Beyond the magnificent seven: where advisers should look next

Most client discussions about artificial intelligence still revolve around the same set of US megacap names. Ryan Synnot, head of investment management at Arrow Private Wealth, thinks the more interesting conversations sit one layer deeper.

The companies most likely to benefit from AI may not be the ones building it. The most valuable sources of return may not be listed at all. And the offset to elevated equity valuations may already be sitting quietly inside defensive sleeves.

For advisers running multi-asset portfolios, the next phase is less about picking obvious winners. It is more about positioning around them.

The AI adoption trade looks underappreciated

Synnot is comfortable holding the hyperscalers through a global equities allocation. What interests him more is the cohort of older businesses set to benefit from adopting AI rather than building it.

“One area we find interesting is the setup for value stocks and more traditional, old-world companies,” he says. These businesses are not in the headlines for new product launches. They are quietly running operations where modest efficiency gains compound into meaningful margin expansion.

The thesis is simple. AI is not just a growth opportunity for providers. It is a cost story for adopters. “These businesses may not be building or distributing AI solutions, but we think there is a substantial opportunity for them to adopt AI and integrate it into their operations and in doing so, meaningfully improve efficiency and profitability,” Synnot says.

He sees the dynamic in his own work already. “Someone like me can achieve considerably more in a single day today than was possible even a few years ago.” For a small business, that translates quickly into output gains.

For a larger organisation, it takes longer. The prize, though, is correspondingly bigger. The market, in his view, has yet to price this in properly.

“A business that successfully integrates AI, drives efficiency gains, and carves out a meaningful portion of its cost base over time could see a significant re-rating of its earnings profile. We think the market is underestimating this.”

For advisers, the AI conversation does not have to be a binary. The choice is not just between expensive growth names and avoiding the theme altogether. There is a middle path through value-tilted managers and old-world cyclicals.

Private markets and the case for venture capital

Arrow’s approach also leans on private markets as a complement to listed equities. Synnot is direct about why. Less frequent valuations smooth observed volatility, but he is clear this is a mechanical artefact rather than a free lunch.

“Everyone is broadly across that private assets are valued less frequently, and as a result, introducing them into a portfolio can reduce observed volatility, though that is really a function of marking frequency more than anything else,” he says. The structural case must rest on more than smoothing month-end charts.

For Synnot, the more compelling reason to allocate is access. Venture capital sits at the centre of that argument. “Many of the nascent and emerging technologies that will shape the next decade are going to emerge from the venture ecosystem,” he says. “If you want access to these technologies at the earliest stage, you need an allocation to venture.”

That matters in an environment where companies stay private for longer. By the time a business reaches public markets, much of the early compounding has already accrued to private investors. The public-only portfolio is becoming a more conservative position than advisers may realise.

A measured venture allocation, sized to liquidity needs, helps capture the slice of return that has migrated away from listed markets.

Defensive assets are doing real work again

The final piece of Synnot’s view addresses the risk almost every adviser is wrestling with. Equity valuations are elevated. A growth scare or earnings disappointment could trigger multiple compression.

Rather than reach for complex hedges, he points to a development that has changed the maths of portfolio construction. “We are also in an environment where defensive assets are offering genuinely attractive yields, some of the highest we have seen in some time.”

That is more than a yield observation. It is a comment on how much equity risk advisers actually need to run. “That means you do not need to take as much risk in your portfolio to meet target returns, and we think that is an important offset to the valuation risk that exists in equity markets today,” Synnot says.

After more than a decade in which fixed income offered little, multi-asset portfolios can again use defensive sleeves as a genuine source of return.

The wider message is that the next phase of portfolio work asks more of advisers, not less. It is not enough to own the dominant names through a global allocation. The harder task is sizing exposure to AI adopters, calibrating private market and venture allocations, and rebuilding the defensive book around yields that finally pay clients to wait.