# FamilyOffice10x - $350 Billion CIO on Iran-Israel War, Safe Heaven Assets & more - Sinead Colton Grant, CIO, BNY Wealth

An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 24 Mar 2026, 54 min.

Audio: https://anchor.fm/s/a453ddd4/podcast/play/117337787/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2026-2-23%2F420578138-44100-2-3646fefe6e82b.mp3

Sinead Colton Grant manages investment strategy for $350 billion+ in private client assets at BNY Wealth. In this episode, she shares her full macro outlook — including a non-consensus call on the dollar, why markets are underpricing Middle East risk, and what the wealthiest family offices are doing differently right now. ⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com We cover: — Why holding cash right now may be more dangerous than staying invested — The dollar thesis almost nobody agrees with coming into this year — Why gold is not the safe haven most investors think it is — The one risk markets are pricing as a tail event — but shouldn't be — Why AI memory chips are already sold out through 2027–2028 — How family offices are using sports investing as an inflation hedge — Why private markets are no longer optional for long-term wealth creation — The truth about the BlackRock private credit gating story If you manage wealth, allocate capital, or just want to understand how the smartest money in the world is thinking right now — this is the episode. Timestamps: (00:00) - Preview (01:41) - Introduction & Sponsor Message (02:51) - BNY Wealth's Current Market Positioning & Non-Consensus Views (06:10) - Liquidity Cycles vs. Market Fundamentals (08:02) - Impact of Geopolitical Crises on Asset Allocation (09:46) - The "Dash for Cash" Strategy Among Allocators (13:00) - How Ultra-Wealthy Clients Are Investing Differently (16:55) - A Deeper Dive into Digital Asset & Crypto Investing (20:32) - Is the AI Investment Space Over-Deployed? (23:12) - Are Private Markets Becoming Too Crowded? (27:17) - Is Risk Being Underpriced in Private Credit? (29:42) - Redefining Safe Haven Assets Beyond Gold (33:03) - Alternative Hedges and Diversifiers in a Portfolio (34:33) - Passive vs. Active Investing: Which Strategy Wins? (36:40) - The Underpriced Risk of Extended Middle East Conflict (39:17) - How Global Custody Flows Influence Investment Decisions (40:30) - Practical Applications of AI in Wealth Management (42:24) - Structural Shifts in Family Office Diversification (45:36) - The Asset Class Poised to Surprise Investors (47:50) - A Framework for Investing During Uncertainty (50:47) - Where BNY is Not Investing Despite Strong Narratives (52:26) - A Tactical View on Investing in Silver (53:40) - How to Connect with Sinead Colton-Grant LINKS Website: bnywealth.com Connect with Prashant: https://linkedin.com/in/choubeysahab Subscribe to VC10X newsletter - https://vc10x.beehiiv.com Subscribe on YouTube - https://youtube.com/@VC10X Subscribe on Apple Podcasts - https://podcasts.apple.com/us/podcast/vc10x-investing-venture-capital-asset-management-private/id1632806986 Subscribe on Spotify - https://open.spotify.com/show/7F7KEhXNhTx1bKTBFgzv3k?si=WgQ4ozMiQJ-6nowj6wBgqQ VC10X website - https://vc10x.com For sponsorship queries, reach out to prashantchoubey3@gmail.com Subscribe for more conversations at the intersection of family office investing, private markets, and emerging trends in wealth management.

## Transcript

[0:00] We think we've seen the through for the dollar and we expect it
[0:03] to move higher against most currencies.
[0:05] With the ongoing war between Iran, US and Israel, how do you
[0:09] think is that going to impact asset allocation within wealthy
[0:13] families? Geopolitical crises, while they
[0:16] may have obviously a terrible humanitarian cost, they actually
[0:21] don't tend to have a prolonged impact on market.
[0:24] The gas positions that allocators are maintaining are
[0:26] higher than even COVID levels, which is quite interesting.
[0:29] So how are you looking at that? Do you think that is just to
[0:32] have that optionality that when the market corrects, if it does
[0:37] then they have a buying opportunity, then they're going
[0:38] to deploy if? You miss the 20 best days, your
[0:42] return can actually be negative, and it's because some of the
[0:45] best days in the market follow some of the worst days.
[0:48] So time in the market meets timing the market, right?
[0:51] That's what you're trying to say here.
[0:53] What was historically considered as the golden standard of safe
[0:58] haven investing gold. It has been falling instead of
[1:01] rising in times of conflict, in times of war.
[1:04] I am not a fan of gold because it does well under certain
[1:09] circumstances usually, but it has no yield and if you own
[1:14] physical gold, obviously there's a cost to store it.
[1:17] Safe haven statuses are not permanent.
[1:20] What's the most underappreciated risk in markets today?
[1:23] Something that isn't being priced improperly.
