PERSPECTIVES FROM
PPI SALT LAKE CITY
Navigating the Policy Patchwork:
Investment Strategies in a Divergent Global Economy
July 23-24, 2025
The Pacific Pension & Investment Institute (PPI) convened in Salt Lake City from July 23 to 25, 2025, marking its first gathering in the U.S. Mountain West region. The program focused on the overarching theme of Navigating the Policy Patchwork: Investment Strategies in a Divergent Global Economy and covered various timely topics, including global trade, fiscal sustainability, central bank independence, U.S.-China relations, and the energy transition. Local business leaders offered additional insights into key sectors driving Utah’s unique growth in an ever-changing global environment.
The Summer Roundtable followed PPI’s annual Leadership Lab for emerging asset owner leaders. This lab emphasized practical leadership skills through case studies, strategic problem-solving exercises, and open discussions with experienced executives.
The Beehive State
Utah has experienced a remarkable transformation over the past 20 years, shifting from a relatively unknown player in the tech scene to one of the world’s most vibrant hubs for innovation and startups. This growth has been fueled by local entrepreneurs who chose to develop and expand their companies in Utah rather than move elsewhere, supported by a growing ecosystem that includes a rich talent pool, strong university programs, and rising global investor interest. Notable Utah-born companies like Qualtrics, Pluralsight, MX Technologies, and Entrata have drawn significant investments or achieved major exits, highlighting the state’s startup momentum.
Simultaneously, Utah continues to lead globally in Winter Olympic sports, building on the legacy of the 2002 Games and the efforts of U.S. Ski & Snowboard. Operating without government funding, the organization supports more than 260 elite athletes through philanthropic and commercial partnerships, including collaborations with local resorts, universities, and tech companies. This synergy is driving transformative developments in the recreational ski industry, highlighted by Deer Valley’s historic expansion—the largest in U.S. ski resort history. Innovative financing and sustainable planning make this project a model for future infrastructure investments, delivering long-term value across real estate, tourism, and lifestyle sectors.
Reassessing American Exceptionalism
American exceptionalism, long regarded as a cornerstone of global leadership through democratic governance, economic strength, and technological progress, is now being reevaluated. The traditional model—once established by the "Washington Consensus” and a deeply rooted sense of U.S. global leadership—is being challenged by changing geopolitical dynamics, economic shifts, and increasing technological rivalry. Although the U.S. still holds considerable influence, doubts are growing about the durability of that dominance and whether its systems are prepared to evolve.
One of the clearest pressure points is the weakening of the U.S. dollar. Despite its ongoing role in global transactions, the dollar has depreciated on a trade-weighted basis due to fragmented global growth and a shift away from U.S. assets. Foreign investors are actively hedging currency exposure, and domestic institutions are reallocating capital internationally. This trend, combined with rising debt-to-GDP ratios and increasing interest payments, raises concerns about fiscal sustainability. Political constraints limit traditional deficit management tools, and although regulatory innovations and digital finance initiatives are being explored, structural challenges remain unresolved.
Technological leadership and defense capabilities are also under pressure. China’s advances in strategic technologies are closing the innovation gap, though the U.S. still benefits from a vibrant venture capital ecosystem and a skilled, youthful workforce. However, evolving warfare dynamics—focusing on cybersecurity and asymmetric threats—are revealing vulnerabilities in America’s defense procurement systems. As global alliances shift and alternative financial centers develop, investors must prepare for a more multipolar world where U.S. dominance exists alongside rising competitors and a more complex global balance.
A Paradigm Shift in Global Trade
Tariffs are now used not only for economic objectives but also to generate government revenue and convey strategic signals. Although current U.S. trade policies may appear inconsistent—aiming to increase revenue, protect domestic industries, and promote freer trade—they have demonstrated political resilience. With tariffs now generating an estimated $300 billion, they remain financially sticky, making them difficult for any administration to eliminate without facing political or budgetary opposition.
