Institutional asset owners are facing a steep climb amid geopolitical instability and macro-economic issues impacting allocations, which are pushing them to cautiously build resilience into their portfolios, according to a new survey from Morningstar.

Margaret Stafford, director of product management for index products at Morningstar, says investors are particularly thoughtful around a concentration risk from technology sector equities.

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“This is very top of mind for asset owners, . . . the challenges [around] how to define and measure the risk of that exposure at the total portfolio level. We saw a tension between increasing [artificial intelligence] concentration or allocating toward AI-driven winners.”

Directing funds to these AI-centric companies may pay off with the current momentum for the technology but it presents exposure and concentration risks, she noted. One anonymous asset owner in the survey noted ignoring the U.S. market the opportunity cost increases significantly.

Meanwhile, a separate survey by Northern Trust found Canadian institutional investors are at the forefront of a move towards private assets, with 100 per cent of Canadian respondents indicating they’ve made allocations to alternatives.

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Private market allocations rose to 17 per cent of the average portfolio, while 94 per cent of respondents said they’re actively investing in private markets, up from 86 per cent in 2025.

The portfolios of Canadian investors show an above-average tilt towards equities, according to Jessica Donohue, head of asset servicing Americas at Northern Trust. Indeed, while the global average for equity allocation stands at 41 per cent, the average allocation among Canadian institutions stands at almost 50 per cent.

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Liquidity considerations are influencing the balance between growth objectives with operational resilience and risk management for investors. “Sixty-four per cent of Canadian respondents said that liquidity has become more important in how they think about risk and that was a significant year over year increase,” Donohue says.

Despite the role of liquidity, Northern Trust’s survey found investors are willing to tolerate higher levels of illiquidity within long term portfolio frameworks, giving space to private assets. In fact, the interest in privates transcends asset owner size with small (under US$10 billion), medium (between $10 billion and $25 billion) and large (larger than $25 billion) clusters all in a similar allocation range of 16 per cent to 18 per cent in privates.

“The number of listed equities has been reducing globally, so to some extent if you want your universe of investment options to be as big as possible, . . . then you really do have to look into these other areas,” says Donohue.

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