[1:26] Markets are expecting all of this will be over in the space
[1:29] for a couple of weeks, right. We're not looking at extended
[1:31] elevated pricing based on everything we see about the
[1:36] situation in the Middle East. That is a very specific risk
[1:39] that right now I think is underpriced.
[1:43] Hey everyone, this is Prashant and I'll be host for the VC10X
[1:46] podcast. And today we have Sinead Colton
[1:48] Grant with us. Sinead is the CIO at BNY Wealth,
[1:52] a firm that overseas $350 billion in private client
[1:55] assets. She has a friend to see to how
[1:58] ultra high net worth families are actually positioning in the
[2:01] current environment. And her views are sharper and
[2:04] more contrarian than most. So without wasting any time,
[2:07] let's dive trade in. This episode is brought to you
[2:09] by Podcast 10X, my podcasting agency for VCs.
[2:14] We help VCs start and run branded podcast that can serve
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[2:42] description below. Now enjoy the episode.
[2:45] Hey Shaneer, it's so good to have you on the VC10X podcast.
[2:47] How are you doing? I'm great.
[2:49] Thanks, Prashant. How are you doing?
[2:52] Very well, thank you. And it's a pleasure having you
[2:54] on today on the on VC10X. And to start things off, let's
[2:57] try to take a broader view, right?
[2:59] At a high level, how are you positioned today across
[3:02] equities, fixed income and alternatives?
[3:05] And what's 1 view you hold that's most non consensus about
[3:08] how the markets are moving? So that's that's a lot to
[3:12] unpack. Generally, we are pro growth.
[3:16] We've been positioned for significant growth in the US
[3:20] economy and the global economy more broadly.
[3:24] So what that means in terms of portfolios is that while we're
[3:27] neutral equities overall we're overweight US large cap and
[3:33] we're underweight emerging markets and international
[3:36] developed. The thesis here being that we're
[3:40] going to see stronger growth in the US we are we've got a lot
[3:45] more tailwinds behind the economy, continued earnings
[3:48] expansion and while certainly non-us markets did well last
[3:52] year, a lot of that was a significant tailwind from from
[3:56] the dollar. So and dollar weakness which is
[3:59] something that we don't expect to continue, you know we're
[4:03] within fixed income as you might expect given the the growthier
[4:08] aspect to our positioning, we are overweight, small overweight
[4:13] in high yield and EMD and slightly underweight in core
[4:19] fixed income. Now a lot of our clients are
[4:22] taxable US investors. So depending on the portfolio
[4:26] that means slightly underweight either in US municipal bonds or
[4:31] in Treasuries. And then turning to
[4:34] alternatives, you know look, I think whether you take an active
[4:38] position in old very much depends on the liquidity of the
[4:41] underlying asset class. We do have a small overweight to
[4:45] real assets because when we think about real assets, it's
[4:49] not just the traditional ones like commodities, but more
[4:53] broadly. And it includes some some of the
[4:55] infrastructure plays that we like, which are really more AI
[4:58] adjacent in addition to some of the energy plays that we like.
[5:04] So small overweight to to real assets.
[5:07] That's really the the main position we have in, in alts.
[5:10] And of course we have exposure to private equity, venture
[5:13] capital, private credit as well as hedge funds.
[5:17] And so our non consensus view, look, I, I think we have a
[5:21] couple. The 1st is the expectation that
[5:23] U.S. stocks will outperform and you know, we see the
[5:27] fundamentals as really being very supportive of that.
[5:30] But the second is that we think the dollar is stronger from
[5:36] here, certainly a non consensus view coming into the year.
[5:40] The dynamics at play at a macro level where we're seeing the
[5:45] rate cuts by the Fed being priced out given what's going on
[5:49] with energy prices. And while other economies,
[5:54] whether it's Japan, the euro zone, may need to hike rates in
[5:58] order to combat inflation, that is also going to come along with
[6:03] a much slower level of economic growth.
[6:05] So we think we've seen the through for the dollar and we
[6:08] expect it to move higher against most currencies.
[6:11] Absolutely. Quite interesting.
[6:13] And markets interestingly feel driven by liquidity cycles
[6:16] rather than fundamentals, right. How much of your current
[6:20] strategy is shared by liquidity versus earnings?
[6:24] We have a couple of ways that we think about that.
[6:27] So look, we we do think a little differently.
[6:32] Our focus is always on the fundamentals and the
[6:34] fundamentals will always drive the returns.
[6:37] Now with liquidity, the way we incorporate that is we want to
[6:43] be a provider of liquidity when others need it.
[6:46] So in other words, be greedy when others are fearful.
[6:49] Right? Time is your friend in investing
[6:52] and we invest over multiple decades.
[6:54] We work with with many, many families who are investing over
[6:59] multiple generations and that long term investment horizon
[7:02] really helps to to filter out the noise.
[7:05] And so how we think about liquidity is, you know, one, it
[7:10] is something that doesn't seem important until you really need
[7:15] it, right? So it's, it's one of those
[7:17] things a little bit like counterparty exposure, right?