This entrenchment is strengthened by a broader realignment of trade policy with national security goals. Supply chain de-risking, especially regarding China, has become a key aspect of U.S. trade strategy. As production shifts to “China-plus-one” countries like Vietnam or Indonesia, relative tariff levels, rather than absolute values, now determine competitiveness. Countries that strike early deals with moderately high tariffs (15–20 percent) find them acceptable, even advantageous, compared to China’s rates of 50 percent or more. These changes reflect a new form of geopolitically driven trade diplomacy, where tariffs serve as tools to differentiate strategic allies from competitors.
However, the promise of “reshoring” remains limited, as automation, high U.S. labor costs, and capital-intensive efforts may reduce job creation. Still, the political story of industrial renewal stays strong, even if the economic benefits are hard to quantify. Looking forward, the current trade system is likely to stay in place, with little political desire—even among Democrats—to lower tariffs on strategic competitors. The only possible change might be in repairing relationships with allies affected by broad tariff policies, though domestic politics and budget limits continue to slow progress. U.S. trade policy is increasingly centered on managing risks and asserting strategic influence rather than maximizing global efficiency.
U.S. Fiscal Sustainability
Foreign holders of U.S. Treasuries, especially China and Japan, appear to be quietly reducing their exposure by letting maturing debt roll off without reinvesting. This slow shift reflects growing concerns about the U.S. fiscal outlook and the risk premium associated with its structural deficits. With about 30 percent of foreign-held Treasuries maturing within two years, even small decreases in reinvestment could greatly affect demand. To manage this, the U.S. Department of the Treasury is exploring alternative sources, including banks encouraged through regulation and short-term demand from stablecoins. Still, these measures are not enough to cover long-term issuance needs.
Policymakers are balancing the challenge of weakening the dollar to boost exports with maintaining its status as the world’s primary reserve currency. Stablecoins are increasingly viewed as a way to support dollar dominance, especially in crypto markets and emerging economies. However, political dysfunction and credit rating downgrades are eroding institutional credibility, leading central banks to diversify away from U.S. assets into alternatives like gold. Although official data such as Treasury International Capital (TIC) reports offer limited insight, broader trends show a gradual movement of global reserves away from the dollar.
The current U.S. administration seems to be pursuing informal economic nationalism—sometimes called the “Mar-a-Lago Accord”—focused on rebuilding domestic manufacturing. Its strategies include imposing tariffs, using military alliances for economic gain, weakening the dollar, discouraging foreign investment, and aligning Federal Reserve policies with executive priorities.
Amid these structural changes, fiscal policy is entering uncertain territory, with spending cuts likely to face legal challenges. Meanwhile, unresolved issues like Social Security insolvency loom large, with no political momentum for reform. While these dynamics may create tactical opportunities for investors in distressed assets, they also emphasize deeper institutional vulnerabilities that could reshape long-term investment strategies.
Central Bank Independence
Central bank independence remains a fundamental element of effective monetary policy, widely regarded as essential for maintaining credibility, market trust, and economic stability. The U.S. Federal Reserve’s unique structure—distributing authority among appointed governors and regional bank presidents—was designed to keep monetary decisions insulated from political influence. However, growing public and political scrutiny is challenging both the Fed’s autonomy and its perceived independence.
Legal and political pressures are increasing, with recent judicial trends indicating potential challenges to the Fed’s status as an independent agency. While major structural reforms would face substantial hurdles, the mere possibility creates uncertainty. In response, the Fed is considering public education efforts to improve transparency and clarify its governance structure. Meanwhile, political figures are increasingly seeking to expand the Fed’s role into areas like climate policy and infrastructure—areas traditionally managed through fiscal policy—raising concerns about “mission creep” and the risk of undermining its core focus on price stability and employment.
These developments have global implications, as the Federal Reserve establishes a benchmark for central bank independence worldwide. Any perceived weakening could encourage similar political interventions in countries with weaker institutional protections. Despite the difficulties, inflation targeting remains the most effective monetary policy framework—so long as it is executed with credibility and independence. Safeguarding central bank independence requires a mix of strong institutional design, informed public understanding, and political restraint to navigate an increasingly unpredictable political and economic landscape.
