gains to be had in 2025. When I look at year-to-date returns across indexes, I notice a few surprising stars: European stocks, Latin America, and real estate investment trusts. The common thread that connects the three? All had been underperformers in prior years. Morningstar's European stock index is riding high this year, as the macroeconomic environment has been improving. The financial-services sector, in particular, is a key beneficiary. Then there's Germany's newfound interest in deficit spending and the continent's focus on military self-sufficiency, spurred by the Donald Trump administration. US tariff announcements caused sharp selloffs in Europe, but the recovery has been V-shaped. A weakening US dollar has magnified European equity gains for unhedged US investors. It doesn't hurt that the European Central Bank and the Bank of England have actually been cutting interest rates. My research and investment colleagues have called Europe 'the most attractive developed-markets region globally,' making European stocks worthy of inclusion in a diversified portfolio. South of the US border, stocks are rallying. Morningstar's Latin American equities index is up more than 22% so far in 2025, thanks to Brazil, Mexico, and the smaller markets of Colombia and Chile. Here, too, a weakening dollar has boosted equity returns for unhedged US investors. This marks quite a turnaround from losses of more than 25% in US dollar terms in 2024. Brazil, for its part, faces serious fiscal challenges. In Mexico, sentiment was dented by election results on both sides of the border. Coming into the year, my colleagues on Morningstar's research and investment team identified Brazil as the highest potential global equity market for the coming 10 years. Latin American stocks are volatile but could hold more upside. Real estate investment trusts are also up double digits this year outside the US. Property sectors in many geographies are vibrant, bolstered by low or falling interest rates. What about the US? The Morningstar US REIT Index is well behind the Morningstar Global Markets ex-US REIT Index in 2025, but it's in positive territory, ahead of the broad US equity market. US interest rates that appear to be staying higher for longer are seen as a negative for real estate. That said, REIT yields are attractive, and property is a 'real asset' that can act as an inflation hedge. US mega-cap technology-oriented stocks did so well for so long that many investors thought they were the only game in town. Coming into 2025, it was hard to envision how the Magnificent Seven could ever be knocked off their perch. The rise of artificial intelligence, widely viewed as 'bigger than the internet,' seemed inexorable. No one saw DeepSeek AI coming, and few predicted the degree to which tariffs would disrupt. Gravity is a powerful force in investing, too. US stocks, especially on the growth side of the market, posted returns in 2023 and 2024 that far exceeded their historical levels. Their losses in 2025 can be seen as a reversion to the mean, or a return to long-term averages. The surprising winners of 2025 show that investment performance is dynamic. Contrarian bets can be profitable, though they can also take time to pay off. Investors who diversify by geography, style, and market capitalization are also well placed to benefit from leadership change. ___ This article was provided to The Associated Press by Morningstar. For more markets content, go to Dan Lefkovitz is a strategist for Morningstar Indexes
