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Perspectives: The investment landscape in 2026 - with Legal & General
180 Plays1 hour ago
Sonja Laud, Global Chief Investment Officer, Asset Management, Legal & General, joins Simon Derrick, HSBC’s Head of Institutional Sales, EMEA, to explore the outlook for the investment landscape in 2026 and what’s shaping the future of global financial markets. Their wide-ranging discussion covers the implications of a fragmented world order and rising debt levels, the role of AI in productivity growth, diversification across private markets, and the importance of a high-performance culture.
This episode was recorded in London on 10 November 2025.
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Viewpoint
00:00:00
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends and opportunities.
00:00:12
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening. And now onto today's show. Welcome.
Guest Introduction: Sonia Laud
00:00:20
Speaker
Thank you very much for joining today's podcast, the latest in the HSBC Perspectives series. My name is Simon Derrick and I'm the head of European and Middle Eastern Institutional Sales. It's an absolute privilege to be joined today by Sonia Laud, who is the Global Chief Investment Officer at Legal & General Assay Management. Welcome, Sonia.
00:00:39
Speaker
Thank you very much. um Great timing to to have the discussion today. um We are at the end of another fascinating year in in global markets. The asset management industry is not without its challenges um at the moment.
Sonia's Journey to Asset Management
00:00:54
Speaker
But before we get into the sort of gory detail of markets and and what we're going to discuss, it would be great to hear a little bit about your story. So how did you get to become or join the asset management industry and to become the to chief investment officer?
00:01:08
Speaker
The very honest answer is trial and error. Because I've spent a lot of my youth and horseback riding and competing and I clearly wasn't destined at that point to join financial markets or the financial services industry.
00:01:22
Speaker
But I had the privilege to join a university that covered three countries. it was Paris, Oxford, Berlin. You study in three languages and you have to do an internship in every country. and I've done consulting, I've done marketing, I've done asset management and investment banking.
00:01:38
Speaker
And I um very much enjoyed asset management simply for the the fact that you have exposure to a global macro, which clearly is a passion of mine. You meet lots of bright people, you have a lot of intellectual stimulus, and it's really a privilege to be exposed to all of these three.
00:01:54
Speaker
I had a real opportunity as well with DWS in Frankfurt. I loved the team, it was global, and I've been working with a fabulous mentor right from the start. What gives you
Working with Global Market Dynamics
00:02:05
Speaker
the most stimulus? What's the most enjoyable part of your job? And, in equally, what's the most challenging part?
00:02:11
Speaker
Firstly, the this stimulating part is working with fabulous people. It's it's great to be surrounded by ah very intellectual individuals. As I said, i have a huge passion for macro and you said in your introduction, it it has been a challenging year. It is equally daunting as it is fascinating. We are seeing a new world order emerging and the year is not even finished.
00:02:33
Speaker
Now, what's the challenging part is navigating it on behalf of our clients. I'm the chief investment officer. I have to make sure that the outcome that we do deliver for clients is commensurate with the objective and the targets we were set.
00:02:46
Speaker
Now you are um looking at markets every day as I do and it's been quite the roller coaster ride. There is um a lot of focus on areas that will shape the future to an extent that we don't know yet and will significantly impact the way markets will behave.
00:03:04
Speaker
And you have a, as a firm, you have an unbelievable Rolodex of clients. So when you're talking to your clients about 2026 allocation and beyond, do people believe in a Goldilocks scenario that we seem to be in and think it will sort of continue or what conversations are you having?
00:03:20
Speaker
In order to believe Goldilocks or not, you really need to dismantle the the current environment because otherwise you can lost very quickly in in the weeds and you you get into little rabbit holes that probably don't tell you what the big picture is going to look like.
00:03:33
Speaker
Because there's couple of major goalposts that have been shifting and that will genuinely influence the the trajectory in the future direction of travel, not only in 2026. So timing is a tricky one because a lot of these are very long term in nature.
Impact of Geopolitics on Markets
00:03:50
Speaker
To start with, a big one is geopolitics. If we're genuinely seeing a move away from the liberal world order that has emerged under the leadership of the US since World War II, but clearly since the fall of the Berlin Wall and the fall of the Soviet Union.
00:04:06
Speaker
You are now looking towards an environment where countries will focus more inwards, will focus on themselves, will look for protectionist measures, which means defense, energy security will all be topics that will be far more important. What does it mean? We have had a pretty synchronized global economic cycle.
00:04:26
Speaker
If countries now move away and no longer look at bilateral and no no at multilateral and relationships when partnership is not does not matter as much anymore, then you might well see greater fragmentation. And and that's an opportunity and it is a threat.