Divergent Views on China
Investor attitudes toward China have become more divided in recent years, influenced by geopolitical concerns, economic uncertainty, and strategic adjustments. While some investors are withdrawing or holding back on new investments, others continue to participate, acknowledging China’s ongoing significance in global portfolios. This split signals caution rather than a complete retreat, as China’s economic size and role in global supply chains remain crucial despite increasing skepticism.
Geopolitical tensions, especially surrounding Taiwan, have heightened concerns but may be exaggerated in public discussions. Expert opinions indicate that a direct military conflict is still unlikely because of the huge costs involved. The more probable threat is miscommunication or accidental escalation, especially given the breakdown in direct military talks between the U.S. and China. Meanwhile, China’s effort to become technologically self-reliant is often misunderstood. Many of its innovations have developed in competitive, market-driven environments supported by foreign investment. Restrictions from the West might slow progress but could also push China to innovate on its own, though demographic and financial challenges may limit its long-term success.
China’s economic slowdown stems from a deeper confidence crisis. Years of regulatory crackdowns, unpredictable policies, and the trauma of extended COVID lockdowns have damaged private-sector morale and consumer confidence. Structural reforms—and possibly even political adjustments—may be necessary to revive momentum.
Finally, China’s technological progress, though impressive, is built on increasingly fragile foundations. Advances in areas like artificial intelligence, semiconductors, and biotechnology have been partly driven by global collaboration and access to foreign intellectual property. As China tries to domesticize entire innovation systems under tighter state control, it risks damaging the very conditions that enabled its growth.
Financing the Energy Transition
Global energy investment has reached $3 trillion annually, with a clear shift from fossil fuels to renewables and grid infrastructure. Renewable capacity—particularly solar and wind—has expanded rapidly, yet demand is surpassing supply, driven by AI, data centers, and growing cooling requirements. Air conditioning alone accounts for 7–10 percent of global electricity consumption. While China leads in deployment, adding 200 GW of solar in just six months, challenges remain for commercializing key technologies like hydrogen, long-duration storage, and advanced nuclear.
Current energy policies often prioritize ideology over practicality, slowing progress. Delays in permitting and regulatory hurdles—especially for nuclear power—hinder viable projects. Small modular reactors (SMRs) find it hard to secure funding because of their long payback periods. Government support, like loan guarantees or faster approval processes, could help close this gap, but policies must avoid market distortion. Startups, rather than legacy energy companies, are leading breakthroughs, with historical lessons showing that infrastructure transitions happen gradually.
Grid constraints are a significant bottleneck, with aging transmission infrastructure and supply chain shortages delaying renewable integration. Investors should evaluate technologies based on regional strengths—such as carbon capture in high-emission areas or green hydrogen in hydropower-rich regions—rather than assuming one-size-fits-all solutions. For nuclear power, overcoming public skepticism and demonstrating cost competitiveness remain major hurdles.
Ultimately, the energy transition calls for practical, outcome-focused strategies—policies that promote innovation without prematurely favoring specific technologies, investments in supportive infrastructure, and collaboration between governments and private industry. The emphasis should be on scalable, system-wide solutions that balance environmental goals with energy security and affordability.
Investing in Rising Insurance Premiums
Climate change, inflation, and regulatory pressures are fundamentally transforming the insurance industry. These pressures are driving up premiums and expanding the protection gap—the portion of disaster-related losses that remain uninsured. This gap has doubled over the past decade, highlighting both a strain on traditional underwriting and a growing opportunity for investors.
As natural disasters grow more severe, insurers experience higher losses and payouts, while inflation increases asset values and service costs. Regulatory and capital limits restrict insurers’ ability to broaden coverage, leading to a shift of risk into capital markets via insurance-linked securities (ILS), particularly catastrophe (CAT) bonds. These tools give institutional investors access to insurance risk with uncorrelated returns, built-in inflation hedging, and significant diversification benefits. Additionally, they provide “portable alpha’ potential, as returns from ILS can be added to existing equity beta exposures.
