A short, 10-to-15-minute survey can help pinpoint how ready an organisation is to adopt artificial intelligence (AI) into its systems and processes, the Top1000funds.com Fiduciary Investors Symposium has heard.
The so-called AI Readiness Index (AIRI) was developed by AI Singapore (AISG) to help it decided which organisations that approach it for help with AI implementation projects are likely to proceed to completion. The survey is available online for any organisation to take.
It’s an approach that helps AISG fulfil its mandate of creating collaboration between researchers and industry to develop and, most importantly, to implement AI solutions, and has seen the nation of just 5.6 million people ranked behind only the US and China as a global AI power.
Laurence Liew, director of AI innovation at AISG, said the survey helps it grade an organisation as AI-unaware, AI-aware, AI-ready or AI-competent.
“This AI Readiness Index, the framework that we use to engage with customers, was something that we developed back in 2018, 2019 because we were spending too much time, I felt, talking to customers that, in the end, did not lead to an outcome,” Liew said.
“For those that AI Singapore will do AI projects with, they have to be AI-ready. So this survey started off as a way to shorten my sales process, my sales cycle. It was a very selfish reason, but eventually it became a very powerful tool to allow us to quickly scan through and determine which companies to work with.”
Liew said AISG assesses a business’s readiness on five issues – organisational; ethics and governance; business value; data; and infrastructure – that it thinks will “determine how successful an organisation is in terms of its AI journey”.
Business value readiness means there must be a minimum expected ROI on investing in an AI project; data readiness means the data for the project must be sufficient and relevant; infrastructure relevance means having the infrastructure to run the project on (“not a laptop”); and ethics and governance means recognising there’s a big difference between knowing if you can do something and whether you should do something.
But the most important, he said, is organisational readiness, and that’s where the survey comes in.
“All our projects have a requirement [that] if we support you, we co-create a project with you, it has to go into deployment,” Liew said.
“So even before we start the project, there is an agreed scope of work to be done. So it’s very deliberate.”
Liew says AISG’s mission is to make the organisations it works with at least AI-aware.
“We get a lot of requests from people who say you have all these high-end, very advanced courses, can we do more training and so on and so forth, can AI Singapore go and teach Python to everyone?” he said.
“If you have been in Singapore long enough, you even hear of some politicians saying everyone must go and learn Python programming. My message is: please stop learning Python programming.
“It does not make sense today for the audience. If you are a super geek, please go ahead, it’s your hobby. But if you think you want to learn Python because you want to analyse some data, it’s a waste of time.”
Liew said there are much better tools to use, including uploading datasets to ChatGPT and asking it to do the required analysis.
“What they need [instead], is half an hour, an hour, or one and half hours, introduction to what is AI. That’s about it, so that they are not fearful of AI, they are open and willing to use AI tools.”
Educating employees about the use and benefits of Ai is critical, Liew said, to avoid HR and other employment-related issues cropping up later on, driven by individuals fearful of the impact AI may have on their jobs.
“I’m sure all of you will have read in the US, when the US ports wanted to bring in automation, they had the port workers went on strike and so on,” Liew said, said.
“As more and more companies bring in automation, the first thing that we have learned that you need to do is actually educate the staff about AI, so [raise] AI literacy. If not, you’re going to get a revolt.
“And obviously you have to have management policies and so on, for retraining, upskilling and so on and so forth.”
Organisations AISG assesses as AI-competent have sufficient and relevant data to support the project, employ people who can take over the project from AISG on completion, and have a clear ROI target.
“I’m going to spend $150,000 of taxpayers’ money, how much is Singapore going to get back?” Liew said.
“What’s your ROI? If it’s one or two-times, I’m not really interested. At least has to be three, five, 10, and so on and so forth.”
Liew said if AISG goes ahead with a project, it throws considerable resources at it.
“For every project that has been approved, AI Singapore will co-invest $150,000 in kind. That means our engineers, researchers. The company must put in $150,000, of which 30 per cent must be cash, 70 per cent in kind. Cash comes to us, and that, combined together, allows me to put together a team to work on the company’s project for six months.”
Liew said AISG’s teams work full-time on companies’ projects, which “not like a typical university where the professor will say, yes, I’ll do the project for you [but] he may only look at your project once a month”.
“These teams, Mondays to Fridays, nine to six, do nothing but the company’s project,” Liew said.