[7:19] It's, it's probably one of the slightly less glamorous parts of
[7:22] the market. But if it if it is absent, it
[7:26] has a very significant impact and for other investors who have
[7:30] a shorter time horizon, who may be more buffeted by these types
[7:34] of short term market movement, that's where we can really with
[7:41] our long term investment horizon take advantage of that.
[7:44] So I don't know that I would say the markets have changed in
[7:51] terms of how they've reacted. I think what's different is just
[7:55] the speed of reaction, right? So the the dynamics are similar
[7:59] but the speed of response is is a little faster.
[8:03] Absolutely. And with the ongoing war between
[8:05] Iran, US and Israel, how do you think is that going to impact as
[8:10] a allocation within valley families and how are they
[8:13] looking at it and you being the trusted partner for them?
[8:16] How are you advising them through these?
[8:18] You know, times when things are changing so fast?
[8:22] Look, I mean again, we we have a long term time horizon and what
[8:28] we have seen throughout history is that geopolitical crises
[8:34] while they may have obviously a terrible humanitarian cost, they
[8:38] actually don't tend to have a prolonged impact on market.
[8:42] And so if you look out three, 612 months after the onset,
[8:49] equity markets are typically higher.
[8:51] Now there are some caveats where if you think about when Russia
[8:56] invaded Ukraine, the impact on natural gas and certain energy
[9:00] prices that was prolonged because there was a supply
[9:02] shock. But when we think about asset
[9:05] classes more broadly, this is not really a time to make
[9:09] dramatic shifts in in asset allocation.
[9:11] It's it's simply too early. I would say that the what really
[9:18] bears close watching here is do we see a fundamental disruption
[9:23] to energy markets that is much more prolonged markets are
[9:26] certainly not pricing that at the moment, but that could cause
[9:31] a significant rethink in not only energy markets supply.
[9:37] There are follow on impacts to economic performance, but also
[9:41] it it's going to impact the deployment of AI which is
[9:44] incredibly energy intensive. Yeah, absolutely.
[9:47] I completely agree. And we recently did a video
[9:50] about Dash for cash that, you know, allocators are now looking
[9:55] to have more cash in hand and increase their cash positions
[9:58] even like right now, we the cash positions that allocators are
[10:01] maintaining are higher than even COVID levels, which is quite
[10:04] interesting. So how are you looking at that?
[10:05] Do you think that is just to have that optionality that when
[10:09] the market corrects, if it does, then they have a buying
[10:13] opportunity, then they're going to deploy.
[10:15] And even, you know, forms like Berkshire Hathaway that people
[10:18] watch, they also are sitting on piles and piles of cash.
[10:21] So how do you look at that? Do you also try to maintain for
[10:23] your clients some, you know, sort of cash allocation so that
[10:27] when the time comes when everyone is fearful, you can
[10:30] actually be greedy and deploy? So there were there were a few
[10:34] elements of that and I think it's really important to level
[10:37] set at the beginning. So one of the things that we see
[10:40] time and time again is that during crisis periods when many
[10:46] investors, particularly individual investors take money
[10:50] out of the market, they find it very hard to make the decision
[10:54] to redeploy. And we've done a lot of work on
[10:59] what happens if you miss even the 10 best days in the, in the
[11:03] year in terms of market return or the five best days.
[11:06] How does that impact your annualized return over, you
[11:10] know, 10/15/20 years? And it's material.
[11:14] So you go from generating, call it, you know, 7 percent, 8% on
[11:18] an annualized return basis to if you're, if you missed the 20
[11:22] best days, your return can actually be negative.
[11:26] And it's because some of the best days in the market follow
[11:29] some of the worst days. So, so when we have that higher
[11:33] volatility, that in itself is not a reason to take money off
[11:37] the table, right. You are rewarded for taking risk
[11:41] in portfolios. Now if you have a very specific
[11:44] thesis about something you want to deploy and we have done that.
[11:48] So we have dry powder which we would put in very short term
[11:51] fixed income and then put that money to work.
[11:55] But I think what's very dangerous for individual
[11:59] investors is to say, OK, let me let me get out of the market
[12:05] because one, history tells us that it's very hard to get back
[12:09] in. But two, over time, the time is
[12:13] your friend as an investor and you can weather this volatility.
[12:17] What it does show you. And look, we we manage
[12:21] portfolios for investors who are you know quite risk averse
[12:26] through to quite risk seeking. But it really highlights the
[12:31] importance of getting that risk calibration right at the
[12:35] beginning of the the relationship with a client
[12:38] because that revealed preference of a lower risk tolerance comes
[12:44] through when markets are volatile.
[12:47] For our clients, we've created diversified portfolios which are
[12:50] designed to weather these storms and then we want to take the
[12:53] tactical opportunities around that.
[12:55] Absolutely. So time in the market meets
[12:57] timing the market, right? That's what you're trying to say
[12:59] here. Yeah.
