The Great Rebalancing Towards Emerging Markets

summary

In Episode 436 of Hidden Forces, Demetri Kofinas speaks with economist, policy adviser, and investor Sony Kapoor about why developed world demographics, debt, and political sclerosis will crush forward returns for investors who fail to rebalance their portfolios for the new investment paradigm.

Kapoor and Kofinas spend the first hour of their conversation unpacking the thesis explored by Sony in two of his papers: “Winter Is Coming” and “The Case for a Great Rebalancing” in which he argues that global capital has been increasingly misallocated due to factors such as the growth of passive indexation, maladaptive benchmarking, and an excessive focus on short-term performance at the expense of long-term returns.

They explore how demographic tailwinds in advanced economies have flipped into headwinds; whether AI driven productivity gains can realistically offset the drag of declining birth rates; why accommodative post GFC monetary and fiscal policies undermined political stability in developed countries; and what recent stresses—including dollar weakness, Treasury market liquidity scares, and an increased reliance on short-term debt financing—suggest about looming financial repression, fiscal dominance, and a rotation out of U.S. capital markets.

The second hour is devoted to a conversation about investor incentives, market structure, investment opportunities in emerging markets, and how to construct a more diversified portfolio suitable for the world that is coming into being. Demetri and Sony discuss why political and currency risks may now be lower for a diversified emerging markets basket than for a similarly diversified portfolio of developed market assets. They discuss what a reweighting toward emerging markets could look like; why India stands out given its digital public rails and domestic-demand engine; how places like Indonesia, Brazil, and Nigeria fit into a rebalancing; and how to think about geopolitics, US policy risk, and portfolio construction in this new paradigm.

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Episode Recorded on 08/18/2025

bio

Sony Kapoor is an influential macroeconomist, finance expert, geopolitics adviser, sustainability specialist & development advocate with a 25-year track record of successfully tackling policy, geopolitical, business, investment, technological & societal challenges. His portfolio career uniquely spans banking, asset management, policymaking, strategy consulting, research, political advisory, tech startups, board roles & civil society in dozens of countries across five continents.

He is an interdisciplinary Professor of Geoeconomics, Climate, & Finance at the European University Institute in Italy, Chairman, World Benchmarking Alliance in the Netherlands, CEO, Nordic Institute for Finance, Technology and Sustainability in Norway, Senior Fellow Macroeconomics & Finance, E3G in London, Chairman, Re-Define & Trustee, Friends of Europe in Belgium.

Mr Kapoor also sits on several expert committees, advisory boards and boards of non-profits and technology startups and has been an adviser to six G-20s, the EU, the UN, IMF, World Bank, many European & Emerging Market governments, large institutional investors and MNCs.

His leadership in tackling the Eurocrisis, promoting financial reform, driving action on climate change, & improving development policy led to recognition as a Young Global Leader by the World Economic Forum, & as a European Young Leader by Friends of Europe. He has been elected Fellow by the RSA, and was awarded an honorary fellowship by Open Society Foundations for helping diffuse the Eurocrisis, promoting tax justice, harnessing new technology for society and greening finance. He is also a recipient of the prestigious Gold Medal for Outstanding Contribution to Public Discourse.

Sony is known for his insightful, charismatic & agenda-setting keynotes, influential reports & incisive commentary. He has been invited to write for publications including The Economist, Financial Times, WSJ, Bloomberg, Les Echoes, SZ, NRC and Aftenposten and has often been an on-camera expert for the BBC, France 24, & Bloomberg.

His advice on Geopolitics, Economics, Finance, Technology, Investing, Globalisation & Sustainability is in high demand by CEOs, corporate boards, supervisory boards, government cabinets, multilaterals & investment committees, often through high-level consultancies & invitations to deliver Keynote Speeches & Seminars.

Mr Kapoor studied Engineering at the prestigious Indian Institute of Technology as a National Talent Scholar, MBA Faculty of Management Studies as a Far Eastern Economic Review Scholar & Finance at LSE as a Chevening Scholar.

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Demetri Kofinas is a media entrepreneur and financial analyst whose mission is to help uncover the hidden forces and pivotal patterns shaping our lives. His contrarian perspective and critical-thinking approach has helped hundreds of thousands of people make smarter, informed decisions. This same methodology has helped guide Demetri’s decision-making as an early-stage investor and as a creator of several innovative media properties and live events.

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