“It’s a full-time thing.”
For more than a decade, emerging markets (EM) debt has, in aggregate, lagged its developed market counterpart. But a constructive macro backdrop echoing the commodities super-cycle that began in the 2000s means that could be about to change, according to Patrick Zweifel, chief economist at Pictet Asset Management.
“Since the peak in April 2011, there’s been a slight underperformance, a slight loss of 0.1 per cent annualised,” Zweifel told the Top1000Funds Fiduciary Investors Symposium in Singapore. “And this is when emerging market local debt started to clearly underperform developed market [debt] as well as US Treasuries, and that has lasted for more than 10 years.”
“So the question that is often raised from investors is, is it still an asset class worth investing in?”
Zweifel thinks the answer is “yes”. But to understand why, it first makes sense to group different EM countries by the macroeconomic factors they’re exposed to: commodity exporting countries versus manufacturers; creditors versus debtors; open economies versus traders; and China, which sits alone.
“The main important distinction when we talk about emerging market debt is the distinction that we make between creditors and debtors,” Zweifel said.
“The reason why they’re very different is because the debtors economies would be much more sensitive to higher global rates and much more sensitive to the dollar, because part of their debts are actually issued in dollar terms.”
During the commodity boom, Zweifel said, commodity-exporting countries returned an annualised 18 per cent while debtor countries returned an annualised 15 per cent as the dollar declined and the US 10-year bond yield declined by more than seven basis points. During the lost decade that followed – when the dollar and 10-year bond yield both rose – the growth of both debtors and commodity exporters declined sharply.
Pictet looks at five macro factors to figure out what will drive the performance of the EM set. Local policy rates are at levels not seen since the commodity boom and are now declining towards neutral levels; global trade is rising, driven largely by EM countries (and Zweifel thinks that, as was the case with Trump 1.0, tariffs won’t curtail global trade but “redistribute” it, because EM markets now trade more and more with each other); and the relative strength of China’s exports.
The US dollar also looks overvalued, Zweifel said, with a possible trigger for reversion coming in the form of policy and growth divergence between the EM and DM countries, while a rebound in local manufacturing supported by rate cuts would be supportive of commodity prices.
“[In the super commodity cycle] all those five factors were positive,” he said.
“When all those factors are positive, it’s a super boom. We now have three out of two – which is not too bad – and two are neutral.”
Zweifel also discussed the outlook for India, the markets of which have become an increasingly popular destination for global capital as investors are drawn to its growth story. Zweifel pointed out that India is a closed economy, highly indebted and heavily indexed to manufacturing, and that, in terms of its debt, it “wouldn’t be the ideal country in which we would be right now”.
“But in terms of its evolution – the reason why you invest in emerging markets is to capture the gross dividend and because of the idea that a poor country will converge towards a richer one,” he said.
“India starts from a very, very, very low level. So despite the fact that it’s, again, a big economy and growing fast, it has a lot of catching up to do. I think there’s this long-term story regarding India that has made it very attractive, because they’re far from being even where China was in the early 2000s. It’s a very long-term story.”
Beyond the chaos, bullying, backsliding and myriad distractions of the second Trump administration, a fundamental and long-overdue rebalancing of the US’s relationships with its key allies is underway, and a “new equilibrium” will emerge.
Global geopolitics expert Stephen Kotkin, a senior fellow at the Hoover Institution at Stanford University, told the Top1000funds.com Fiduciary Investors Symposium in Singapore that “there’s a lot to be optimistic about in this insanity of Trump and chaos and unpleasantness”.
“It’s not pretty, but he’s an instrument of processes that are bigger than him,” Kotkin said. Ever-escalating demands for the US to project its power globally had become fiscally unsustainable, and something had to give. Previous presidents had tried and failed to find a solution but Trump – even if in spite of himself – may force the change that’s needed.
“The US is 5 per cent of global population, 25 per cent of global GDP, and 50 per cent of global military,” Kotkin said
“Europe is 7 per cent of global population, 17 per cent of global GDP and almost 50 per cent of global social spending. How long could that keep going? It went way longer than we thought. Europe has been pocketing $350 billion a year in US security assurance for more than 30 years, spending [it] instead on their quality of life.
“I would have taken that deal, and they took that deal because the Americans gave them that deal. That deal is no longer affordable by the United States, and so the rebalancing is underway.”
