‘Mindful’ of AI exposure: wealth managers at Hong Kong summit urge balance in portfolios

Executives at a private wealth conference in Hong Kong emphasized AI infrastructure as a promising "defence plus growth" investment opportunity, while urging investors not to over-rely on artificial intelligence. Sabina Chiang, head of Hong Kong managed investments and wealth solutions at Standard Chartered Bank, highlighted that "Infrastructure opportunities now really lie at the bottleneck of solving [AI's] demands within structural growth."

She pointed out that AI, despite being digital, faced numerous physical constraints, such as the need for data centres, telecoms towers, fibre networks, and various sources of power, including nuclear, solar, battery, and grids. This offered investors a growing investment opportunity, with "Infrastructure 2.0" focusing on shifting from pure defence to defence plus growth.

Earlier in the week, senior financiers discussed AI infrastructure investment opportunities and risks at the Global Financial Leaders' Investment Summit organized by the Hong Kong Monetary Authority. Pimco CEO Emmanuel Roman cautioned that the demand for infrastructure, potentially reaching US$10 trillion over the next five years, could eventually lead to a downturn.

However, Chiang maintained that the criteria for infrastructure investments remained unchanged, emphasizing the importance of assets being essential, hard to replicate, and providing predictable cash flows and inflation adjustments.

Markus Egloff, head of global wealth solutions at KKR, advised investors to be cautious of AI exposure in their portfolios. He noted that the S&P 500 had around 40% correlation to AI when considering earnings and revenue sensitivity of companies. Investors with portfolios solely tracking the S&P 500 were heavily exposed to AI. When seeking investment opportunities in private equity, infrastructure, or private credit, Egloff encouraged investors to consider diversifying and looking for less correlated assets.