Global wealth managers view ongoing geopolitical tensions as the biggest threat to capital markets in 2025, research from Universal Investment has found.

Nearly nine in 10 (87 per cent) wealth managers believed that geopolitical tensions were a threat to capital markets, followed by wars and terrorist attacks (54 per cent), and inflation (46 per cent).

Universal Investment noted that regulatory risks (36 per cent) were considered “far more worrying” than the ongoing interest rate policy of central banks (26 per cent).

Meanwhile, climate change ranked second to last amongst capital market threats, cited by 17 per cent of respondents, only ahead of supply chain issues, which were considered the lowest risk.

The survey also asked which asset classes and countries wealth managers will be recommending to retail investors in 2025.

It revealed a “clear direction”: An asset class split that is clearly overweight in developed markets, with an ideal equity allocation of more than 43 per cent and almost 22 per cent in fixed income.

Wealth managers were recommending that emerging market equities should account for just under 10 per cent, while emerging market fixed income should have an allocation of just over 5 per cent.

They also recommended a 5.5 per cent allocation to real estate, although just over 4 per cent of the total allocation should go towards alternative investments.

Universal Investment highlighted that the recommended allocation to gold and other precious metals was “quite high” at 7.7 per cent.

Looking at country allocation, the US topped the investment list with 45 per cent, followed by Europe with 30 per cent and Asia, excluding China, with 6.7 per cent.

While wealth managers expected strong growth in China, only 3.8 per cent recommended allocations in the region, below that of Japan at 5.5 per cent.

In terms of thematic investments, pharmaceuticals rank highest at 70 per cent, overtaking technology (60 per cent).

Cybersecurity (49 per cent) and infrastructure (37 per cent) came in third and fourth, with climate and environment ranking sixth with 23 per cent.

Universal Investment also found that interest in sustainable investments had cooled, with 35 per cent of wealth managers expecting demand for ESG investments to continue falling, while 37 per cent forecast it to remain at current levels, 21 per cent expected an increase, and 7 per cent anticipated a dramatic decline in ESG investment demand.

“From a global perspective, there is an expectation that the economy will perform well in 2025,” Universal Investment stated.

“Contrary to the opinion of some experts, a clear majority of the respondents to Universal Investment's annual survey of wealth managers predict an upturn in the US and even a boom in Asia, particularly China. For Europe and Germany, wealth managers surveyed predict recession or stagnation.”

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