There is a particular kind of market risk that doesn't show up cleanly in a spreadsheet. It doesn't follow earnings seasons or central bank calendars. It arrives through a headline, a border dispute, a sanctions announcement - and by the time most investors have processed it, the repricing has already begun.

Geopolitical risk is not new. But the current environment has a different character to it. What we are seeing is not a series of isolated shocks, but an accumulation of structural pressures: fractured supply chains, sustained conflict, and policy unpredictability operating simultaneously across multiple geographies. That combination has a way of staying in markets longer, and running deeper, than a single event.

The question for investors is not whether this will eventually resolve. It's whether their portfolios are positioned to navigate the period before it does.

 What Markets Are Actually Signalling

In periods of genuine geopolitical stress, the signal tends to show up in commodities and currencies before it surfaces in equities. Energy markets become a key transmission mechanism: oil price volatility doesn't just reflect supply anxiety, it flows directly into inflation expectations, corporate cost structures, and consumer sentiment.

We have seen exactly this dynamic play out. Supply disruptions have kept energy markets volatile and directional. Currency markets have repriced on shifting capital flows and policy divergence. These are not peripheral markets - they sit at the centre of how geopolitical stress propagates through the real economy.

Systematic trend following is well-suited to precisely this environment. Not because it predicts geopolitical outcomes (it doesn't) but because it is built to detect and follow the price trends that geopolitical stress tends to produce. When energy trends, it captures energy. When currencies move on safe-haven flows, it captures that too. The strategy doesn't need to know why a trend is happening. It needs to know that it is.

The Diversification Assumption Worth Re-examining

Most portfolios carry an implicit assumption: that diversification across asset classes will provide protection when conditions deteriorate. In stable regimes, this assumption generally holds. In stress regimes, it often doesn't.

When a single macro force - geopolitical risk, an energy shock, a sudden policy reversal - moves through markets simultaneously, assets that appeared uncorrelated begin moving together. The diversification that looked sound on paper compresses exactly when it needs to expand.

This is not a flaw to be corrected with more asset classes. It is a feature of how modern markets behave under stress, and it requires a different solution: exposure to return streams that are structurally independent of traditional beta, rather than just spread more widely across it.

"True diversification isn't about just holding more assets," says Simone Haslinger, CEO of East Coast Capital Management. "It's about holding assets that behave differently when conditions become difficult. That's a higher bar -- and it's the bar that matters."

A Framework Built for Uncertainty, Not Despite It

At ECCM, we are often asked how trend following performs in "normal" markets. The reality is that trend following is designed for the full range of market conditions, but it tends to earn its keep most visibly in environments like the current one.

Geopolitical stress produces the extended, directional moves across commodities, currencies, and rates that trend following is built to capture. Elevated volatility, far from being a headwind, is the raw material the strategy works with. And because our approach is rules-based, it doesn't require us to take a view on how a conflict resolves, which policy will be enacted, or how long uncertainty will persist. The price action tells us what we need to know.

This matters in practice. When uncertainty is high, discretionary decision-making is most prone to error: anchoring to prior regimes, hesitating at inflection points, or seeking safety in familiar assets regardless of what the trends are telling them. A systematic process removes that vulnerability.

Conclusion

Geopolitical uncertainty is not a phase to be endured while waiting for markets to normalise. For investors with the right framework in place, it is a productive environment - one that generates the kind of clear, sustained trends that systematic strategies are built to capture.

At ECCM, our ECCM Systematic Trend Fund is designed to do exactly that: to respond to what markets are doing, wherever the opportunity arises, and to deliver return streams that remain genuinely uncorrelated to traditional portfolios through periods of stress and stability alike.

Wholesale clients can find more information on ECCM and the ECCM Systematic Trend Fund at Australian Fund Monitors and ECCM's website.

The prevailing narrative in infrastructure favours scale. Large funds, large assets, and large ambitions dominate the conversation. Yet, as Europe's energy transition continues and policy reforms reshape the investment landscape, it's increasingly clear that meaningful progress is being driven by the small- and mid-cap segments. Transactions below €500 million account for the majority of European infrastructure deals. This is the centre of gravity for new investment and innovation.   

