Key Takeaways

  • Luis Laboy, a director at Hewlett Foundation, posits that traditional distinctions between developed and emerging markets are obsolete, as all now contend with heightened geopolitical, social polarization, and policy risks.
  • This paradigm shift demands allocators abandon static investment frameworks, embracing dynamic portfolio construction that accepts constant change in market structures.
  • Manager selection should prioritize quality and a proven ability to manage broad disruption risks, including technology, regulatory shifts, and value chain vulnerabilities.
  • Allocators must actively question their cognitive biases, focusing on what their portfolio truly needs rather than preconceived wants.
  • Technology is no longer a standalone sector but a core differentiator for traditional "old economy" businesses, dictating their future competitiveness.

The Global Convergence of Risk: Why Every Market is 'Emerging'

Luis Laboy's central claim is simple yet profound: the traditional map of global markets is obsolete. He challenges allocators to consider that the hallmarks once reserved for "emerging markets"—geopolitical risk, political uncertainty, social polarization, and policy risk—now accurately describe virtually any market. As Laboy puts it, "If I describe a market to you and I tell you this market has geopolitical risk, it has political uncertainty. It has social polarization. It's got policy risk... Today, it describes any market that's out there." This perspective forces a reckoning with how institutional capital constructs portfolios, moving beyond simple geographic buckets that no longer reflect the complex, interconnected nature of global instability. It suggests that risk is no longer geographically isolated but a ubiquitous factor in every investment thesis.

This new reality means investment strategies must shed rigid structures. Laboy suggests that accepting constant change is the first step toward finding answers in a world where “everything that we kind of like know and build our careers on is changing right now.” The shift is from static checklists and fixed categories to an adaptable, fluid process. Instead of asking “what is this market,” allocators must now ask, "how is this market changing, and how can we dynamically adapt our exposure?" This mindset helps avoid being anchored to past definitions or models that no longer hold true for market behavior or risk distribution.

What does this mean for manager selection in this globalized risk environment? Laboy’s team at Hewlett Foundation found success by seeking managers who invest in quality and demonstrate a deep understanding of disruption risk. This includes threats from technology, regulatory shifts, and fragile value chains. “We found managers that invest in quality... that were really managing disruption risk and was important in their process,” Laboy notes. Crucially, this involves challenging deep-seated biases. Laboy explicitly states, “one of the things we've kind of let go of is biases... We're focused on what we need relative to what we want. Right? Back to married at first sight.” Furthermore, technology's role has evolved; it’s no longer just a sector but a capability. Laboy observes, “It's no longer about tech versus the rest of the world. It's old economy names are now going to differentiate themselves based on how they apply tech.”

Why It Matters

This perspective signals a structural recalibration for private equity professionals and LPs. For deal sourcing, it implies that risk diligence must expand beyond traditional macro and political stability analyses to encompass granular assessments of geopolitical fault lines, social cohesion, and policy agility in every market, even mature ones. Valuations will increasingly embed a premium for companies whose management teams demonstrate not just operational excellence but a proven capacity to anticipate and mitigate non-traditional disruption risks across technology, supply chains, and regulatory shifts, regardless of their geographic base. For LPs, it validates a shift away from allocating purely by developed vs. emerging market mandates, instead favoring GPs with bottom-up, dynamic risk frameworks and active portfolio management that can navigate an environment where "emerging" characteristics are globalized.