00:04:41
Speaker
Interest
Interest Rates and Fiscal Challenges
00:04:42
Speaker
rates, goalpost number two. yeah You will know it. Incredibly important. Not least because governments are the most interest rate sensitive in the economy.
00:04:52
Speaker
And that matters because we're of course having huge debates, not least in this country here, how debt sustainability and fiscal sustainability can be achieved because we're looking at rising debt levels, fast rising, and we're looking at budget deficits and you need an answer to it. And this is even before you come to aging populations, the real gaps in um in pension savings and so on. Now, all of these have implications for markets and it's all about understanding how these will influence um equity and bond markets um and those in turn will be driven by growth inflation monetary policy. So we are trying to do it in turns because as I said, if you try to solve for all of them in one go, you will never get to the right answer.
00:05:37
Speaker
Do you think next year at points we're going to go back to discussing long end yield levels, debt sustainability, etc.? My assumption is that it will flare up and that you potentially have tactical trade opportunities.
00:05:50
Speaker
But to start with, we should all be very clear what the long-term implications are. and Let me use the US um based on the numbers of the Congressional Budget Office.
00:06:02
Speaker
If you look at this, the the stats are very clear. We have currently um expenses of 7 trillion and we have income of 5 trillion. Gives you a gap of 2 trillion. We have debt levels that based on the current trajectory are expected to rise to 156% of GDP. That's from currently roughly And that's by 2055.
00:06:24
Speaker
So that are debt levels that we have never seen before. And we all know what the bond market will say to this, because unless you have a clear, incredible solution for your two trillion gap here,
00:06:37
Speaker
you know that your debt level only goes one way because the two trillion needs to be financed. And then, of course, you can immediately come to the role of AI because what is a big lever in your economic ah growth profile is productivity growth.
AI and Productivity Growth
00:06:53
Speaker
Population growth in most of the developed world is pretty anemic. yeah The other part of the economic growth function is productivity. So if you want to really change the the fortune of your forward-looking trajectory, it's productivity growth. Expectations are very high that AI can deliver some of this at least. And and you know if again, if you look at the u US and the CBO projections, 156 is status quo.
00:07:19
Speaker
If productivity growth is half a percent better than the baseline, the debt level drops to 113. If it is worse by half a percent, you go over 200. So it's big split. Massive multiplier on that number, yeah. Yes. But then you now you can understand how markets will react to it, i.e. going forward with the incoming data points, the market will judge where you're heading. Because you've you've given the market an understanding what the what the worst and the best case scenario looks like. So there's clearly a lot of focus on the roughly 3 trillion and in capex that just the hyperscaler have announced until 2028 and that hopefully will drive a lot of this innovation.
00:08:01
Speaker
But it's very important to understand and I'm quoting Jeff Bezos here who talked about a good bubble. in AI saying that the 3 trillion in CapEx, of course, will not all deliver in terms of the and of the returns on that investment.
00:08:18
Speaker
it It is impossible. And we are seeing in order to get to the innovation, in order to get to that level of outcome, you need to have some destructive investment that will lead to better and innovation on the back of this. So what he's saying Markets will not like it, that the CapEx will not deliver in terms of returns. The real world will like it because it will potentially lead to a better outcome.
00:08:41
Speaker
U.S. recession question mark in the sense that clearly the numbers are softer and clearly, you've already said it, there is such a massive concentration in ai investment as a percentage of GDP this year.
00:08:56
Speaker
So what do you think the the the full path for U.S. growth is? So the US starting point clearly is better. I think it's currently the projection is between 1.82%, which is ahead of where Europe is. We know it. And that does matter if you come to the question around AI and productivity growth, because ah the US has always been the more dynamic economic backdrop. And as such, that their starting point is better.
00:09:21
Speaker
Now, again, there's the long term versus the immediate short term. There has been a lot of attention on the labor market and the more recent softness. There has been equally a lot of attention that consumer spending still seems to be holding up quite well.
00:09:34
Speaker
You have had and the impact, of course, from Donald Trump's immigration policy. We have seen um you know border crossings literally come to a halt and a standstill. That has an impact on how the labor market has rebalanced. So there's a lot of moving parts. So um again, this is really the short term.
00:09:52
Speaker
I would not spend too much time and really consider, and of course, the longer term trajectory.
Europe's Geopolitical Challenges
00:09:59
Speaker
This is not me saying that there's no risk of a more significant sell-off. right we We are at levels where yeah we are very much and prone to see a more vulnerable market environment simply because of where we are. And of course, the assumptions that are underpinning so far the the and the market levels.
00:10:17
Speaker
Is this Europe's big moment? Do you think that there is the political flexibility, willingness to to to to use the German announcements earlier in the year as a prompt for a very optimistic five or ten years ahead?