Kotkin said the “quality of life social-spending bender” undertaken by Europe but funded by the US could not last. It had to end, and “it took something crazy out of the social media, reality television, real estate, pro-wrestling, beauty pageant side of America that you maybe didn’t know as well, and you know all too well now” to end it, Kotkin said.
“The rebalancing is making a lot of people angry, but it’s also galvanizing them in very positive ways. The idea that US is losing Europe is just bunk. Do you have any idea what the trade volume is, what the tech transfer is, what the [foreign direct investment] is, let alone the cultural ties? Do you think that’s going away because Trump is going to be in the White House for a few years?
“No, none of that’s going to go away. It’s just going to come out the other side, with a different balance, a different equilibrium.”
Right now, politics in the US “couldn’t look crazier,” Kotkin said, andit’s “very hard to understand, it’s very confusing, and Trump doesn’t really know what he’s doing”.
But the chaos is not part of a cunning master plan.
“There is no secret here. There’s no conspiracy. There’s no multi-move thing,” he said.
“That’s not Trump. Trump is all thumbs, literally. And it’s news-cycle stuff, nothing strategic at all.”
No retreat
But Kotkin challenged the view that Trump’s posturing and the rebalancing that he’s set in motion signals that the US is retreating from the world.
“This is not about America giving up its role in the world – all of that is social media rubbish,” he said.
“This is about a rebalancing of the costs and benefits, and it’s happening, and it’s a mess, and Trump’s version of it is going to maybe even fail to produce a new equilibrium, but it’s going to break the current equilibrium that needed to be broken.”
Kotkin said Trump is “an unwitting instrument of history” in this respect – and possibly also in others – but investors should look past the noise and the distractions to focus on “what could be the next equilibrium, and how we might get there”.
“This is a positive story,”
“Something [that] was unaffordable couldn’t continue, and there’s a rebalancing underway, and it’s going to be very difficult to get from point A to point B, but that’s the journey that we’re finally on.”
Kotkin said the concept of the “global commons” form the foundation of global prosperity. It manifests in things like “the fact that you can sail a ship on the sea and have your stuff on it and get it delivered”, he said, or that there’s reliable global infrastructure for the internet and financial systems.
“Everything you do, you’re free riding on the global commons.
“You don’t pay for it. It’s not part of your cost structure, but it’s a colossal part of your revenue structure. The global commons is what some people are calling ‘the US-led international order’, the rules-based order.”
There is no alternative to the US-led order, Kotkin said, except for the loss of the global commons. The US-led order is imperfect, but it’s the best of all options.
“If I had a choice, would I create things the way they are? Are things just? Is it an ideal order? Does everybody have a say? The answer is no, to all of those questions,” he said.
“But you tell me what you got better that provides for the global commons, and then maybe I’ll take it, if you can show me what’s better.”
The “fiscal insanity” of US deficits blowing out from $4.6 trillion to $7.6 trillion in the space of a single lifetime also had to stop.
“I mean, seriously, where was that going to come from?” he said. “I don’t know how much economic growth you’re going to generate or how much inflation you’re going to use to pay that off. And remember, when it started, interest rates, you needed a microscope to see them, and now interest rates are normal again. We now spend in the United States more on interest payments than on our global military. Yeah, that’s not going to work.
“There needs to be a fiscal realignment. The fiscal insanity can’t go on anymore.”
But there is also a “struggle to the death over institutions” being waged between the left and the right of American politics – which tells us that the institutions must be worth having, and that they are resilient, Kotkin said.
“The left is going to lose and the right is going to lose, and the institutions are going to win, because that’s what happens in America again and again and again,” he said.
Trump’s actions and his manner of executing them has galvanised Europeans and Canadians like nothing before him, Kotkin said.
“Now the Europeans are having these crisis meetings about what to do: 17 per cent of global GDP, can they protect themselves?” Kotkin said.
“I think they could. There are countries with a lot less than 17 per cent of global GDP, like Russia with 2 per cent, that have a military.
“How long has Canada been in the doldrums, and now Canada is going to stand tall. Trump has galvanized Canada.
“This galvanization, long overdue, is fantastic. Again, does Trump understand that he’s doing this? Does he understand that he revived Trudeau’s party in Canada with the idiocy of the 51st state that will never happen? No, of course, he doesn’t understand that. But is it a potentially, really good thing? Certainly beyond doubt. It’s really good thing for America too, if Canada stands up.”
