Investment Directions: Positioning beyond uncertainty

How can investors manage growing AI exposure?

AI remains an important investment opportunity, but concentration has increased significantly across major equity and fixed income indices.¹ We favour being more deliberate about where that exposure comes from rather than simply adding broad technology exposure.

Market leadership within AI is also changing. At its peak, dispersion between the best and worst-performing US technology subsectors reached approximately 71%³ reinforcing the case for being selective.

Where do we see opportunities within AI?

We continue to see opportunities in the core AI theme, including semiconductors, where strong earnings have supported the investment case.

For investors seeking AI exposure at attractive valuations alongside greater geographic diversification, we also see opportunities in Chinese technology, which was trading at 14.3x blended forward earnings in late August.⁴

Where can investors look beyond the recent AI winners?

AI opportunities extend beyond technology companies. Rising power demand from AI infrastructure is creating opportunities across energy, nuclear and mining.

We see scope to add anti-momentum exposures, including areas such as India and healthcare that have been over-punished for a lack of direct AI exposure in 2026. Healtchare in particular, may offer exposure to longer-term AI adoption with different return drivers.

Where can investors find income today?

Income opportunities have reset significantly. More than 80% of the global fixed income universe now yields above 4%, compared with less than 20% on average between 2010 and 2021.²

But not all yields offer the same compensation for the risk taken. We see a case for looking more closely at the underlying sources of portfolio income, both within and beyond traditional fixed income. Plus sectors, emerging market debt and equity income stand out as areas where we believe investors can access differentiated sources of yield and return.

How can investors find income across fixed income?

Flexible income strategies which can invest across corporate bonds, securitised credit, high yield and emerging market debt can complement core fixed income by enhancing yield while actively managing duration.⁵

Securitised assets can provide another source of income. Compared to euro IG, EUR AAA CLOs offer a differentiated source of income, combining higher yields at similar or higher credit quality with structural credit protection, floating-rate exposure and limited duration risk – in our view.

Where do we see opportunities in emerging market debt?

Emerging market debt (EMD) can offers attractive income alongside differentiated return drivers. Despite geopolitical uncertainty, fundamentals have remained resilient. Investor appetite for EMD ETPs has remained strong, with inflows reaching approximately $24.8B, putting 2026 on track for the strongest start to the year since 2021.⁶

Short-duration EMD was yielding approximately 6% by early August,⁷ with returns driven primarily by EM credit premiums and country-specific factors rather than the same forces driving developed-market bonds.

Can equities provide another source of income?

Yes. Equity income can complement bonds by combining current income with the potential for earnings growth and longer-term capital appreciation.

Systematic approaches can also address a traditional trade-off of high-dividend investing: concentration in mature sectors that can sacrifice growth and introduce unintended style biases. By combining diversified equity exposure with dividend capture and option premia, investors can monetise volatility for additional income while retaining growth exposure.

How can investors build more resilient portfolios?

Building resilience requires more than simply holding a range of asset classes. Investors also need to understand the underlying drivers of portfolio risk and returns.

Changing correlations and steeper yield curves can make long-duration government bonds less reliable as a portfolio offset. Maintaining liquidity through cash or cash-like investments may also help portfolios adapt as opportunities emerge.

How can investors diversify sources of return?

Differences in interest rates, inflation and government policy have increased dispersion between countries,⁸ creating opportunities for strategies that focus less on overall market direction and more on relative value opportunities. Systematic-led liquid alternatives that seek to capture these dislocations can provide another source of portfolio diversification.

What role can private markets play?

Demand for private markets continues to grow as investors seek new sources of return and diversification. Diversified multi-alternative strategies can play an important role in complementing broader portfolios. Implementation also matters: listed private market exposures may not capture the same return drivers as private, unlisted assets, which can offer differentiated sources of alpha.

Sources :
1. Source: BlackRock Aladdin, as of 31 July 2026. Indices are unmanaged and one cannot invest directly in an index.
2. Source: BlackRock and Bloomberg, 26 August 2026.
3. Source: BlackRock and Bloomberg, 25 August 2026.
4. Source: BlackRock and Bloomberg, 26 August 2026.
5. Source: BlackRock, as of 7 August 2026.
6. Source: BlackRock and Markit, as of 2 September 2026. EMD ETP inflows: approximately $24.8B.
7. Source: BlackRock, as of 7 August 2026.
8. Source: BlackRock with data from Bloomberg, Morningstar, as of 31 March 2026. Equity dispersion based on root mean squared error of rolling 12-month returns for 27 individual country equity markets within MSCI ACWI.