McKinsey research into long-term investor thought processes led by Denver partner Tim Koller reads like a comfortable bedtime story for the investment class - yet the realities of today's long-term shareholder sentiment are anything but that.
Still used as a point of reference today, an analysis of 320 large United States companies between 2012 and 2022 concluded that long-term intrinsic investors reward performance through three neat categories: market share gainers, active capital allocators, and operational transformers.
“Our analysis reveals a close connection between companies’ focus on fundamental performance and long-term intrinsic investors’ ownership. The lesson is clear: All companies get the investors they deserve. Focus on operating performance, and the right investors will follow over time.” - McKinsey
However, there's a not-so-little problem in relating that to today's investment climate.
That decade-long study conveniently ended just as Donald Trump was elected U.S. President for a second term and the world entered its most disruptive investment period since the 1970s.
Let's take a look at how a consistent air of market volatility has now changed investors' long-term approach to growing wealth.
Theory: meet tariffs
Our current investment landscape bears little resemblance to McKinsey's framework.
Fund manager Vanguard has downgraded its 2025 economic growth to under 1%, while Deloitte projects core PCE inflation hitting 3.6% by Q4 - hardly the stable macro environment that enables Koller's 320 corporates to execute their strategic playbooks.
The Trump administration's April 2025 reciprocal tariff order imposed 10% baseline rate on all imports, with higher rates for specific trading partners.
This isn't gradual policy evolution that McKinsey studies typically capture; it's economic shock therapy that renders a decade of capital allocation wisdom suddenly obsolete.
It didn't emerge overnight, yet the shift represents a masterclass in how quickly academic frameworks can become buried in the annals of history.
Consider the mining sector, which exemplifies how Koller's categories now require complete recalibration.
The top 40 global mining companies (excluding gold) saw revenues and EBITDA drop 3% and 10% respectively in 2024, yet shares of Barrick Gold, BHP Group, and Rio Tinto remain investor darlings due to their "Tier One" assets and low-cost operations.
Volatile commodities
Mining perfectly illustrates the McKinsey study's limitations.
Commodity markets in 2025 face unprecedented volatility due to Trump's trade policies, China's economic uncertainty, and shifting energy transition dynamics.
Traditional "market share gainers" mean little when entire supply chains face 25% tariff barriers almost overnight.
The messy reality of mining stuff in 2025 is wrought with geopolitical machinations that lead to supply chain gluts, shortages and market volatility.
Deloitte's 2025 mining trends report emphasises digital transformation and ESG compliance as key differentiators, yet companies have had to increased digital spending by 25% while struggling with fundamental operational challenges.
The chess pieces are moving with alarming speed across the global mining battlefield and the sector's "active capital allocation" now centres on survival rather than growth optimisation.
Rio's now completed US$6.7bn acquisition of Arcadium Lithium in March 2025 appears strategically sound - a contrarian play on energy transition materials.
But the interplay of commodity concentration risk and geopolitical tensions is forging entirely new supply chains, making historical wisdom allocation increasingly irrelevant.
Growth decelerators?
McKinsey's research identifies tobacco companies as classic "growth decelerators" that intrinsic investors abandon, yet overlooks the sector's remarkable financial engineering that offset gradually lowering cigarette sales.
The global tobacco market expects 2.55% CAGR growth through to 2032, reaching nearly US$1 trillion in value, despite declining consumption.
An uncomfortable reality is that these companies have mastered defensive innovation, with traditional cigarette volume declines are being offset by reduced-risk products like heated tobacco and nicotine pouches.
These companies demonstrate operational transformation through product diversification - precisely what Koller claims intrinsic investors reward.
The disconnect suggests his framework misses sectors that generate cash through defensive innovation rather than growth optimisation.
Global tobacco use reductions will only reach 25% by the end of this year, missing the World Health Organisation's 30% target.
For investors, this represents predictable cash generation in an increasingly unpredictable world. Policy met reality, and reality won again.
Tech disruption
Top fund managers have been buying technology stocks including Alphabet and Salesforce during 2025's volatile market, but not for the reasons Koller's research would suggest.
These aren't market share gains through commercial excellence - they're defensive plays against technological obsolescence.
2025's standout performers include firms like Diginex (up 2,065.6% since its January IPO) and various precious metals miners.
Explosive moves reflect euphoric hope and debasement hedging rather than fundamental operational improvements.
