Conference Presentation, Panel
Alpha Architects for Multi Asset Strategy | Global Conference 2025
Milken InstituteJared Carney, Khaled Al Shamlan, Ashley Baum, Jeb Bentley, Saira Malik, David Mihalick
- Markets are expected to maintain high correlation between asset classes over the next several years due to central bank actions and geopolitics, though non-U.S. markets may outperform U.S. markets this year driven by lower tech exposure, with a potential U.S. rebound later in the year following tariff-induced inflation bumps and Q1 technology earnings recognition.
- Portfolio strategies are trending toward a 50/30/20 allocation (equities, fixed income, alternatives) and increased allocation to private assets, with the Texas Retirement System anticipating this 50% private asset mix could be the largest in the U.S., while Mubadala aims to deploy capital in assets lasting decades and local teams target 28-38% USDIRR in regions like Brazil.
- Specific return expectations include real estate equity entering a low double-digit return up cycle once it bottoms, public fixed income high-yield corporates yielding approximately 8% with equity-like returns and lower rate risk, and a 7% actuarial return requirement for the Texas Retirement System which exceeds the ~6% outlook for public equities.
- Investment plans emphasize long-term time horizons of 10 to 20 years for portfolio optimization, structured incentive systems mixing one-year and three-year returns to retain talent, and the use of "special opportunities" or "ghost" portfolios with 0% target weights to provide liquidity and deploy capital opportunistically.
- Key risks identified include the potential for beneficiaries living longer than projected, the challenge of high correlation causing losses during frothy markets where fundamentals are ignored, the risk that chasing returns concentrates exposure to unperceived risks, and the difficulty of timing short-term windows when the biggest returns occur.
- Strategic approaches to mitigate risk involve building decade-long relationships with asset managers, maintaining internal management of roughly 95% of general accounts for liquidity flexibility, focusing investment committee time on structure and downside protection, and utilizing risk overlays to monitor correlated exposures across teams.