After 15 years of diversified portfolios hurting investors, we are now reaching an inflection point, said Karen Karniol-Tambour, co-CIO, Bridgewater Associates, at the Global Alts 2025 Conference in Miami Beach.
In a Jan. 28 fireside chat, Karniol-Tambour said investors are at an inflection point after 15 years of standard 60/40 or 70/30 passive portfolios outperforming well-diversified portfolios.
“The more it was different from a standard allocation, the worse it was,” said Karniol-Tambour. “That’s in our bones now. We’ve lived through 15 years where anyone diversifying was worse, (but) we’re at a spot where we all know it’s a different world ahead of us than what was behind us.”
That different world includes a “revolution going on in portfolio management,” she said, with clients eschewing the traditional strategic asset allocation and wanting more flexibility and more ability to see portfolios as a single integrated whole, said Karniol-Tambour.
“It’s all about risk,” she said.
One key component of that change will be rebuilding exposure to public fixed income.
While some clients have large fixed income portfolios, many clients place private credit into the fixed-income asset class, so fixed income isn’t doing the job it should.
“That (private credit) exposure is much more of a credit/’growthy’ exposure that’s not doing anything for you to diversify in case of a downturn,” said Karniol-Tambour. “It’s a great alpha source but it’s not actually diversifying you.”
When looking at the public markets overall, she said “It’s about neutral in my view. It’s not a great time to really lean in and take a great deal of risk.”
She anticipates a strong growth environment accompanied by a stronger-than-expected inflation environment.
“I like stocks better than bonds but like the option of bonds,” she said. “That could change quickly because of the amount of policy uncertainty we have.”
Speaking of policy, Karniol-Tambour said this is a “particularly good time to hedge currency exposure,” although she noted President Donald Trump’s tariff policy is not anticipating the result of “foreigners coming in and wanting to buy U.S. financial assets.”
In February 2023, Karniol-Tambour was named as the firm’s third co-CIO, joining Robert Prince and Greg Jensen. She joined Bridgewater in 2006 straight from college as an investment associate on the firm's fixed-income team and became head of investment research seven years later. Before ascending to her co-CIO role, she was co-CIO for sustainability with Carsten Stendevad.
Bridgewater Associates had about $160 billion in assets under management as of July, according to Bloomberg.