[13:01] And if we look at in general, you know, what are your
[13:04] wealthiest clients doing today that's different from maybe 12
[13:08] to 18 months ago? I would say there are a couple
[13:12] of areas. So the first is depending on the
[13:19] particular family office, some, some family offices are on Gen.
[13:24] 7, Gen. 8 even. Others are still with the, the
[13:28] first generation, with the with the wealth creator.
[13:32] What we're finding with some of those, particularly the the
[13:36] earlier stage family offices, they have a very long runway.
[13:40] They really think about the time horizon that they have as
[13:44] investors and they're also thinking about how they engage
[13:48] the next generation. And so two things are coming to
[13:52] the fore there. The 1st is digital assets.
[13:57] Now often when we say digital assets, people will think about
[14:00] crypto. It's not just the currencies,
[14:02] it's digital assets across the board.
[14:04] So thinking about the broader ecosystem tokenization, So we
[14:09] have seen a marked increase in the level of interest and it's
[14:14] particularly because of the increased regular later clarity
[14:16] here in the US over the last 12 months or so.
[14:20] We conduct a family office survey every year.
[14:23] In our survey, in our most recent survey, we had over 75%
[14:30] of respondents were either already allocated to digital
[14:35] assets or planning to make an allocation in the next 12
[14:38] months. So that's a very significant
[14:40] shift. The second area that I would
[14:43] point to is luxury assets. Now often if we think about
[14:50] luxury assets, that might be art, that might be jewelry, but
[14:55] what's increasingly coming into that sphere is sports investing.
[15:02] So prior to the pandemic, really the only option you had to be an
[15:07] investor in sports was to be an extremely wealthy family that
[15:10] owned almost an entire team. That has completely changed with
[15:14] the broader availability of access to many different types
[15:19] of sports and sports adjacent investment opportunities with
[15:23] strategies that are much more diversified.
[15:25] So not a single team exposure to multiple teams, multiple ways to
[15:30] generate revenue. And again, this is 1 area where
[15:35] we see a lot of engagement with the next Gen. which is very
[15:39] important for a lot of family offices that I would say has
[15:42] come to the fore more. And again, when when we
[15:46] conducted this survey, over a third of our respondents had a
[15:51] sports allocation. And so you know that that is a
[15:56] significant increase and look something that I would the final
[16:01] piece that I would point to and this isn't new, but it's
[16:05] incredibly important for our clients.
[16:07] And it also links back to to one of your previous questions.
[16:12] There's a huge level of tax awareness.
[16:14] So most of the clients that we work with are taxable investors
[16:18] here in the US And so that means that they will take advantage of
[16:23] not only solutions that are designed to generate taxable
[16:29] losses, but also it impacts their investment horizon, right?
[16:33] They there's a much higher level of capital gains tax if you hold
[16:37] something, you hold a position for less than a year versus more
[16:40] than more than one year. And so just an increasing focus
[16:45] on the impact of tax on investment returns.
[16:49] I'm not sure I can say that it's different than 12 to 18 months
[16:52] ago, but it it's in almost every conversation we have.
[16:56] Absolutely, that's quite interesting.
[16:57] And when when you talk about digital asset, is it primarily
[17:00] for crypto like Bitcoin or other tokens that are out there or are
[17:05] the other assets out there? Because when we recently did a
[17:08] family office round table, although it's not a massive, you
[17:11] know, data to, you know, analyze anything on, but we had two
[17:15] family offices and one was a multi family office, you know,
[17:17] handling about $100 billion and they did not seem very excited
[17:23] about crypto. And that's how the things.
[17:25] But what you are saying that 70% of your family offices are
[17:29] interested or deployed into that space is quite telling.
[17:32] So give us a view into that. What makes them excited?
[17:34] Are they trusting that fully? Because the people that I was in
[17:37] call with, with the family office, they were saying that
[17:40] they firstly don't understand it as much and they would rather
[17:43] deploy into technologies like quantum computing and the future
[17:46] rather than crypto around with a lot of uncertainty, right?
[17:52] And look, I would say with family offices, there is a
[17:56] significant dispersion in how they think about crypto, first
[18:01] of all, to level set. So in certain cases, the
[18:04] exposure may be through the currencies, but it's also
[18:08] tokens. It's also thinking about
[18:10] blockchain technology and the payment rails in the US In many
[18:15] cases, we see the exposure coming through in AVC portfolio
[18:20] where there's a manager that's been allocated to that is
[18:23] focused on that space. So in terms of the percentage
[18:27] allocation, it's generally low single digits.
[18:33] It's here's where I'd say the conversation is.
[18:37] We have many, many of the family offices we work with,
[18:43] particularly the ones who are thinking about what's next in
[18:48] financial services. They're looking at things like,
[18:52] for example, real time payment ability.
[18:55] They're looking at the broader proliferation of stable coins.
