Mitch Finnen
11 February 2026
You Can’t Hedge Everything
Investment risk is multi-faceted. Investors cannot control for every risk they will face.
In controlling for some risks, an investor inherently exposes themselves to others. A classic example of this is hedging currency. An investor hedging back to their local currency prevents themselves from being exposed to foreign currency movement, but opens themselves up to the risk of the devaluation of their local currency.
Explore Volatility, Liquidity & Private Market Risk for High-Net-Wealth Investors
After Peak Globalisation: The Geopolitical Risks Markets Are Repricing
For a long time, investors faced very little geopolitical risk. Since 1942, the world has structurally shifted from peak isolationism required during war economies towards peak globalisation in 2016.
Since 2016, protectionist trade policies, increasing levels of conflict, and prioritisation of national interests driven by populism in many governments has created an environment in which new risks are present for investors - few of those who managed these risks prior to 1942 are still around.
A brief summary of the key geopolitical risks present in the economy today (ranked in order of their observed effect on listed financial instruments) are:
- Fractious trade policy driven by the Trump administration.
- The emergence of artificial intelligence with the ability to render large numbers of people unemployed within the decade.
- Increased levels of global conflict in the Middle East, Latin America, and Europe.
- The threat to the independence of the US Federal Reserve.
- The potential for an invasion of Taiwan by China.
- Nuclear states engaging in hot conflicts.
The typical capital allocator today has never had to deal with this confluence of risk variables. To know which risks you should be exposed to has become exceptionally difficult. Having said that, the reversal of may long-running global trends gives the heads up investor a chance for substantial outperformance.
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Positioning for the Next Multi-Decade Cycle: AI, Scarcity, and Active Risk
When broken down into their commensurate parts, my estimation of the risks I want to take are as follows:
Exposure to artificial intelligence through select equities and ‘picks and shovels’ plays like AI infrastructure. AI is Pandora’s box - we have opened it, and there is no shutting it. It will form part of the collective conscious forever. We may reach general intelligence within 2 years, or 5, or 50. Once we do the world, and existence, have fundamentally changed. We will no longer be the sole intelligence operating in our known universe. There is no better asymmetric risk and return trade-off available today.
Scarce resources - select property, commodities, bitcoin, manufacturing metals. The M2 money supply will continue to grow. No government will be elected in the short or medium term on a promise to cut spending and restore budgetary surpluses. Assets with genuine scarcity will rise continuously against the fiat dollar. This is doubly true for metals used in defence applications, as the US withdrawal from their role as an enforcer of the global order has created a vacuum into which trillions of dollars will be thrown to ensure that national sanctity is upheld.
Global indices are incredibly long, and getting longer on companies who are dependent on near perfect execution of complex strategies. Active investors make a smaller share of the market than ever before. While it may take some patience, positioning away from the index could lead to huge outperformance if some of the larger players fail in execution and get punished.
By owning the inputs to the most valuable pursuit in human history, assets with true scarcity, and being active in a sector infamous for not rewarding active investors, an investor would put themselves at the nexus of the ongoing continental shifts in trade winds. we are at the beginning of a multi decade cycle. This is not the beginning of the end, or the end of the beginning - we are still at the start. We have barely crossed the line and entered the race. If you feel these trades are overblown or played out, I would ask you this: in 1989, when the Berlin Wall fell, would you feel as though globalisation had entered a final stage?
That was the end of the beginning for globalisation. I don’t know what the Berlin Wall looks like for the contemporary world, but I am sure it hasn’t happened yet.