The market has different ideas about value creation than McKinsey's consultants.
AI's world-changing implementation exemplifies how traditional capital allocation analysis breaks down.
When fund managers buy tech stocks, they're often hedging against rapid technological displacement rather than backing sustainable competitive advantages.
The ‘real’ long-term outlook
Private markets show a decidedly more optimistic outlook for 2025 than in recent years, with investors expecting increased dealmaking and liquidity.
This shift suggests real long-term investors have moved beyond public markets - not the same game McKinsey studied - they've changed the rules entirely.
Private credit AUM reached US$1.6tn by end-2023, with managers holding US$520.2bn in dry powder.
These are the true "intrinsic" investors - they're not following Koller's categories - they're pursuing infrastructure, direct lending, and real assets that offer inflation protection and regulatory arbitrage.
Institutional investors are increasing allocations to American small caps and private markets while using multi-manager approaches.
This represents a fundamental rejection of McKinsey's large-cap, public-market focus.
Capital crisis
Companies now face transfer pricing complications due to tariffs, requiring adjustment of intercompany prices to prevent US entities from bearing disproportionate costs.
This operational reality makes Koller's "active capital allocation" category almost quaint.
The Trump tariffs amount to an average US$1,200 household tax increase in 2025, fundamentally altering consumer demand patterns.
"Market share gainers" must now navigate supply chain reshoring, inventory front-loading, and currency volatility - none of which feature in the 2012-2022 data set.
Companies are implementing 90-day delay strategies and negotiating supplier price reductions while cutting costs elsewhere.
This is crisis management, not the strategic resource allocation that attracts long-term investors, yet McKinsey's framework assumes execs have the luxury of strategic choice.
Valuation outliers?
Koller identifies "valuation outliers" as companies that deliver solid operational performance but trade at levels that discount most positives.
This category has exploded in 2025's environment.
Schwab's 2025 outlook shows fixed income benefiting from high rates while equities face a narrowing edge over risk-free investments.
When 10-year treasuries offer genuine real returns, the equity risk premium compresses for all but the most compelling growth stories.
JPMorgan Asset Management maintains neutral to modest overweight equity positions, while expressing higher conviction in credit overweights.
This shift reflects professional money management's recognition that traditional equity analysis methods struggle in the current environment.
Beyond McKinsey's framework
Willis Towers Watson recommends specialist asset managers, hedge funds for uncorrelated returns, and real assets for inflation protection.
This sophisticated approach reflects institutional recognition that traditional public equity categories no longer provide sufficient diversification.
Morningstar now assigns 40%-50% recession probability over the next year, making defensive positioning more critical than growth optimisation.
The firms that survive this environment will be those that preserve capital rather than maximise returns.
A point of conjecture of the old analysis is its U.S.-centric view during a period of unprecedented deglobalisation.
Commodity concentration risk and geopolitical tensions are forging new supply chains and dictating national strategy, creating value pools that didn't exist during the study period.
Mining companies face increasing investor scrutiny of capital deployment, with a strong focus on capital discipline and returns.
This represents a shift from growth optimisation to capital preservation - precisely the opposite of what Koller's "active allocators" achieved across the 2012-2022 timeline.
The playbook was rewritten while McKinsey was still editing the previous edition.
Forward-looking pragmatism
BlackRock identifies the loss of long-term macro anchors as a defining feature of the new regime, with inflation expectations no longer firmly anchored and fiscal discipline ebbing away.
This environment requires investment frameworks that acknowledge uncertainty rather than extrapolate from stable periods.
The successful companies of the next decade could be those that:
- Maintain optionality rather than commit to specific growth strategies
- Preserve balance sheet flexibility for rapid pivots
- Build supply chain redundancy rather than efficiency optimisation
- Generate cash through defensive market positions rather than market share expansion
The old framework served well during the post-financial crisis recovery period, when central bank policy provided stable macro conditions and globalisation reduced operational complexity.
That world has ended and the clock is ticking on academic frameworks built for yesterday's challenges.
Case-in-point the mining and metals sector's readiness to embrace transformation through innovation, collaboration and agility - and offers a template for other industries to perhaps follow.
Trustworthy, measured capital allocation has gone up in flames. And emerging from its ashes? Adaptive survival in an environment where yesterday's best practices become tomorrow's constraints.