[19:02] They're expecting the next legislation here in the US to
[19:06] provide additional clarity and in a in addition to the interest
[19:12] in the space itself, it's almost more of an opportunistic
[19:16] allocation where fine, it hasn't changed the financial system
[19:21] today, but there's something here and we want to have some
[19:25] exposure in our portfolio. Now very often this will, it
[19:29] will also be the case that the families are investing heavily
[19:33] in tech, certainly very AI focused.
[19:36] That's actually the biggest scene that we see among our
[19:38] family offices, not only from an investment perspective, but also
[19:42] to increase the efficiency in their own portfolios and
[19:46] secondly, exposure to areas like space, like biotech.
[19:53] It's so it's a very tech forward approach, but it's not every
[19:59] family office. I would certainly, I would
[20:02] certainly agree with that. But we're increasingly seeing
[20:05] family offices leading in and particularly where the the
[20:12] influence of millennials, Virgin Z, right.
[20:15] There's a lot of talk about the great wealth transfer, over 120
[20:20] trillion of assets expected to change hands over the next two
[20:24] decades or so. And we're seeing increasingly
[20:28] that that's a topic of conversation with with the next
[20:32] Gen. Absolutely.
[20:33] That's quite interesting. And they're talking about AI
[20:36] that's been a big team for the past year or so.
[20:39] Do you think that we might just be over deployed in the space
[20:42] and families? They might or might not be
[20:45] familiar with the AI space, but it's, it's the buzzword and
[20:48] everyone is talking about it and they're attracted to it.
[20:50] They weren't a part of it, right.
[20:52] So do you think we might just be over deployed and the market
[20:55] might have already valued what's already there and it's growth
[21:00] potential and we don't know what the future holds.
[21:03] But there's also something that's talked about that, OK,
[21:06] there will be a few winners, just a handful of winners and
[21:08] everything else will go away, right?
[21:10] So and if they're deploying, to what strategy are they taking?
[21:13] They are only deploying the big players, like the opening eyes,
[21:16] you know, Google or the big players or they're also happy to
[21:19] go earlier and take a bet early on in a startup journey.
[21:24] And this is a really important question.
[21:26] And look, I think there are there are many ways in which AI
[21:34] can impact not only the investment landscape, but
[21:37] everyone's day-to-day. We're at a relatively early
[21:41] stage in all of that. And market participants are
[21:46] clearly having trouble differentiating between the
[21:50] various the different elements of the ecosystem.
[21:55] We had the SAS apocalypse a few weeks ago.
[21:59] We've had, you know, wealth management firms have
[22:03] significant amounts of value wiped out, all based on a single
[22:09] report, a single use case. Look, the potential is enormous.
[22:14] But what we also know from the.com, the experience in the
[22:18] late 90s is that the, there are clear winners and losers as all
[22:24] of this plays out and they can be hard to identify in advance.
[22:29] So here's what we're seeing the the most sophisticated family
[22:32] offices do. They are looking for exposure
[22:37] through private equity, through venture capital.
[22:41] They're taking some direct stakes and, and they're also
[22:45] looking at well, what are the use cases within, within my own
[22:49] business, we tend to see with family offices that direct
[22:56] investment that particularly in this space will often learn more
[23:01] towards AI if the wealth creator has a background in, in
[23:07] technology in that space and is much more familiar with it.
[23:12] That's quite interesting. And over the past few years, we
[23:15] have seen that there's been a big shift towards private
[23:18] markets. So like over the last decade,
[23:20] right? Are we at a point where
[23:22] allocations are becoming too crowded in the private space?
[23:27] Left level set on why we've seen that that increase so cast your
[23:31] mind back to the late 90s. It doesn't feel that long ago,
[23:34] but you know it's what 30 odd years ago almost back then in
[23:40] the US you had about 8000 public companies.
[23:44] Today that number is closer to 3 1/2.
[23:46] It's just it's a lot harder. It's a lot more cumbersome to be
[23:49] a public company today. And so at the same time we've
[23:53] seen a significant increase in the number of, certainly in the
[23:56] number of private equity backed companies that's quadrupled to
[23:59] about 16,000. At the same time, post the
[24:05] global financial crisis in 2008, the increase in bank regulations
[24:10] LED a lot of banks to step away from some of the the loan
[24:16] activity that they were doing. And you've had private credit
[24:19] step in where banks were previously active.
[24:21] And so private credit at the same time has really increased
[24:26] in in size with both of these spaces.
[24:31] First of all, once the market is bigger.
[24:34] Second of all, it is a space where manager selection is
[24:39] critical because the difference between a top quartile performer
[24:43] and a bottom quartile performing manager is enormous.
[24:47] So in the public market, your best performing active US large
[24:51] cap manager, you know, they might be 300 basis points over
[24:56] the benchmark. The worst might be 500 basis
[24:58] points below. But in the private market that
[25:04] could be a difference of 2030 even 40% in, in certain
[25:10] vintages. So, so the, the importance of
[25:15] manager selection is critical and particularly on the private
[25:18] equity and VC side, there tends to be much more persistent in
[25:21] returns because of their expertise on the operating side.
