By Christopher Robbins and Jennifer Lea Reed
COVER STORY
Is The Great Asset Shift For Real ?
FA asked investment specialists how they ’ re shuffling portfolios in a high-interest-rate world .
By Christopher Robbins and Jennifer Lea Reed
A WORLD WHERE UNCERTAINTY is high and convictions are fragile suddenly is presenting advisors with a host of new questions — and challenges . How should they invest in the current market ? Should they price in a recession ? Are private assets or foreign markets more attractive alternatives today ? Most importantly , should advisors reposition client portfolios for a new interest rate regime ?
With so many moving parts to this puzzle , chief investment officers at RIA firms are trying to address problems that others might trust to crystal balls : Will the job market stay strong ? If so , will the Federal Reserve continue to raise interest rates or has its work been done , and will it now pause ?
Do asset allocation strategies need to be permanently reimagined now that a 40-year bull market in bonds has ended ? Should the 60 / 40 stock-bond playbook be torn up ? If firms are moving their clients into bonds , how long should the durations be ? What is the role of alternatives in the new investment garden ? What if clients don ’ t want to be in the markets at all ? A 5 % money market yield is finally paying you enough to , as one investment specialist puts it , sit and be patient .
Financial Advisor tried to mine the investment wisdom of investment officers at some of the country ’ s biggest firms and get a sense of how portfolios are being rearranged for the future for maximum benefit on clients . How big a role will bonds and income play in the picture , especially now that so many people are hitting retirement , and capital appreciation may not be as big a factor as their ability to keep unwinding assets , perhaps for a longer life ?
Dave Grecsek , the managing director of investment strategy and research at Los Angeles-based Aspiriant , says that even though markets fluctuate , fundamentals don ’ t . “ One needs to recognize that markets usually work fairly well in terms of rapidly discounting all available information ,” Grecsek says . “ So larger efforts to move tactically have generally proven to be ineffective strategies for maximizing wealth , especially for taxable investors .”
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