The ILS market, now approaching $115 billion, is gaining momentum as a scalable alternative, with CAT bonds expected to double from $25 billion in 2017 to $50 billion in 2024. Similar to how private credit grew in response to bank lending restrictions, institutional capital is well-positioned to fill the insurance gap. Besides financial returns, ILS investments also provide social benefits by aiding post-disaster recovery and climate resilience, aligning with sustainability goals and giving investors the choice to focus on either global diversification or supporting local communities.
Managers’ Perspectives
U.S. equities have significantly outperformed international markets since the financial crisis, growing at approximately 13.5 percent annually compared to 6.5 percent for non-U.S. equities. However, this gap is partly influenced by dollar strength, which historical cycles suggest could reverse. Diverging monetary and fiscal policies—particularly U.S. fiscal constraints—add complexity, with currency fluctuations playing a key role in global portfolio outcomes. Meanwhile, state-led industrial policies are gaining momentum in the West, reflecting China’s strategic rise in critical technologies, where it now leads in 57 of 64 key areas, challenging Western dominance.
The energy transition and AI adoption are reshaping investment priorities. While low-carbon investments have grown from $350 billion in 2015 to $2.2 trillion today, fossil fuels still provide 80 percent of global energy. This contradiction requires a dual focus on decarbonization and adaptation strategies, such as climate-resilient infrastructure. AI’s influence extends to power demand, labor markets, and enterprise software, with vertical-specific opportunities emerging beyond U.S. hyper-scalers.
In client portfolios, traditional diversification faces new challenges. Focusing heavily on U.S. equities ignores risks like declining ex-U.S. revenue for multinationals, while infrastructure and real-economy assets—essential for energy and AI growth—are undervalued. Emerging markets, especially in financials and digital inclusion (such as India’s mobile banking boom), present fresh growth opportunities. However, geopolitical fragmentation calls for nuanced strategies, from currency overlays to evaluating how Western firms compete with Chinese rivals. In this changing landscape, investors must navigate state-market partnerships, technological splits, and the complex effects of decarbonization and energy security to create resilient portfolios.
Allocators’ Perspectives
There is a growing consensus among asset owners that the world is entering a new era marked by deglobalization, inflationary pressures, and increased government intervention. This change calls for a reassessment of traditional investment frameworks. The previous narrow range of high, stable returns is broadening into a wider distribution with more volatility and “fatter tails,” requiring a more flexible approach to asset allocation. The shift from siloed investment models to a “one-fund” structure reflects a desire to mix public and private exposures more effectively, especially as regional policy changes and capital controls make implementation more complex and localized.
Private equity distributions remain weak, with few investors expecting to be cash-flow positive soon. Concerns are rising about general partners heavily relying on subscription credit lines to return capital. Meanwhile, infrastructure, climate credit, and private credit are becoming more attractive, especially in a rising interest rate environment. Although U.S. public equities stay overweighted in many portfolios, some investors are beginning to reduce their exposure. Hedge funds received a lukewarm outlook.
Digital assets remain a small part of most institutions' portfolios, despite external pressure—often from boards—to investigate the field. Investment teams stay cautious, mainly due to reputational risks, as shown by an instance where a blockchain-focused investment was wrongly described as a direct crypto wager, resulting in public criticism.
Internally, organizations are investing in leadership development and knowledge transfer through tools like mentorship programs and fireside chats to bridge generational gaps and prepare for a future full of ambiguity and change. This is especially important as younger, tech-savvy staff bring new expectations and tools into the workplace. Institutional memory and lessons learned from investments become even more crucial when recessions and crises are more spread out and unfamiliar to newer team members.
Finally, liquidity management remains crucial. Institutions aim to raise and maintain liquidity not only to navigate market uncertainty but also to seize opportunities when dislocations occur. This involves ensuring balance sheet flexibility, managing commitments to private markets carefully, and positioning portfolios for both offense and defense as market conditions change.