[25:25] So umm, that is the backdrop. It is not that there's an over
[25:32] allocation. As we start to think about
[25:35] creating portfolios, we're increasingly much closer to how
[25:40] endowments would think about it, which is I have equity exposure,
[25:46] some of it is public, some of it is private.
[25:50] Now, the other point here is if you look at some of the largest
[25:57] private companies here in the US, if they were to go public,
[26:04] and I suspect they, they may not ever go public, they're not
[26:09] going to go into indices in, you know, they're not going to start
[26:12] in the small cap index. They're going to go straight
[26:14] into the S&P 500. And so the model that was
[26:18] previously deployed a couple of decades ago where, you know,
[26:22] you'd, there'd be an IPO, the company would be a small cap
[26:25] stock, you could hold it all the way up until it became a large
[26:28] cap stock and, and benefit from that value creation.
[26:33] It's hard to do that now. The, the opportunities to do
[26:35] that are much more limited. And so, uh, the private asset
[26:39] exposure is incredibly important, but the managers that
[26:44] you choose to work with, or even the, the direct deals that our
[26:47] families are, are involved with, the manager selection is
[26:51] critical and then diversification across deals
[26:55] also critical. And look, the other thing to
[26:57] bear in mind is we spoke about AI previously.
[27:01] You know there's a lot of infrastructure investment
[27:04] needed, AI adjacent spaces and some of that level of capital
[27:09] deployment can only really be done through through private
[27:12] markets, certainly in terms of the some of the deals that we
[27:16] see moving at speed. Absolutely.
[27:18] Quite interesting. And private credit has lately
[27:21] been the talking point, right? It has seen massive inflows and
[27:25] some liquidity crunch recently with BlackRock blocking
[27:28] withdrawals for a 26 billion fund.
[27:31] Are we reaching a point where a risk is being underpriced?
[27:35] Let me level set here because with with most of the semi
[27:42] liquids or Evergreen funds, those funds structures are set
[27:47] up so that liquidity of 5% a quarter is is part of the
[27:52] underlying fund structure and anything more than a 5%
[27:57] withdrawal request, the funds have the right to gate and that
[28:00] is very clear to all investors going in.
[28:03] So these these strategies are working exactly as as intended
[28:11] as as structured. So there is nothing surprising
[28:15] there. But here's what I would say.
[28:18] You with every investment, you come back to the fundamentals.
[28:22] And in private credit, it's about underwriting and it's
[28:24] about due diligence. So some of the highest profile
[28:31] deals that went awry, yeah, that was to do with fraud.
[28:37] But I think it's naive to believe that there won't be any
[28:42] defaults, right? You look at high yield, for
[28:45] example, the average historical default rate is around 4%.
[28:51] We've got similar, maybe slightly lower average default
[28:55] rates for, uh, for private credit.
[28:58] So in our view, the asset class is still fine, but I think what
[29:04] you're actually seeing play out here is it's a newer asset class
[29:09] for individual investors and really the importance of the
[29:13] very clear communication around how these strategies work.
[29:18] So our clients, many of them invest in drawdown vehicles, but
[29:24] some of them like Evergreen funds, they like the more
[29:27] frequent, more timely valuation. But when we discuss them, we
[29:33] really talk about these allocations being considered
[29:37] just like private markets exposure.
[29:39] This is not where you should be looking for liquidity.
[29:43] Yeah, absolutely. Quite, quite telling there.
[29:45] And one interesting phenomena that we are seeing right now is
[29:49] that what was historically considered as the golden
[29:53] standard of safe haven investing gold, right, it has been falling
[29:59] instead of rising in times of conflict, in times of war, you
[30:02] know, which goes against what has been thought that OK, in
[30:04] types of war, rising uncertainty, gold will you know,
[30:08] support My Portfolio. So how do you look at that?
[30:11] Why is that happening and what does safe haven investing look
[30:14] like today? Are there different assets for
[30:16] safe haven investing right now that we're not aware of?
[30:19] Let me start with gold. I am not a fan of gold because
[30:25] it does well under certain circumstances usually, but it
[30:30] has no yield. And if you own physical gold,
[30:33] obviously there's a cost to store it.
[30:35] So, so the the circumstances under which I would allocate to
[30:40] gold are a relatively few. Having said that, my background
[30:47] is in currency markets and one of the things that currency
[30:49] markets tells you is that safe haven statuses are not
[30:55] permanent. Umm, if we think about the
[31:03] dollar, the dollar wasn't always a safe haven currency.
[31:06] And in most of the 90s, that is not how it worked.
[31:09] Your typical safe haven currencies were the Japanese
[31:12] yen, the Swiss franc, even the British pound.
[31:17] You look at 2008, a lot of that changed.
