GlobalData StatusUpdate: Geopolitics, Active ETFs and Alternatives Reshape APAC Portfolios

Key Points

• Geopolitics is now a primary driver of APAC asset allocation — 68% of wealth managers in 2025 say geopolitical risks matter more than economic ones, prompting investors to add diversifiers, hold more "dry powder," and demand clearer risk communication from firms.
• Retail caution is rising: growth in equities, bonds, mutual funds and ETFs is slowing while deposits have increased, with high-net-worth clients remaining more resilient but mass and lower-affluent segments expected to slow due to inflation and cash-flow pressures.
• There is a clear shift to professionally managed and active strategies — uptake of managed mandates and active ETFs (71% of managers see rising demand) is growing alongside alternatives like tokenized assets, hedge funds (GBP 116bn inflows), and private debt, while crypto and NFTs are retreating and investors demand higher manager quality and liquidity transparency.

GlobalData LON: DATA outlined shifting asset allocation trends in the Asia-Pacific (APAC) region during a webinar led by Heike, a Sydney-based member of the firm’s wealth management research team. The session focused on how geopolitical uncertainty, market volatility, and evolving investor preferences are reshaping retail and high-net-worth portfolios across the region.

Geopolitics increasingly driving allocation decisions

Heike framed the current investment environment around heightened geopolitical risk, describing it as a persistent backdrop marked by “much more frequent and sharper spikes” tied to events such as the Russia-Ukraine war, the escalation in Gaza, and more recent concerns involving Iran.

She said this matters for wealth managers in two key ways: portfolio construction and client communication. On construction, she noted investors are more aware of concentration risk and energy shocks, more willing to add diversifiers, and more open to holding “more dry powder.” On communication, she emphasized that clients want reassurance that firms are monitoring risks and have a plan—without reacting dramatically to every headline.

Heike cited survey results showing that in 2025, 68% of APAC wealth managers agreed geopolitical risks are more important drivers of asset allocation than economic ones, up from 57% in 2023.

Retail caution shows up in flows and wealth growth

Heike said investor uncertainty is visible in retail holdings growth trends. While she characterized risk assets as “still growing” rather than experiencing a full retreat, she said growth is slowing across equities, bonds, mutual funds, and ETFs. By contrast, deposits are showing higher growth than in the prior three years as investors seek safety, liquidity, and greater selectivity about where they take risk.

She added that broader liquid wealth growth is moderating across the market. The high-net-worth segment was described as more resilient due to better diversification and a greater ability to capitalize on opportunities, while lower affluent segments are expected to slow more visibly due to inflation and cash-flow pressures.

Shift toward managed solutions and active ETFs

Despite recent caution, Heike said the longer-term trend in APAC remains a gradual rotation from deposits into market-based assets, though the region still appears “a bit more conservative” than the global picture and maintains a larger share in savings products.

In periods of volatility, she said investors are more willing to hand over control to professionals, driving uptake of managed mandates. She described this as an opportunity for providers, while also noting that it raises the bar on performance and communication in order to justify fees.

Heike also highlighted growing demand for active ETFs, calling it a direct result of heightened market volatility. She said 71% of APAC wealth managers agree that investors are increasingly opting for active rather than passive ETFs. Active ETFs remain about 10% of the total ETF universe, she noted, but are growing quickly, with notable opportunities in India, Malaysia, and China. According to Heike, flows are coming more from mutual funds than from passive ETFs, and there is particular momentum in fixed income active ETFs where “dynamic duration management” and market inefficiencies can create openings for active strategies.

ESG demand remains, but becomes more selective

Heike pushed back on narratives that ESG demand is broadly fading, saying GlobalData’s data indicates ESG remains an important component of high-net-worth portfolios and that APAC stands out as a growth market supported by regulation, product development, and a growing investor base.

However, she said the retail segment has shown some retreat amid more challenging markets, as investors emphasize performance and capital preservation—making ESG “more of a secondary consideration” unless providers can demonstrate no compromise on core objectives. Overall, she characterized ESG as becoming “more selective rather than less relevant.”

Alternatives: tokenization, commodities, hedge funds, and private debt

Heike said tokenized assets are gaining relevance in APAC (and the Americas) as tokenization moves beyond a niche digital asset theme. She argued the appeal is less about the technology itself and more about enabling fractional ownership and reducing barriers such as high minimums and administrative complexity, particularly for traditionally hard-to-access investments like private credit and real estate.

In APAC high-net-worth portfolios, she said equity allocations have become more prominent since the pandemic, supported by strong markets and “a bit of FOMO,” while real estate and commodities allocations have declined and bonds have remained broadly stable. She warned that higher equity exposure increases concentration risk, particularly given AI-related technology’s role in driving performance, reinforcing the need for diversification and rebalancing.

On commodities, Heike said the asset class has “moved back into focus” as both a diversifier and potential performance driver amid geopolitical risk, inflation concerns, and supply-side uncertainty. While precious metals were described as the clear winner over the past year, she noted gold has faced more mixed performance recently due to a stronger U.S. dollar, higher Treasury yields, and the reduced likelihood of near-term rate cuts—making it less attractive relative to income-generating products. She also described a shift in high-net-worth commodity exposure toward simpler, more liquid access via ETFs, and away from direct holdings such as physical gold.

Heike identified four key trends in APAC high-net-worth alternatives allocations between 2024 and 2025:

• A move away from cryptocurrencies amid what she called a “crypto winter,” reflecting concerns about volatility
• A view that NFTs are “basically a fad,” with NFTs declining to 1% of the average high-net-worth alternatives portfolio
• Rising demand for hedge funds as investors seek active management; she said hedge funds had their best year since 2009 and the strongest inflows since 2007, totaling GBP 116 billion in net investor inflows
• Rapid growth in private debt funds, driven by income appeal and perceived insulation from public credit, alongside growing emphasis on manager quality and clearer liquidity terms

Heike said concerns have emerged around private debt portfolio quality—particularly related to software lending amid AI-driven disruption—and referenced an example in which BlackRock limited withdrawals. She said GlobalData expects the pace of inflows to slow, with a greater investor focus on quality managers and improved liquidity transparency. Across alternatives, she said investors are moving away from speculative exposures and toward higher-quality products, increasing the importance of due diligence and portfolio fit for wealth managers.

The webinar also discussed targeting by wealth tier and demographics. Heike said investment behavior changes sharply with affluence, with the mass market remaining heavily deposit-led and broader investment propositions becoming more compelling around the mass affluent threshold. She also said millennials show the highest investment penetration in APAC, but tend to engage differently—more likely to self-manage via digital platforms—supporting hybrid models that combine digital access with advice on demand.

About GlobalData LON: DATA

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