Our experience over more than a decade - with around €3 billion invested across energy, transport and digital infrastructure - consistently points to the same conclusion. The lower mid-market is where policy ambition, operational delivery and investor returns align most effectively. There's less need for intermediaries, and it's materially less competitive. This gives space for genuine value creation, rather than simply financial engineering.

This is not a question of taking more risk: it's about operating closer to the assets, closer to local stakeholders and closer to the decisions that determine whether Europe's economic and decarbonisation objectives are delivered in practice.

Policy tailwinds and competitive advantage

Recent reforms in the EU's market design for electricity, quicker permit approvals, and the Net-Zero Industry Act have shifted the balance in favour of assets that can adapt quickly and align with local policy priorities. Small- and mid-cap platforms have a structural advantage. In practice, this means utilities that work constructively with municipalities, transport assets embedded within national and regional strategies, and energy platforms that can adapt business models as subsidy regimes and security-of-supply priorities evolve. Large, centralised assets often struggle to respond at this pace.

The Draghi competitiveness report and the ongoing debate about Europe's cost of capital highlight the importance of bilateral, primary deals that avoid auction-driven premia and that can deliver better-timed execution. This matters in an environment where value is increasingly created through operational decisions rather than multiple expansion.

Risk, value and evidence

The notion that smaller assets are riskier doesn't stand up to scrutiny. In regulated sectors, risk is defined far more by framework stability and governance quality than by asset size. Our utility investments in Finland, for example, operate under the same regulatory regimes as larger peers, yet benefit from more conservative capital structures and greater scope for hands-on asset management.

This difference in governance and capital discipline translates into outcomes. And the results are measurable through financial key performance indicators that capture both short-term returns and long-term sustainability-driven resilience. In 2024, our energy assets generated nearly 900 GWh [1] of renewable electricity, avoiding 274,000 tonnes of CO₂e [2]. In the same year, our district heating platforms delivered 1.4 TWh [3] of reliable, low-carbon heat to over 88,000 customers; our electricity distribution assets supported security of supply through a harsh Nordic winter; and our trains were among the most reliable on the UK network.

Agility, local solutions and systemic change

Small- and mid-cap assets move at a different pace. Development timelines are shorter, adaptation is faster, and innovation is less encumbered by bureaucracy. In Finland, this has enabled the rapid deployment of electric boilers to exploit periods of low-cost renewable power, the co-location of data centres to capture waste heat, and the diversification of fuel sources within district heating networks to improve resilience. These initiatives were delivered through close engagement with management teams and local authorities, and implemented within months rather than years.

In Italy, a similar logic underpins the development of biomethane platforms, which are focused on upgrading existing biogas assets rather than pursuing greenfield development. This approach leverages existing infrastructure, shortens delivery timelines, and aligns decarbonisation objectives with energy security and local agricultural systems.

European energy policy is rightly ambitious, but the practical work of decarbonisation and resilience is local. Electrifying transport, decarbonising heat, and building digital infrastructure are challenges that play out in villages, towns and municipalities. Small- and mid-cap investors are embedded in these contexts. By working directly with management teams, local authorities and communities, we can deliver solutions that are tailored, rapid and enduring.

This strategy prioritises essential services, high barriers to entry and predictable cash flows, while preserving the ability to actively influence outcomes through majority or co-control positions and long-term partnerships. It also shapes exit options. Assets that have grown and de-risked within the lower mid-market naturally transition into a broader buyer universe over time. This includes larger infrastructure funds, strategic buyers and long-term holders. Liquidity is enhanced rather than constrained.

Final thoughts...

The infrastructure required to support Europe's changing economy won't be delivered solely by megaprojects or flagship assets. It will be built incrementally, through thousands of local decisions across infrastructure systems. It will also be shaped by those who can combine agility, results, and local insight to deliver measurable outcomes - especially as policy and competitiveness trends continue to evolve.

Small- and mid-cap investors operate at the interface between policy ambition and practical delivery. As such, they're uniquely positioned to support European competitiveness and decarbonisation.