Gaelle Mallejac, CIO at Ostrum, an asset manager with €384bn in assets under management (AuM), outlined that European institutional investors currently face three simultaneous challenges.

First, geopolitical and macroeconomic uncertainty is undermining traditional diversification. Second, increasingly stringent regulatory frameworks—including the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy—are adding complexity. Third, investors remain under pressure to deliver high real returns while managing volatility.

Rethinking portfolios: a unified approach

To address these pressures, Mallejac noted that asset managers are increasingly adopting a Total Portfolio Approach (TPA), which moves away from managing individual asset classes in isolation. Instead, this approach views the entire portfolio through a single lens to optimise for risk, return, liquidity, sustainability, and regulatory capital efficiency. “We have to optimise all these objectives and constraints,” she said, during an asset manager media conference organised by Natixis Investment Managers in Paris on 18 March 2026.

Europe’s resilience hinges on sovereignty

Sovereignty and the role of infrastructure assets have emerged as central themes for European resilience, noted Raphael Lance, head of private assets at Mirova. Achieving sovereignty involves securing energy independence, agricultural autonomy, and the reshoring of critical industries to ensure European autonomy.

While there has been a focus on decarbonisation for two decades, recent geopolitical tensions highlight the risks of energy import dependency and the social risks associated with rising energy prices.

Energy transition unlocks infrastructure opportunities

Against this backdrop, infrastructure investment is becoming increasingly critical. Innovation in electrification presents a major opportunity. Lance estimates that electricity currently accounts for approximately 25% of energy consumption, but there is potential to reach 40% to 45% through investment in transportation and industry. Such a shift necessitates significant capital for renewable generation and grid infrastructure to manage intermittency, supported by technologies like battery storage and AI-driven grid optimisation.

For investors, these infrastructure assets offer attractive qualities, including a hedge against inflation and a low correlation with traditional markets, while supporting broader economic and social stability.

Closing Europe’s €800bn funding gap

The European economic landscape faces a cumulative €800bn shortfall to compete effectively with the US and China, stressed Bruno Poulin, CEO at OSSIAM. Addressing this gap requires progress toward a savings and investment union, facilitated by initiatives like the 28th regime to allow capital to flow more freely within Europe. “It is one of the key elements for strengthening European sovereignty.”

Furthermore, there is a pressing need for EU-wide investment tools, similar to US 401(k) plans, UK ISAs or France’s PEA, to encourage long-term participation. The scale of the challenge is evident in national issues, such as the French pension system, which could face a funding gap of 1.4% of GDP by 2070—equivalent to between €70bn and €170bn annually.

Lower fees would improve investor returns and confidence in financial markets. While asset managers may earn less per product, Poulin argued that increased inflows—from money markets into equities and real assets—would boost AuM and offset fee reductions, supporting overall market growth.

AI as copilot, not competitor

Artificial Intelligence (AI) is viewed as a copilot that enhances human expertise rather than replacing it. In the US, Poulin noted that approximately 50% of large corporations use AI, compared to only 12% in Europe, a gap that has contributed to a 4% productivity gain for American firms.

Within asset management, AI is used for process improvement, including analysing vast volumes of ESG and macroeconomic data, and for decision support through predictive signals and risk alerts. For example, Lance explained that AI is used to manage solar power plants in Estonia by predicting weather patterns to optimise grid injections.

Poulin distinguished between data—structured information such as prices or satellite imagery—and metadata, which provides context, quality, and validation. The concept of Explainable AI (XAI) is essential to ensure that models remain transparent and free from bias. Poulin warned that “guesses kill AI,” emphasising that data must be contextualised to avoid incorrect conclusions, such as misinterpreting satellite images of empty supermarket car parks without knowing it was the day of the Super Bowl.

From divestment to “brown-to-green” ESG

The evolution of ESG is shifting from simple divestment to a “brown to green” strategy. “Financing transition is not about divesting the economy as it is. It is about investing in the economy as it needs to become,” said Mallejac. She suggested investing in high-emitting companies that have credible transition plans in industries such as chemicals or building materials.

This requires proprietary methodologies, such as Climate Strategy Assessments, to evaluate capital expenditure plans, governance, and execution credibility. While some firms remain sceptical, engagement and monitoring of decarbonisation trajectories are essential, though many oil and gas majors have yet to prove sufficient commitment to net-zero pathways. “Active management has a crucial role,” argued Mallejac.

Innovation transforms fund distribution

Product innovation and retailisation are transforming distribution. New structures are allowing individual investors access to private equity and infrastructure, though this requires high levels of transparency and education.

Looking ahead, Poulin outlined a list of upcoming innovations. They included tokenisation, which can lower entry barriers to real assets for smaller investors. He also expects the arrival of absolute return ETFs (producing positive returns regardless of overall market conditions) and outcome ETFs which are designed to provide a predetermined investment return—a specific “outcome"—over a set period.

Together, these trends suggest a European asset management industry in transition—balancing resilience, innovation, and structural reform to navigate an increasingly complex investment landscape.

Sylvain Barrette in Paris

Paperjam attended an asset manager media conference organised by Natixis Investment Managers in Paris on 18 March 2026, following an invitation from a public relations firm, which covered travel and accommodation expenses.