00:10:34
Speaker
I very much hope so. And I am German, so I'm a bit biased, but I see it from the perspective that we started with geopolitics.
00:10:45
Speaker
And if we assume that we are moving towards a more fragmented global world order, then this idea of allyship and the idea of size will be important and will be different.
00:10:57
Speaker
And the reason why I'm saying this is because we all know how dependent Europe has been on the US for defense, um on on gas and energy, on on Russia, and even for ah cheap labor we have outsourced to Eastern Europe first and then to some extent to Asia.
00:11:13
Speaker
that can't continue. If you want to keep your seat at the table, if you want to at least make the overall framework more stable, energy security defense, it does require significant investment. And naturally, if you think about it, you don't need 27 different defense budgets and you don't clearly need 27 different defense procurement programs because size matters. So you would be able clearly to position yourself in a very different context if you were to act together. The same is true for the domestic market. The eurozone overall is a very interesting consumer market that clearly a lot of global companies are very interested in in selling to.
00:11:54
Speaker
Again, I don't think it's ever been portrayed sufficiently as one market. And then I don't have to tell you that capital markets union and and the the reform of of these would be huge in order to drive capital market depth and and the level the level of liquidity that that it would provide. So, long-winded way of saying that Germany needs to demonstrate that the fiscal headroom they have and the very low debt levels they start off from, it will be used wisely.
00:12:28
Speaker
Now, France is in a very different position right now, trying to find a prime minister that is willing to stay for a bit longer. um and And it's very clear, and this is true across Europe, political fragmentation is not helpful in the context of the need of structural reform.
00:12:44
Speaker
And um we know that we need Germany, France, Italy, Spain, at least be aligned in in where we are heading. I believe there is an opportunity, but i'm I'm caveating. I put a little bit of a hedge on here that, of course, we have seen Europe move in a crisis.
00:13:02
Speaker
I would hope the crisis is still urgent enough that we will see further action. I hope that with the realization of the shift in the global world order, there is a an understanding of that crisis and what it might mean for Europe. I can't have the largest UK asset manager, uh, in the building and not ask about how you feel the prospects for the UK are, uh, in the context of the discussion that we've just had around the US and Europe.
00:13:32
Speaker
In principle, the UK is not in a different position. The discussions have been for quite some time and will remain around fiscal sustainability, debt sustainability and how you find the least worst option, how you address both of them. And that, of course, in the context that economic growth has been a bit anemic. We have had inflation levels that are higher than what we've seen definitely in Europe. And so the Bank of England had definitely a more difficult, a more complex job to do in balancing these twos at these two in comparison to the journey the ECB has been on, which, of course, had a far cleaner path to two cuts. So, private markets. So we've seen the announcement of the partnership with with Blackstone. Congratulations. It would be great to get your thoughts, I guess, on that, but also more broadly on, you know, themes that you're seeing again from the that your end clients and and your plans within Legal Engine.
00:14:29
Speaker
Absolutely. Private markets are now a key allocation in large institutional investors' portfolios or institutional clients in general. um And this is mainly linked to the understanding and the need of liquidity and liquidity requirements because that's absolutely paramount before you engage and in private markets.
00:14:53
Speaker
And so we would expect that this to some extent is rising further and we'll probably see a ah broader diversification across the private market asset classes. because It's very clear what used to be mostly private equity has then been followed by private credit. We are now seeing more infrastructure, we're seeing more venture. So you really see and an attempt to have a a broader allocation across private markets.
00:15:19
Speaker
The diversification benefits are well understood, right? It it does give you a a level of diversification that will allow you to smooth out the market movements, clearly against public markets where, of course, we know any bad news is imminently reflected in the price.
00:15:37
Speaker
It doesn't happen the same way in privates and particularly from an institutional investor's point of view that there's clear benefits. Very often, talking about pension funds, you have and and a perfect alignment yeah with the longevity of your and liabilities and through these assets. you Very often in infrastructure in particular, you have um an inflation hedge embedded. So there's a lot that really aligns very well with and those investors' interests.
00:16:02
Speaker
And as such, as I said, I believe we will have um a stronger focus even on the allocation towards private markets going up. Now the um partnership with Blackstone, we're very pleased that we were able to um see this happening. And again, they are a formidable private market powerhouse. And when it comes to the origination of private credit in particular, you know, i'm my sister division, Institutional Retirement, in order to write PRT, so Pension Risk Transfer Business, there is a need to have the right assets and of course having access to a pool of very, very useful um useful and attractive assets to support them is great.
00:16:44
Speaker
And of course, we are looking to partner with them to see what kind of product proposition might work for the wealth channel or the the retail channels. Yeah.