Equity and infrastructure drove gains at C$473 billion ($329 billion) Caisse de Depot et Placement du Quebec (CDPQ), the Montreal-based asset manager which oversees the investment of Québec Pension Plan for more than six million Quebecers alongside many other pension and insurance plans.
CDPQ’s public equity portfolio was the standout performer due to the investor’s increasing exposure in recent years to growth and tech stocks that have been propelled by advances in AI. CDPQ also attributed gains to “holding the course on a diversified approach” and “quality execution by portfolio managers.” The 25.5 per cent return surpassed the benchmark index’s 24.1 per cent.
Over five years, the portfolio’s annualised return was 10.5 per cent, just below the index’s 11.1 per cent, a difference CDPQ attributed to its significant underweighting in major US tech stocks in 2020.
Private equity shook off the impact of high interest rates that had impacted the portfolio in 2023 to rebound in 2024 generating a return of 17.2 per cent. CDPQ linked gains to sustained growth in the profitability of portfolio companies, particularly in the industrial and consumer goods sectors.
Infrastructure was another strong performer, returning 9.5 per cent off the back of the “excellent performance” of port, energy and telecommunications assets. Recent strategies in the allocation have included significant sales in the airport sector in Europe.
Amidst ongoing geopolitical uncertainty, Charles Emond, CDPQ’s president and CEO said diversification is more important than ever.
“While uncertainty is high, particularly due to ongoing tariff negotiations, discipline and the sound diversification of our portfolio will remain key to delivering the long-term returns our depositors need. Their plans remain in excellent financial health, and our results for one, five and ten years have made a significant contribution, despite the turbulence,” he said.
Real estate woes
On the downside, CDPQ’s latest results flag “persistent headwinds” in the $41.8 billion real estate allocation given the fund’s above benchmark exposure to US offices in poorly performing cities New York and Chicago. Real estate suffered a 10.8 per cent loss, worse than the portfolio’s 2023 loss of 6.2 per cent and is the third loss in five years. Over five years, the portfolio’s annualised return was -2.2 per cent below the index’s 0.7 per cent return.
In contrast, CDPQ said the logistics sector and shopping centres have been resilient despite the global slowdown.
In January 2024, CDPQ announced plans to bring its real estate subsidiaries in-house to cut back on costs. In an ongoing process (it will take over two years), CDPQ has been integrating Ivanhoé Cambridge and Otéra Capital Inc. into its investment and corporate services teams, targeting an annual saving of C$100 million. The strategy also aims to increase the focus on investment expertise, maximise business relationships and partnerships and strengthen analytical capacity.
The latest losses come despite enduring efforts to overhaul the allocation. In 2019, two-thirds of CDPQ’s real estate allocation with Ivanhoe Cambridge was invested in office and retail assets. By 2023 two-thirds was invested in logistics and residential real estate alongside a growing allocation to alternative life sciences facilities and office and retail assets are in the minority in a complete reversal.
Focus on Québec
Investments in Québec have reached $93 billion, bolstered last year by C$4.3 billion in new investments and commitments that put the fund close to achieving the ambition of $100 billion in 2026.
Some of its investments in the province last year included a C$500 million investment to support National Bank of Canada in acquiring Canadian Western Bank and a C$158 million investment in WSP Global to help it buy U.S.-based Power Engineers. Elsewhere, CDPQ invested in Nuvei, a technology providers in the global payments industry, and QSR International, a key maritime logistics player headquartered in Québec City.
Less successful investments on home soil comprise a $150 million investment, now written down, in electric vehicle battery maker Northvolt. The Swedish firm, which announced plans in 2023 to build a factory outside Montreal, filed for bankruptcy protection last year.
Other Canadian investors that ploughed into the company include C$138.2 billion Ontario Municipal Employees Retirement System and C$699.6 billion Canada Pension Plan Investment Board and the C$77 billion Investment Management Corp.
Faced with the problem of deploying the £500 million ($645 million) of contributions that pours into its funds every month, the UK’s NEST did something that few asset owners have done: buy a stake in an external asset manager.
