In a recent episode of Zephyr's Adjusted for Risk Podcast, Ryan Nauman, the market strategist at Zephyr, engaged in a thought-provoking discussion with industry expert Paisley Nardini. As the Managing Director and Head of Multi-Asset Solutions at Simplify Asset Management, Paisley brought her extensive experience and knowledge on the evolution of financial markets and the modern approach to investment diversification.
The Evolution of Financial Markets
Ryan opened the conversation by highlighting how financial markets have rapidly evolved, leading to new dynamics in investment strategies. With correlations between historically low correlated assets increasing, creating diversified portfolios has become more challenging. As a response to these complexities, new investment products and strategies have emerged.
Meet Paisley Nardini
Paisley Nardini, who has spent over 15 years in the industry, shared her journey from a bond trader to managing diversified portfolios across multiple asset classes. Her role involves working closely with clients, speaking to investors and advisors, and discussing market trends, risks, headwinds, and tailwinds that shape modern investment strategies.
The New Frontier of Liquid Alternatives
A significant focus of the discussion was on the role of liquid alternatives in portfolios. As traditional bonds have become more positively correlated with stocks, diversifying risks has become critical. Paisley emphasized the importance of managed futures and commodities as valuable tools for investors. Managed futures, with their history of providing crisis alpha, and commodities, due to their real-world relevance and macroeconomic influences, present unique opportunities for portfolio resilience.
Active Management in Modern Markets
Paisley highlighted a re-emergence of active management as investors seek more certainty and defined outcomes. The growing trend of active ETFs with slightly higher expense ratios reflects a shift towards strategies that offer downside protection and aim to smooth the investor experience.
Embracing Commodities and Managed Futures
While commodities haven't been top performers recently, Paisley advocates for active management in this sector. By focusing on specific commodities rather than broad indexes, investors can capitalize on macroeconomic and geopolitical trends. Similarly, managed futures, which allow for dynamic responses to market changes, offer uncorrelated returns that are indispensable in building resilient portfolios.
Conclusion: Educating for Future Success
In closing, Paisley emphasized the importance of education in helping investors and advisors understand the benefits and risks of incorporating these diverse strategies into portfolios. With a focus on prudent participation and diversification, investors can better navigate the modern investment landscape.
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