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Chief Investment Officer Ben Pace discusses allocation adjustments and risk considerations in light of market fluctuations, in a recent interview for wealthmanagement.com about how leading RIAs are navigating the current investing climate.
What recent investment allocation changes has your firm made?
This summer we reduced our weighting to U.S. large cap equities from overweight in our model portfolios to equal weight as we believed that the somewhat surprising advance through the first half of the year had left equities fairly valued. The proceeds of the reduction went to close our longstanding underweight to core fixed income. With interest rates across the maturity spectrum having risen close to our year-end target and with the Fed near the end of its tightening cycle, fixed income yields have effectively “normalized” and are now deemed to be attractive from a risk-adjusted return perspective.
What’s your top contrarian pick at the moment?
Although we do not believe a recession in the U.S. economy is imminent, interest rate spreads in the high yield debt asset class are not sufficiently attractive to compensate investors for the risk of an economic slowdown or the refinancing risk that will occur as debt matures over the coming years. Despite our rather favorable assessment of the broader fixed income markets, we are aggressively underweight this riskier asset class within the space.
In what areas of the market are you taking risk off?
We recently reduced the weighting to U.S. large capitalization equities and high yield debt.
In what areas of the market are you putting risk on?
We have increased our weighting to core fixed income through both an increased allocation and in extending duration.
Ben is the Chief Investment Officer and a Partner in the New York office. He leads the firm’s Investment Committee and is a member of the Executive Committee. He has more than thirty-five years of experience in investment management. Ben has been featured in the Wall Street Journal and Reuters, and is a frequent commentator on Bloomberg TV and radio, Fox TV and CNBC, appearing regularly on network programs such as Power Lunch, The Closing Bell, Squawk Box, and Worldwide Exchange.
Prior to joining Cerity Partners, Ben was Chief Investment Officer and Head of Global Investment Solutions for Deutsche Bank Private Wealth Management in the U.S. In his role as CIO, he sat on the PWM Global Investment Committee, providing input on the U.S. economy and capital markets. He oversaw the investment strategy and asset allocation for PWM clients in the U.S. As Head of Global Investment Solutions, he brought together PWM’s capital markets and investment capabilities in an effort to provide an effective and consistent experience for clients. Prior to joining Deutsche Bank in 1994, he managed equity income funds for two investment organizations. During his tenure with those institutions, he also served as a securities analyst with a particular emphasis on the financial services and healthcare industries.
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