Navigating Structural Change: Considerations for Long-Term Investors
While the case for AI and technology remains compelling, there are important questions about concentration, valuations, capital intensity, and portfolio resilience.
The Bank of England and the Bank for International Settlements have both highlighted concerns about equity valuations, index concentration, and capital demands of AI infrastructure. At the same time, AI-related revenue, cloud investment, and institutional capital flows continue.
For long-term investors, the key question is not whether AI matters — it clearly does. It is whether today’s market structure is creating risks that need reviewing across the total portfolio.
Why this matters
A small number of US technology companies now account for a significant share of major global equity indices. Passive investment can reinforce that concentration, while AI exposure is also increasingly present in fixed income and private markets.
At the same time, the largest technology firms are moving from asset-light software models to capital-intensive infrastructure investment, with implications for cash flow, funding and valuation.
For investors, this creates a broader governance question: does the current portfolio structure still reflect long-term objectives, risk appetite, and liability profile?
Three areas to consider
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What do your benchmarks really contain?Global equity benchmarks are more concentrated than they were. Understanding the resulting exposure — particularly to the US and large-cap technology — is increasingly important.
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Is the AI growth story being matched by cash flow?AI-related businesses continue to generate strong revenues, but infrastructure investment is rising quickly. That shift is changing the funding profile of the largest technology names.
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Is your portfolio resilient to a wider range of outcomes?Geopolitical volatility, inflation risk, and changing bond-equity correlations reinforce the need for scenario analysis and total portfolio review.
What long-term investors should review
- Benchmark composition and concentration
- Passive versus active equity exposure
- AI-related exposure across the total portfolio
- Scenario analysis and downside resilience
- Stewardship and governance frameworks
How Marsh can help
We can support investors with:
- Total portfolio exposure analysis
- Scenario analysis and stress testing
- Benchmark and portfolio construction reviews
- Stewardship and governance framework reviews
- Assessment of concentration and structural risk