[31:20] And then Fast forward to today. The yen is not considered a safe
[31:25] haven because Japan is a net importer of oil.
[31:29] The pound has not been considered a safe haven really
[31:31] since the financial crisis. And yes, the Swiss franc because
[31:35] of its current account surplus, Jill works as a Swiss bank, but
[31:38] the Swiss National Bank is not very happy about that.
[31:41] So one of the things that we that we like to think about when
[31:45] constructing portfolios is not just what's the label, but what,
[31:50] how is something really going to diversify a certain risk.
[31:54] The biggest risk that markets are, are really trying to
[31:57] grapple with right now is what do elevated energy prices mean
[32:01] for inflation and how does that then impact asset prices?
[32:05] And so in that environment, we're safe haven, It's more
[32:09] likely the dollar uh, because interest rates will start to
[32:12] move up for all the the reasons that we uh, we spoke about
[32:15] earlier, but it's also some of those quasi inflation hedges And
[32:19] in fact, just going back to the one of the previous questions,
[32:22] sports investing, one of the other reasons why family offices
[32:25] like it is that it's a quasi inflation hedge.
[32:28] Umm, we, we don't classify it quite that way.
[32:33] We need more data in order to, to see that.
[32:35] But it's an illustration of how the concept of diversifiers, how
[32:42] the concept of the risk that you're trying to take account of
[32:47] in the portfolio is going to, is going to impact your, your
[32:53] allocations. And this is where stress testing
[32:55] becomes really important, not just what's happened in the
[32:57] past, but playing through specific scenarios going
[33:02] forward. Absolutely.
[33:04] That's quite interesting. So as you mentioned sports
[33:07] investing as being can, can become another hedge.
[33:10] Are there any other assets that you would like to mention that
[33:14] people should look at that can help in times of uncertainty
[33:17] that if other assets are going in One Direction, this one asset
[33:20] can hold up your portfolio? Again, it comes back to time
[33:25] horizon. So over the long term, equities
[33:27] are a very good inflation hedge. You know, they, they will
[33:31] increase in value in line with the, the level of economic
[33:35] growth and generally over time they, they will move higher.
[33:38] And it really depends on what you're trying to, to hedge
[33:41] against. If it's the the one off shock in
[33:44] terms of a, a step change in inflation, you know, their real
[33:49] assets are really one of the few areas that tend to do well.
[33:54] But we're not constructing portfolios for the sake of a
[33:57] couple of months, right. This is really more over
[33:59] multiple years. And so I think there's actually
[34:04] a a danger in reallocating the portfolio too much and being too
[34:08] responsive to what's happening day-to-day in market.
[34:11] But look, in terms of our exposure, we think about real
[34:15] assets, that is everything from a broader commodity exposure
[34:20] through some infrastructure, through even some real estate
[34:26] and all of those are good value preservers when you see
[34:31] inflation start to rise. Absolutely.
[34:35] And if if there was an investor who just doesn't look at the
[34:38] market but makes a point to, you know, has said their allocation
[34:43] on paper one time and just follows that rigorously
[34:47] regardless of what the market is doing or geopolitics, interest
[34:52] rates, anything. Do you think that investor has a
[34:56] good chance of beating the investor who's too away with all
[34:59] these things and tries to change his portfolio based on what's
[35:03] happening right now? I think there were two pieces to
[35:06] that. So the first is how you invest
[35:10] at inception, right? Ideally you want to allocate
[35:14] over time, so you're not putting all of your money to work at a
[35:19] single point in time. The second is a diversified
[35:22] exposure which will help you generate attractive returns but
[35:25] also mitigate the risk. And then the third piece is
[35:29] disciplined rebalancing, right? It's a very institutional
[35:32] approach. But that over time means that we
[35:36] know equity markets typically have higher returns than bond
[35:39] markets and certainly do over time.
[35:42] But you need to rebalance in order to to ensure that your
[35:47] portfolio remains diversified and you capture some of those
[35:49] gains and lock them in because otherwise left to its own
[35:54] devices that portfolio, let's say you started at 6040, it'll
[35:57] end up being closer to something like 9010.
[36:03] But your second question is it depends on the type of the the
[36:09] second investor that's more tactical.
[36:13] If we're talking about, you know, a high frequency macro
[36:17] trader that's watching the markets 24/7 maybe.
[36:23] But if it's most investors it they have a tough time doing it,
[36:27] part of it is that when they take money out of the market,
[36:31] more often than not that money stays out of the market for an
[36:34] extended period of time, and that is incredibly detrimental
[36:37] to returns. Consistency and time is your
[36:40] friend. Absolutely great.
[36:44] What's the most underappreciated risk in markets today?
[36:47] Something that isn't being priced in properly.
[36:50] I would say if we look at the situation in the Middle East,
[36:55] that is an incredibly volatile situation with the potential to
[36:59] impact energy prices for an extended period of time.
