From AI to asset allocation: Investment trends from CFA Institute Live 2025

After attending CFA Institute LIVE 2025 in Chicago last month, I gained valuable insights into what’s shaping the thinking of the global investment community.

What stood out for me was the rise of private credit as a tactical asset class, the sustainability of the artificial intelligence (AI) theme, and the critical need to leverage AI tools for enhanced investment decision-making. I also engaged in discussions with
global investment managers about their perspectives on opportunities in South Africa.
 

Tactical asset allocations

Given the dispersion in return profiles across asset classes due to prevailing geopolitical events and the global economic climate, tactical asset allocations have become critical.

The fact that 80% of active managers underperform their benchmarks over a three-year period talks to the challenges the investment industry faces in delivering market-beating returns in an increasingly complex environment.

The key to delivering long-term returns is getting the asset allocation right, with alternative investments playing an increasingly relevant role in diversified portfolios.

Among alternatives, private credit in the form of asset or project finance is increasingly emerging as a key component required for portfolios that aim to beat benchmarks. Exposure of 10-15% is the sweet spot due to the superior returns offered, which compensate investors for the longer-term lock-ins and loss of liquidity.
 

The enduring AI theme

Despite growing scepticism about the sustainability of the AI theme and the industry's lofty valuations, the theme still has considerable room to run.

The next evolution in the AI-driven investment thesis will focus on the complementary and related industries that will benefit from the AI boom.

Developing the data infrastructure and generating the energy needed to support the massive computing power needed in our AI-dominated future will require significant capital, unlocking a host of new investment opportunities.

Industry bodies like the International Energy Agency (IEA) predict that electricity demand from data centres that support AI and AI tools will more than double by 2030 to around 945 terawatt-hours (TWh).

Supporting this demand will require a massive pipeline of new generation projects globally.

Achieving this scale while meeting growing global energy demands will require significant funding, with energy security emerging as an important strategic objective for AI-intensive companies like Google, Amazon and Meta.

In this regard, the biggest and most immediate needle movers will come from nuclear. However, many investors are also looking to the sector to deliver an important ESG slant to meet their mandates of mitigating risks and potentially enhancing long-term financial returns.
 

AI-informed investing

Beyond the thematic investment trends, the use of AI tools to gain a competitive advantage has become a pressing issue that institutional investors cannot ignore.

Consensus view is that AI will enhance, rather than replace, the role fund managers and asset allocators play in the industry, where investment professionals apply the technology in business matters.

While applications in data analysis are already a major focus, decision-makers must begin to leverage AI to process information faster to inform strategies and asset allocations. This will become mission-critical in an increasingly dynamic global marketplace.
 

SA investment case

When engaging global investment managers about South Africa and our value proposition, the message was clear.

The country has its own unique self-help story playing out, which is independent of what is happening in the rest of the world, particularly with our biggest trading partners in the US, Europe and Asia.

The enduring message was that the potential for success in the current environment, with strong emerging market and commodity tailwinds, is firmly in investors’ hands.

In conclusion, as we navigate an increasingly complex investment landscape, it is essential for professionals to remain agile and informed. The evolving dynamics of tactical asset allocation, the rise of alternative investments, and the transformative potential of artificial intelligence are reshaping how we approach investment strategies.