00:16:54
Speaker
and And again, I mean, that's set very much central to our strategy as well um around increasing the velocity of our balance sheet. So there's there's there's a lot more to talk about um talk about
AI's Disruptive Potential in Investment
00:17:05
Speaker
there. And i back to AI for a sec. are you How are you using it dayto day to day? Do you foresee portfolios being run by part of it in the future or just more broadly within the within your business? What are the use cases today?
00:17:23
Speaker
So let me start by saying that I think the industry is still a bit naive in the way it assumes AI will disrupt what we're doing. And I believe that it will happen a lot faster and it will be more disruptive than what we currently believe.
00:17:40
Speaker
there is finta companies that There are companies out there that already manage long short portfolios um and we have seen large institutional clients are willing to support this and put money to work.
00:17:53
Speaker
um And so that that shows you how far this has um this has come. Research is ah is a big one, right? Because if you consider what analysts or what we've asked analysts to do, would you today ask someone to do an earnings write-up? No, probably not. Would you ask someone to complete a um a balance sheet Excel spreadsheet model? No, maybe not. And and so it is really all about understanding where AI can enhance the processes and be equally clear what the value add of the human being is in that process.
00:18:30
Speaker
And what we are saying to our investment people is It is not AI that will replace you. It is the person that can use AI that will replace you. yeah i like that. yep Yeah. Yeah.
00:18:41
Speaker
We're looking at a proof of concepts across research and and and stewardship. We're looking at within the index framework. So there's there's a lot of areas ongoing um or within, of course, the the principles of LNG group ah because we want to make sure that we are really creating synergies and that we don't have too many individual and opportunities and ideas that potentially can't be can't be scaled. Very often they can be, so you need to make sure that ideas are shared across the board. There are lots of parallels there, that's very much our own thinking is you can arm everyone but it's much better to pick some really meaningful um projects that can make a difference so and um written and then just that will gain moment momentum. Yeah, because co-pilot is good but that's not what will deliver the level of productivity gains that you will need. But what we've said as well across the investment floor, you everyone every one has an AI objective, no exceptions. Because depending on where you start, and it doesn't matter, nobody has to be an AI expert, but we want to see progress in and how the individual engages with AI.
00:19:46
Speaker
And that's compulsory for everyone. with Again, lots parallels. So we have circa 800 salespeople in institutional sales, and everyone has access now. and and And it's interesting to see who's using it and who's not, and why they're using it how they're using it.
00:20:00
Speaker
So clearly technology helps, data is important, but fundamentally, I still believe this is a people business. um And so talk to me a little bit around, I guess, the high performance culture that you've got at Legal in General, what you do with your talent. Generally, what's your personal ethos to to sort of managing your talent?
00:20:20
Speaker
It's
Importance of Authenticity and Talent in Finance
00:20:21
Speaker
very important it will remain a people business. This will not change. This is why... the war for talent will go up. Because with everything we've just said, you read you need the right skills and you need people that really understand where their value add is coming from.
00:20:42
Speaker
And I think it's fair to say that we will not have all the right skills already in the right places. and that this will be um a change. And let's face this in a cost-constrained environment, you don't have the luxury anymore to just add additional headcount. You have to be very clear that all your people, coming back to the high-performance culture, are delivering against the objectives you you have for them.
00:21:07
Speaker
And needless to say, but it sometimes goes as ah as ah as a given. Investment excellence is not that easy to achieve in every market environment, but is a given or is is a necessity in order to be invited by clients. What's the greatest or best piece of advice you've personally had?
00:21:28
Speaker
To be authentic. This is particularly now, I'm speaking as a woman in an industry that is still moving at a glacial pace when it comes to female representation.
00:21:39
Speaker
and But being authentic has been the the best way to navigate. You can only continue to be good at your job if you are yourself, if you have the energy, if you can identify the passion that you have for the job. And um in in that context, I believe that's that's still the best way forward.
00:21:58
Speaker
I'm smiling only because i was asked that question about six weeks ago and that's exactly the same answer that I gave. So, um, total coincidence. But I do find um you know that there's a lot of um ah events where particularly young women in the industry ask for that advice, particularly from a more senior woman.
00:22:15
Speaker
And there it is more you you have to really make sure they understand that it is all about them and it's about self-reflection as well. it's It's good to be ambitious, but understanding whether that environment really is for me, whether I can really strive and can be authentic. is is something that really i can I cannot repeat often enough because that is the key to my mind to to success as well yeah because it is that self-reflection that allows you to understand and where you want to head and you know what else is required to get you there.
00:22:47
Speaker
Sonja, it's been an absolute pleasure. We could go on all day. But thank you for creating time um in your schedule. We don't take it for granted. And great to talk to you today. Thank you. Likewise. Thank you very much for having me.
00:22:57
Speaker
Pleasure. Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.