IFM Investors was established by a consortium of 16 Australian industry superannuation funds in 2004, and now manages circa $145 billion in private and public market investments on behalf of more than 700 institutional investors around the world. The deal was “serendipitous”, says chief investment officer Liz Fernando.
“Given the rate of growth we’re seeing we’re having to run really hard just to stand still,” Fernando tells Top1000funds.com. “So it was pretty obvious that we needed other mechanisms to help us get deployment capacity increased in a thoughtful and high-quality way.”
The strategic partnership is multi-faceted and allows NEST a unique vehicle to act on its private investment ambitions. With the aim of increasing allocations to private markets to 30 per cent of the total fund, NEST has said it will allocate £5 billion through IFM by 2030 across infrastructure, debt and private equity. It is expected the assets of the fund will more than double to £100 billion by 2030.As a large shareholder, NEST gets to co-design products and will receive “founder’s rates” on new products.
Preferential fee structures are a feature of the institutional investment management landscape. But while NEST declined to comment on its fee arrangements, sources say that it can expect an even steeper discount on the global infrastructure debt fund it’s currently developing with IFM than most managers would bring to even the biggest pension funds – though for new products in areas of the market where fees have already come down to a few basis points they’ll get the rack rate.
Other founding shareholders receive heavy discounts on IFM’s flagship global and Australian infrastructure products, paying less than 50 basis points with no performance fee (given NEST was not involved in seeding or designing these products, it will pay the rack rate).
The founder’s rates on these products are so attractive that a consideration in several of the Australian superannuation fund mergers that have taken place over the past few years has been whether they would pass on to the successor fund (Top1000funds.com understands the rates are generally transferable).
For NEST, the stake in IFM is held in its private equity portfolio and it will receive a dividend if IFM elects to pay one. Recent history has seen other owners encourage IFM to reinvest capital in the business to accelerate future growth rather than paying it out as dividends, which NEST is “supportive” of.
It’s another instance of the growing trend of big pension funds taking stakes in asset managers. The Oxford endowment and Commonwealth Superannuation Corporation (CSC) recently bought into a new sustainable credit business launched by Osmosis IM, after previously investing in Osmosis’ funds. In September 2024, West Yorkshire Pension Fund bought a 25 per cent stake in boutique natural capital manager Rebalance Earth, while the California State Teachers’ Retirement System invested with and took a strategic stake in “climate-as-an-asset-class” manager Just Climate as part of its collaborative model – which prioritises insourcing of asset classes like equities and fixed income, and partnering with external managers for co-investments – in 2023. And back in 2021, Temasek took a minority stake in natural capital manager Leapfrog.
“Taking an equity stake is a long-term commitment and not one we took lightly,” Fernando said in an email response to a follow-up question. “As you’d expect, we considered multiple aspects of the investment as part of our due diligence – financial, regulatory, reputational, alignment on the ongoing management and stewardship of assets. Ultimately, particularly given the nature of IFM and our shared values, we were comfortable to proceed.”
Fernando believes that NEST fits neatly into the IFM shareholder register because it looks pretty much like everybody else there: defined contribution, profit-to-member, with a long investment horizon and a burning need to deploy more money. Other IFM shareholders include the $230 billion AustralianSuper, Australia’s largest superannuation fund, the $189 billion Australian Retirement Trust and the $63 billion Hostplus.
“We weren’t competing with other suitors because IFM was quite specific about what they were looking for,” Fernando said. “They were interested in adding a shareholder, but they wanted a like-minded shareholder and there’s not that many NESTs out there. It’s quite unique; it sits in the UK but it looks like a superannuation fund, for all intents and purposes, more than any other institution in the world.”
With a big global presence, and 13 offices around the world, IFM, which is headed by David Neal, former boss of the Future Fund, was already growing its UK presence. It will likely get a boost from its new shareholder as Fernando believes that the products IFM co-develops with NEST will be of interest to other DC plans and improve its distribution in the UK.
NEST sees the move as an extension of the strategic partnership model that it has pursued with other managers – though that pursuit has not, in the past, extended to buying a stake in them.
“We have few managers and we see them as partners,” said Rachel Farrell, NEST head of public and private markets. “We stick with them and they grow with us. If a manager isn’t particularly capital constrained, that’s a very useful way of having long-term capital that’s going to grow, because we tend to set up evergreen structures where we continue to put capital into that structure and it allows them to potentially fund multiple years of investments.”