You can find original article here WealthManagement. Subscribe to our free daily WealthManagement newsletters. Geopolitics are now playing a major role in how private capital is allocated, while the continued evolution of investment vehicles for private investors poses new challenges for the financial services industry, according to The World Rewired, a new report from the Chartered Alternative Investment Analyst Association. CAIA based the report’s conclusions on 12 months of data gathering through roundtables with senior industry executives, closed-door LP discussions and feedback and surveys from CAIA’s 14,000 members. CAIA’s research found that after years of globalization driving investment trends, the changing geopolitical environment is causing investors to focus on strategies that align with more local and regional priorities, ranging from energy security to industrial policies. “Most advisors and most of us as professionals have lived through a period of stability in terms of geopolitics and a more stable macro backdrop that we’ve enjoyed for a number of years, and that’s changing,” said Aaron Filbeck, managing director, content and community strategy, at CAIA. “If you are an advisor, there is a portfolio conversation that needs to be had about what you own that’s got an awareness of the geopolitical climate. But maybe a more important point is that your clients are turning on the TV and seeing the news every day. So, being able to articulate what’s going on in the world and how it relates to the portfolio you are managing [is important].” The report authors found that the majority of CAIA members (62.1%) now view emerging markets as a source of growth and diversification for their portfolios, a role that developed markets can’t replicate. Other, although less prominent, reasons cited by CAIA members for wanting access to emerging markets included a view of them as a source of new talent (15.6% of those surveyed) and as potential centers of innovation in fintech, tokenization and blockchain (12.6% of those surveyed). Another almost 10% of members believe emerging markets will eventually become a major source of private capital. In addition, North American asset managers are increasingly setting up shop in emerging markets, including China, the Persian Gulf region, India, and Latin America, which means these regions will continue to grow in importance as major financial centers, Filbeck noted. However, this is happening against the background of rising geopolitical risks, ranging from the war in Iran and the current oil blockade to the possibility of a Chinese takeover of Taiwan and disruption to the world’s semiconductor supply chains. As a result, asset managers and investors must now consider not only the potential returns from a given investment strategy but also the exposure to geopolitical risks.
A major change in investment trends over the past few years has been the growth of semi-liquid funds. Combined data from Morningstar, the Investment Company Institute, and Crescit Capital show that in 2025, these investment vehicles, including interval funds, tender offer funds, BDCs, and non-traded REITs, totaled an estimated $402.7 billion, up almost twofold since 2022. But while asset managers and investors are still trying to figure out the details on how semi-liquid vehicles work in practice—including, for example, redemption limits, which are coming to the forefront now as private credit BDCs are getting negative press—the financial services industry is already talking about tokenization as the next frontier for investment. The CAIA survey showed about a third of participants (29.2%) view tokenized private markets as having the most impact on how investors will allocate capital going forward, roughly on par with those who pointed to semi-liquid funds as being the most impactful (27.7%). According to CAIA, senior executives at the roundtables admitted that “liquidity terms [in semi-liquid vehicles] are complex to govern” and “investor expectations are difficult to calibrate.” “I think beyond education, an important element across the entire ecosystem—from the asset manager to the advisor to the client—is setting the proper expectation for how we should be treating these vehicles,” Filbeck said regarding the financial industry’s struggle to fully master the workings of semi-liquid funds. “Where we’ve landed in the short term is that, despite what we say about these vehicles being long-term and the assets being long-term, there is still a behavioral bias to treat these like an ETF or a mutual fund, where you are trying to trade in and out of it and get your money out when things go bad. Instead, we need to spend a lot more time training ourselves and our clients to think about these as long-term vehicles that just so happen to have a liquidity mechanism and utilize the operational benefits as the true benefit.” Meanwhile, tokenization, which would imply continuous liquidity and real-time pricing, would “undermine” the relative stability of the semi-liquid model, CAIA researchers point out, since it relies on periodic liquidity and complex valuation protocols. “A dominant discussion in the private markets is around liquid product design, but it’s very possible we’re having the wrong conversation,” Filbeck said. “Tokenization could shift the focus from building better fund structures to rebuilding the infrastructure beneath them. If ownership, liquidity and settlement become digitally native, that changes the game entirely.” According to Filbeck, there appears to be a tension in the financial services industry between those who are focusing on how to make private assets more accessible to individual investors within an existing infrastructure and those who want to use an entirely new infrastructure—blockchain—in order to provide investors with easy access and efficiency. “I think we are still way too early to say that infrastructure in tokenization is at a place where it’s going to overtake the semi-liquid fund structure, but I could see a world where it becomes a really viable candidate for how transactions take place and perhaps even transactions within some of the semi-liquid fund structures as well,” Filbeck said. “It could help the secondary market, help liquidity, and so on.”