Across wealth and asset management, one pressure point keeps rising to the surface: portfolios increasingly need illiquidity, while clients still expect daily liquidity. At the same time, correlation risk is eroding the resilience of traditional portfolio structures, and geopolitical shocks are reshaping allocation themes faster than many firms can adapt. These are not isolated challenges; they are shared industry pain points affecting every allocator, CIO, and portfolio construction team.

At FundForum 2026, we sat down with Fahad Kamal, Chief Investment Officer and Managing Director at Coutts. Fahad brought a fresh perspective on how wealth managers are navigating the tension between client behaviour, market structure, and the tools required to build portfolios that can withstand the next cycle turn.

Earnings momentum as the anchor in a volatile market

A recurring theme throughout the conversation was the strength of the earnings backdrop. As Fahad emphasised, "What pays is to be focused relentlessly on the earnings story, and that's what we're doing at Coutts." This focus has helped navigate choppy waters over recent years, with earnings momentum (particularly in AI-linked equities) continuing to support constructive positioning.

Despite geopolitical noise and macro uncertainty, markets may be hitting new highs, but unlike previous cycles driven by euphoria, valuations today are being carried by earnings rather than sentiment. As Fahad noted, "While we're having all-time highs every day, they are being literally led by earnings as opposed to the other way around. This is very, very different than previous cycles where you just get a huge amount of euphoria."

This dynamic is giving wealth managers room to stay invested while still tightening risk controls ahead of any future turn in the cycle.

Energy volatility and the acceleration of renewables

Geopolitical shocks in energy markets have had an unexpected effect. As Fahad put it, "This has been the greatest advertisement for renewable energy that there ever could have been." Nations and corporates are reassessing how to reduce exposure to instability, with every organisation asking themselves: "How do we isolate ourselves from future geopolitical shocks?"

The answer, increasingly, is a pivot toward wind, solar, and battery innovation: not driven by marketing narratives, but by genuine demand and measurable return potential. Fahad highlighted that "sustainable investing is right back up at the top of the agenda, for the right reasons, because it's being driven by genuine demand and actual returns and return on investment. That is the most sustainable form of sustainable investing."

This shift is reshaping long-term asset allocation frameworks across the industry, with renewable energy emerging as a return-driven allocation theme rather than purely an ESG consideration.

The declining resilience of the 60/40 portfolio

One of the most pressing challenges discussed was the weakening resilience of the traditional 60/40 model. As Fahad explained, "The traditional 60/40 portfolio is probably less resilient today than it has been in the past, simply because that 40%, which is meant to be a ballast, is much more correlated with the 60%, which is your risk."

When bonds and equities increasingly move together, the protective ballast that once shielded portfolios is no longer reliable. Wealth managers are responding by incorporating liquid alternatives "a set of strategies that are entirely uncorrelated from either equities or bonds, meant to produce cash-plus returns, and most importantly, to provide drawdown protection" alongside gold and other uncorrelated exposures.

These tools are becoming essential for firms seeking to maintain upside participation while controlling downside risk in a more correlated world. As Fahad noted, "Where you can find things that are uncorrelated from your main sources of risk, that in itself becomes attractive."

The liquidity mismatch: client expectations vs. portfolio reality

Daily liquidity remains the dominant mindset for private bank and wealth management clients, even though very few ever liquidate their portfolios. As Fahad observed, "We are still very much in a world, particularly in private banks in the UK, where liquidity is considered something that happens every day. You can liquidate your entire portfolio every day, where actually, in reality, very few people ever do, but just the thought and the comfort of being able to do that is very appealing."

Yet modern portfolio construction increasingly requires exposure to private markets, where illiquidity premia and stronger drawdown characteristics offer meaningful benefits. The industry is now confronting the gap between what clients expect and what portfolios need; a conversation that demands trust, education, and long-term relationship building.

As Fahad emphasised, navigating this shift requires deep client relationships: "We are in the trust business. Let's be absolutely clear. Money can be managed by lots of people around the world. The reason why we are as good as we are is because we have that trust... we've earned that trust over 300-plus years at Coutts."

This foundation enables the difficult conversations about accepting illiquidity in exchange for enhanced returns and better drawdown protection. The journey involves asking clients: "How much illiquidity can you handle? Does it make sense? Is this the right thing for you?"

Preparing for the next cycle before it arrives

A key takeaway from the conversation was the importance of preparing portfolios before volatility emerges. While the underlying economic paradigm remains strong and valuations are supported by earnings rather than euphoria, Fahad stressed the need for vigilance: "We absolutely are aware that at some point, as all cycles, they come to an end, and you have to be prepared in advance. You have to make sure the gates are locked before the horses are bolted, not afterwards."

Wealth managers are tightening risk, taking profits prudently, and ensuring drawdowns remain within acceptable levels. Fahad's advice was clear: "Enjoying the sunshine, but preparing, as always, for the winter. Classic advice, but one that you have to be relentlessly focused on at all times."

This mindset, proactive rather than reactive, is becoming a defining characteristic of firms aiming to stay resilient through the next phase of the cycle.