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Episode 1: Strengthening Portfolios for Volatility – An Asset Class Overview
CIO of Global Asset Allocation Anwiti Bahuguna, Ph.D., reveals the investments that may reduce risk, improve diversification and aid performance through ongoing market volatility.
- Your Volatility Roadmap
- Institutional Investor
Key Points
What it is
We highlight the investments across equities, fixed income and private markets that tend to hold up relatively well through difficult markets.
Why it matters
The long-term, risk-adjusted performance of a portfolio may depend on how it performs during market downturns.
Where it's going
High-quality equities with strong cash flow and return on investment, along with private-market secondaries and hedge funds, tend to perform well amid volatility.
Source for fixed income returns: Bloomberg. Year-to-date through April 25, 2025, cash has returned 1.4% while the 10-year Treasury has returned -0.33%.
Daniel Gamba (DG): Markets have been experiencing extraordinary volatility for the past several weeks. And clients are really looking to protect their portfolios, diversify their portfolios, and look for opportunities. So as we look at the environment, what are you telling clients?
Anwiti Bahuguna (AB): The market environment is volatile, for sure. There is a fair amount of policy uncertainty in the markets right now as trade and tariff policies are being negotiated. S&P has fallen intraday, Daniel, about 21% from its high at $6100 in February, and more importantly, from a multi-asset lens, we haven't seen bonds actually provide protection either. So the policy uncertainty is actually an environment where we have a diversified set of solutions that can really play defense in markets like this.
DG: As you're looking for specific opportunities for clients. I know that you discuss with institutional clients but also within manner in many for many years for wealth clients and family offices. So on equities, what are you telling your clients?
AB: On the equity front, companies with really high quality companies which tend to have good earnings, good cash flow, they do well in this environment. At the same time, companies which have characteristics of low volatility … so the combination of low volatility and high quality is a winning combination. Not just through a defensive period like this, but really for your total portfolio.
DG: What are you telling your taxable clients in family offices and wealth?
AB: So for those who are taxable and care about taxes, we have tax advantaged equities or tax efficient equities, which can actually, in volatility, harvest losses and provide what we call tax alpha in addition to active management.
DG: I know we also manage over 400 billion of liquidity and fixed income securities. So what are you telling us about what opportunities we have on liquidity and fixed income?
AB: So in a volatile environment, Daniel, people care more about capital preservation and holding cash. Holding shorter duration bonds is a great option in your portfolio mix in these times. Shorter duration bonds are not subject to the volatility of longer duration bonds and doing quite well when markets are volatile. At the same time, just like we spoke about tax advantaged equities — for tax efficiency, there is an option to hold municipal bonds for tax efficiency in your asset allocation portfolios.
DG: What about private markets in this environment, what are we telling clients to do?
AB: So then we have a platform called 50 South that manages billions in private equity, private credit. In this environment, typically we see a slowdown in M&A activity because of illiquidity. And so some of the things that we see performing well here are things such as distressed credit, such as hedge funds, which have historically performed well here. And we also see greater interest in the secondary markets, which also tend to do well when volatility is high and liquidity is low.
DG: So thank you, Anwiti. That was a great overview of the capabilities that we have and what we're telling clients during this market.
AB: Thank you for having me, Daniel.
Main Point
Investing for difficult markets and long-term performance
High-quality equities with strong cash flow and return on investment, private-market secondaries and hedge funds, and thoughtful liquidity strategies may soften portfolio volatility, improve diversification and aid long-term performance.
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