17 September 2026
Artificial intelligence and geopolitical fragmentation may dominate today’s investment debate, but another transformation is taking place more quietly across global markets. Governments are removing regulatory barriers, investing in infrastructure, reforming corporate governance and addressing currency distortions — with potentially significant consequences for the returns generated by capital.
In a recent Enterprising Investor analysis, Rohit Goel, CFA, and Apoorv Bhargava argue that investors should look beyond the political narrative surrounding structural reform. The more relevant question is whether policy changes can alter the prospective return on capital — and, if so, where that improvement will first become visible in earnings, balance sheets and asset prices.
Lowering the barriers to investment
One important channel is deregulation.
Faced with substantial financing needs and weak productivity growth, a number of economies are seeking to encourage private investment by simplifying regulation, reducing approval times and lowering the cost of doing business.
The approaches vary considerably. Chile, for example, has combined tax reductions with a new investment framework designed to shorten approval times for mining projects. Europe, meanwhile, has begun pursuing regulatory simplification alongside renewed efforts to create a more integrated single market.
For investors, however, announcing reform is not enough. The relevant evidence comes later: higher investment, accelerating credit growth, stronger corporate profitability and greater activity in sectors directly exposed to the new investment cycle.
This distinction is central to the authors’ argument. Markets may initially price reform as a political development, but durable investment opportunities emerge only when policy changes begin to affect economic behaviour and corporate fundamentals.
Infrastructure returns to the investment agenda
Structural change is also being driven by geopolitical fragmentation.
Energy security, defence capacity, resilient supply chains and infrastructure are increasingly viewed not only as strategic priorities but as essential components of economic policy. Germany’s €500 billion infrastructure fund is one prominent example, while Gulf economies are also directing substantial resources towards infrastructure and alternative supply networks.
This differs from conventional short-term fiscal stimulus. The longer-term investment case depends on whether spending expands productive capacity, removes bottlenecks and ultimately increases an economy’s potential growth rate.
The immediate beneficiaries may include construction and materials companies, engineering businesses and infrastructure credit, while successful programmes could eventually attract greater volumes of private capital.
Corporate governance can unlock domestic capital
A different reform story is unfolding across Asia, where high domestic savings have not always translated into efficient capital allocation or attractive returns for minority shareholders.
Japan offers perhaps the clearest example of how that can change. Corporate governance reforms and pressure on companies trading below book value have encouraged greater attention to capital efficiency, shareholder distributions and return on equity. Korea’s Value-Up programme follows a broadly similar direction.
For equity investors, the consequences can be relatively direct. Better governance can lead to more disciplined capital allocation, higher dividends and increased share buybacks.
Japan also illustrates why implementation matters more than announcements. The analysis highlights evidence that companies identified by the Tokyo Stock Exchange as strong examples of reform have significantly outperformed businesses that have simply disclosed reform initiatives, as well as those that have yet to take meaningful action.
Europe is approaching the mobilisation of domestic savings from a different direction. The Savings and Investments Union seeks to channel more household savings towards capital markets and productive investment, while countries including India, Malaysia and Thailand are pursuing their own initiatives to deepen domestic participation.
Currency reform can make markets investable again
In frontier markets, the transmission mechanism can be very different.
Currency distortions can make otherwise attractive markets difficult for international investors to access. Recent reforms in countries such as Nigeria and Egypt have moved exchange rates towards more market-determined levels, helping restore price discovery and reducing uncertainty over access to foreign currency.
In Nigeria, for instance, a parallel-market currency premium that had previously reached 30%-50% disappeared following reforms. Such changes can reopen markets that international investors had effectively been unable or unwilling to access.
Yet greater investability does not automatically mean an attractive investment. Valuation remains crucial. Frontier-market spreads have narrowed substantially over the past two years but remain wider than much of the emerging-market universe, even as sovereign ratings enter an upgrade cycle. For investors prepared to accept the additional liquidity and accessibility risks, that combination may warrant closer attention.
From reform announcements to investment signals
The challenge is distinguishing structural change from temporary political initiatives.
The authors identify several factors investors can monitor. Durable reforms tend to have broad institutional support and address persistent barriers to investment rather than relying primarily on temporary subsidies, tax incentives or pre-election spending. Their effects should also become visible in measurable economic and financial indicators.
Those indicators differ according to the reform. Deregulation may appear in investment activity, credit growth and bank profitability. Infrastructure reform can benefit construction, engineering and credit markets. Governance improvements can be tracked through return on equity, payout ratios and buybacks. Currency reform may become visible through reserve accumulation, foreign capital flows and improved price discovery.
And across all these cases, valuation remains the final test. Even a successful reform does not automatically create an attractive entry point if markets have already priced in the benefits.
For global investors, this creates a different way of looking at international diversification. Opportunities may emerge not simply because one geography is cheaper than another, but because reforms are changing the way capital is allocated and the returns that businesses can generate from it.
AI and geopolitics will continue to command attention. Structural reform is less dramatic, and its results can take years to become visible. But precisely because markets do not always price those changes immediately, identifying where reform is moving from policy announcement to corporate fundamentals could become an important source of long-term investment opportunities.
Read “Structural Reforms are Creating New Global Investment Opportunities” on CFA Institute Research and Policy Center