3 investment principles for building long-term resilience

Today, the global investment environment is being reshaped by forces that go beyond any market cycle or structural trend. They strike at the foundations of the global order, rewriting the rules of global investing.

Recent years have brought unprecedented uncertainty and far-reaching changes to investors. Cyclical shifts in growth, inflation and interest rates continue to influence markets. However, these cycles now produce a wider cone of outcomes and interact with deeper, longer-term forces playing out over years rather than quarters.

We group these forces into two categories: structural and foundational. Both unfold over the long term, but differ in their systemic impact. Structural shifts evolve within the existing system; they can often be analyzed and prepared for. Foundational shifts, by contrast, fundamentally transform the system itself, challenging long-held assumptions and requiring a basic rethinking of portfolio construction and investment management.

Structural shifts include rising public debt, demographic changes, growing global imbalances between savings and spending, and widening gaps in technology adoption. These are already altering capital flows across borders, weighing on productivity in some regions, and influencing long-term returns.

Foundational shifts go even deeper, redefining the post-war world order once based on free trade, capital mobility and institutional trust. Long-standing assumptions about safe havens, liquidity and asset correlation are being challenged. Politics and geopolitics now influence economies and financial markets directly and immediately.

In an increasingly volatile and fragmented trade system, policy decisions can quickly reverse advantages, reminding us that today's winners may not remain so tomorrow. Capital markets are likewise fragmenting along geopolitical fault-lines, complicating cross-border investing.

Finally, artificial intelligence (AI) and the climate transition are also unfolding in ways that signal not only long-term transformation but foundational change, reshaping how economies function, how capital is deployed, and how future value will be created.

Faced with these profound changes, it is tempting to chase the short-term hype or retreat in the face of the unknown. At GIC, we do neither. We focus on long-term value, with an emphasis on avoiding permanent loss.

We take an “inversion” approach to risk – studying the typical causes of permanent impairment (losses that are very hard, or even impossible, to recover from) so we can steer clear of them. Historically, such losses have come from weak business fundamentals, having to sell early to repay debts, external shocks, or even fraud. Our investment process is designed to guard against such pitfalls.

Less obvious but equally damaging is overpaying. History offers many reminders: the Japan stock market bubble in the late 1980s, the dot-com crash in the early 2000s, and the repeated bursting of meme stock bubbles in recent years. Long horizons offer little help in such situations. Even if asset prices eventually recover, the time lost will have been too great. This is why we remain disciplined on price.

From the top down, we focus on capturing long-term risk premia by staying diversified – building a resilient and flexible portfolio that can withstand market stresses, adapt across cycles and long-term shifts, and compound value over time.

While concentrated markets can make diversification feel costly in the short term, it remains essential to long-term portfolio resilience. GIC diversifies across asset classes, geographies, sectors and time. For example, in private markets, we spread investments across multiple years – known as time or vintage year diversification – to avoid overexposure to any single time period.

Amid unprecedented shifts, diversification alone is no longer enough; granularity and agility are equally critical. Granularity enables precision. Within broad themes like AI or climate, opportunities vary widely across value chains. We need to break these down into investible segments. For instance, in AI, we distinguish between enablers like chip-makers or data centre providers, monetizers like cloud platforms and software companies, and adopters integrating AI into their operations. This allows for more targeted investments.

Similarly, in climate, we see long-term opportunities in electrification, energy efficiency and climate adaptation. However, investments vary in risk profile, policy support and relevance across markets. In the global energy landscape, exponential demand growth and persistent supply disruptions have renewed focus on energy security and affordability. This has resulted in more fragmented investment trends, with each country charting its own path to secure, cost-competitive energy sources. This requires, again, a targeted approach.

Agility, meanwhile, demands decisive action as these trends evolve. In volatile markets, dislocations arise when market participants are forced to buy or sell, creating mispriced assets. By preserving liquidity and flexibility, we can respond when others cannot – whether in private credit during bank lending crunches, or private equity secondaries where liquidity-seeking investors sell at discounts.

Additionally, we see agility as the ability to spot underappreciated themes early. Climate adaptation, a vital but historically overlooked part of the climate response, is gaining urgency as physical risks rise. It is becoming both an inevitable need and a complementary investment theme alongside decarbonization. Our research estimates that the investment value for a select set of adaptation solutions will grow from $2 trillion today to $9 trillion by 2050, with $3 trillion attributed to incremental growth driven by global warming. This creates opportunities across both established solutions, such as weather-resilient building materials, and emerging technologies, such as weather intelligence.

Foundational shifts are reshaping the investment landscape in profound ways. For long-term investors, this complexity only reinforces the need for enduring principles. Diversification helps us withstand uncertainty and sudden shocks, granularity enables sharper risk-taking, and agility keeps us responsive to emerging opportunities. By applying these principles consistently, we can turn volatility into opportunity, compounding resilience and returns over the long term.