Market trends such as artificial intelligence and geopolitical fragmentation have created economic uncertainty to which pension funds must adapt, according to findings by US manager BlackRock.
BlackRock is by a margin the largest asset manager in the world, with more than $14 trillion in assets under management as of December 31, 2025.
Its “Investment Directions for Institutions” report targeting the EMEA region argued that macro and market volatility will likely be “structurally higher” in the next year. The report gave portfolio predictions across scenarios such as potential continued growth in AI, or the worsening of US risk premiums.
The BlackRock report also argued that private markets play a key role in boosting portfolio expected returns, due to higher alpha potential and early access to structural opportunities.
This would be particularly true if US risk premia worsen, namely a more negative scenario of US driven geopolitical decoupling, leading to lower growth, higher inflation and repricing of risk across US assets.
However, private markets returns have remained comparatively low compared to the global equities assets classes in recent years. US equities also remain the largest allocation in the BlackRock Investment Institute’s strategic portfolios.
The BlackRock analysis also pointed to a potential improved risk-return profile within the fixed income sleeve: increasing allocations to these exposures raises expected returns with only a modest uptick in risk. For instance, a 30% allocation to private debt lifts the fixed income sleeve’s expected return from 1% to 2%, while risk rises from 4.0% to just 4.6%, improving the return risk ratio.
