Planning portfolios for 2024: Goldman Sachs leaders discuss

Fixed Income Strategy

• Advises clients to lock in higher rates on longer-term bonds now, rather than holding cash, given current yield levels and expectations of future Federal Reserve rate cuts.
• Notes that many clients have been favoring cash over longer-term bonds despite the "smart idea" of securing current rates.

Geopolitical Risk and Asset Allocation

• Recommends maintaining a U.S. asset overweight relative to non-U.S. assets due to lower geopolitical risk, stronger institutions, sustainable GDP growth, and higher corporate profitability in the U.S.
• Advises U.S. preeminence as the primary long-term strategy but acknowledges multi-year historical periods where non-U.S. markets outperform the U.S.
• Maintains a non-U.S. allocation to ensure diversification and discipline against year-to-year volatility, preventing emotional deviations from long-term plans.
• Suggests that equities are the most durable asset class for maintaining purchasing power against high inflation, which peaked at 9.1%, rather than gold or commodities.

Cash Management and Market Timing

• Identifies inflation erosion as a critical risk for clients holding large cash reserves, particularly those with recent business exits (e.g., CEOs, founders).
• Implements a disciplined "tranching" strategy for deploying cash into the market to manage risk and reduce emotional decision-making.
• Schedules tranche executions on the first of the month to remove emotional elements from timing decisions.
• Advises accelerating tranches during inevitable market pullbacks of 5% to 10% to enter positions at more favorable prices.

Private Market Investing

• Highlights private equity as a source of persistent alpha with consistent long-term returns, emphasizing that success is highly dependent on selecting top-quartile managers due to the widest dispersion in returns across any asset class.
• Warns against allocating all capital in a single vintage year (e.g., 2021) to manage illiquidity risk; instead, recommends a disciplined, diversified approach with annual allocations.
• Views private credit as a long-term portfolio staple rather than a tactical overweight/underweight position, noting material yield advantages over public high-yield bonds to justify illiquidity risk.
• Targets long-term themes such as supply chain infrastructure and commercial real estate dislocations (e.g., hybrid work impacts) as key drivers for private market innovation and investment.

Legacy and Multi-Generational Planning

• Integrates asset location and allocation processes to fund philanthropic goals alongside investment portfolios.
• Encourages early education for children regarding investing, legacy protection, and global impact as part of a multi-generational strategy.