By Andrew Foerch, CityWire featuring Brian Spinelli, CFP®, AIF®, Co-CIO
From gold to spices to credit-sensitive fixed income, here’s where four RIA investment heads are allocating capital after a turbulent year in the markets.
2022 was in many ways a brutal year for investors.
The S&P 500 is down nearly 20% since January 1, and rather than offering protection from that slide, global bond markets suffered their worst year in recent memory, with the Bloomberg Aggregate Bond Index down roughly 13% year-to-date.
This pricing reset has thrown off portfolios and forced RIA investment heads to rebalance their asset allocations. While many sense heightened risk across the equities markets, some see opportunity on the horizon in certain sectors, including energy, infrastructure and healthcare. And bonds, after a rough stretch thanks to the Fed’s unprecedented rate hikes, may be in for a big rebound.
Several CIOs also touted tax loss harvesting strategies they’re using to help clients limit their capital gains taxes. After all, with losses across the board, such opportunities are bountiful — perhaps a silver lining to an otherwise stormy investing year.
From stocking up on gold and spices to lengthening bond durations, here’s how four CIOs are repositioning portfolios for 2023.
Brian Spinelli
Co-chief investment officer
Halbert Hargrove, AUM: $3bn
‘We’ve found refuge in a couple of places, including off-market alternatives like private real estate, private lending and those areas of the market that aren’t repriced every single day. It’s not that we’re going to be selling them off, but the alternatives tend to be heavier on the income side than the appreciation side. Since they’ve been making distributions, a lot of what we’ve been doing is taking the cash and slowly reallocating into the asset classes that have been underweight because they got beat up this year.
In equities, the international developed sector is one we like, partly because the dollar got really strong and has come down a little and provided a bit of a tailwind. And then adding back into US equities because they’ve come down so much. For the most part, in this environment, we’ve been more market weight with a value tilt. The other thing is buffered equity products, whether it’s through structured notes or ETFs with defined outcomes. That way we give you equity exposure where there is protection on the downside, but in exchange, you are going to be capped if the market decides to pull a 2020 and shoot to the moon.
Fixed income is also an opportunity because yields have come up quite a bit. We’re taking some of the distributions from those assets that have done well in this environment, and which have become overweight in the portfolio, and slowly putting that income back into the traditional fixed income that we originally took away from to fund allocations in alternatives. For high-tax clients we like municipals. And we still like the PIMCO Income Fund. You can see how much that’s adjusted on its yield.
I will note that in the middle of last year, we went to a short or low duration tilt so that the interest rate rises wouldn’t be as impactful. I don’t know if we’ll have the opportunity in 2023, but we would like to go back to more duration when that makes sense.’
