Senior Vice President Multi-Asset Class Solutions at Northern Trust Corporation. Responsible for developing and managing discretionary, multi-asset class products, including ETF model portfolios.
While portfolios with a static allocation to investment-grade bonds have seen significant losses due to rising rates, more dynamic portfolios can reduce exposure to those bonds in favor of other instruments that appreciate more with inflation. Those include Treasury inflation-protected securities and high-yield bonds that have less interest-rate sensitivity.
Northern Trust Asset Management also repositioned the equity side of clients' portfolios during this volatile and inflationary period by overweighting U.S. companies, which are less affected by the Russia-Ukraine war than international stocks. The company has also overweighted the portfolio in natural resources stocks, which have historically protected against inflation better than other asset classes and are a source of high income at the moment.
While growth stocks fared well in 2019 and 2020, investors still exposed to them through static portfolios are being hurt by their significant underperformance versus the broader stock market. That's due to rising rates and inflation, which favor value and dividend-yielding stocks. Tactical portfolios were able to make appropriate adjustments to changing conditions.