[37:04] But markets are pricing right now and the responses that we've
[37:07] seen lead me to believe that markets are expecting all of
[37:12] this will be over in the space of a couple of weeks, right?
[37:14] We're not looking at extended elevated pricing.
[37:18] If that is not the case, then markets have underpriced the
[37:22] risk of inflation moving reasonably higher.
[37:25] And so just to to quantify that, you know, if and oil prices have
[37:31] been moving, whether it's WTO or Brent, they're generally moving
[37:35] higher. If we assume they're above $100
[37:40] barrel, then the impact on inflation here in the US is
[37:45] estimated to be .2 to .3 of 1%. But you go to Europe and Asia
[37:53] and that impact is more than .5 of 1% heading heading towards .8
[38:01] to 1% depending on the the duration.
[38:03] And obviously the level inflation is the building block
[38:08] for so much pricing. You cast your mind back to 2022.
[38:12] Obviously those were extremely elevated inflation levels.
[38:15] But if you start to see inflation moving higher, if you
[38:18] start to see the trajectory of central bank activity moving
[38:24] from many of the cuts have already been priced out.
[38:26] But if you start to see the market pricing in more hikes,
[38:29] then I think that really starts to in to impact the fundamentals
[38:33] not only in bond markets, but also in in stock markets.
[38:37] And so look, you know, if you take all of that together and
[38:42] the more extreme scenario, let's say inflation moves up
[38:46] significantly, you're going to see equity markets sell off,
[38:50] bond markets sell off, you'll see the dollar higher.
[38:53] Generally it's bad for it's worse for emerging markets in
[38:57] international than it would be for US large cap and small cap
[39:01] would also struggle in the US because it is a more interest
[39:05] rate sensitive market because much more of the debt that those
[39:08] companies hold is floating rate. So based on everything we see
[39:11] about the situation in the Middle East, that is a very
[39:15] specific risk that right now I think is underpriced.
[39:18] Got it. BNY sits at the center stage of
[39:22] global custody flows. How, if at all, does that
[39:26] vantage point influence your investment decisions?
[39:30] So there's a lot of insight on money in motion in markets and
[39:37] and for us it's helpful at the margin because we're long term
[39:42] investors. It's a different time horizon,
[39:45] but we want to be cognizant of how flows are evolving over over
[39:50] shorter time periods. One of the areas that's actually
[39:54] very helpful for us is the firm's role in digital assets.
[39:58] So the we were one of the first firms to offer some digital
[40:02] asset custody. We're also involved in a lot of
[40:05] conversations around blockchain tokenization and that for us is
[40:12] very helpful in terms of seeing. How the financial system
[40:16] potentially incorporates the technology and it really brings
[40:22] a very particular lend to digital assets that really
[40:26] complements what we're seeing in our in our family office
[40:29] portfolios. Absolutely.
[40:31] Yeah, quite interesting. And you mentioned how families
[40:35] are now using AI, not just investing but also using within
[40:39] how they deploy and invest, right.
[40:41] So how is actually changing portfolio construction or risk
[40:45] management inside wealth management for you and even for
[40:48] families? How are they using it?
[40:50] Well, look, I mean the first places that we see this being
[40:55] deployed is really around more operational tasks, things that
[41:01] are very repetitive where you can create a almost a digital
[41:04] employee in order to carry out the tasks.
[41:07] We're also seeing some interesting developments around
[41:10] streamlining reporting, making particularly the reporting
[41:13] around private assets more real time, still not real time, but a
[41:16] little bit more so you know, for portfolio management or
[41:20] portfolio construction. I think it's still a little
[41:22] early. The promise is certainly
[41:25] interesting, but of course with a change of that nature, we, we
[41:32] would expect all investors to be much more, to require much more
[41:36] testing before they would deploy it right.
[41:39] Again, it comes back to the concept of the promise versus
[41:43] what's actually being delivered today.
[41:46] But what I will say is there are many different types of family
[41:51] offices from very large ones with a very large staff.
[41:56] But there are many family offices deploying significant
[41:58] capital that have fewer than 10 people on staff.
[42:02] And so there the increased efficiency that you can gain
[42:06] through AI is very, very attractive.
[42:09] But again, you're deploying significant amounts of capital.
[42:12] You want to be very sure that you've tested all aspects of
[42:16] that, that you understand what the the cyber implications are
[42:20] before you would actually deploy.
[42:22] But we are certainly seeing that the interest.
[42:25] Absolutely. And are you seeing a structural
[42:27] shift in how family officers think about diversification,
[42:31] especially across geographies or currencies?
[42:34] I would start my response by saying, look, family offices are
[42:39] some of the most sophisticated investors across the globe.
[42:44] They're focused on not only the investment piece, but they're
[42:50] also somewhat unique in that they're investing over for
[42:53] multiple generations. They need to think about not
[42:57] only that time horizon, but also the engagement of the next Gen.
[43:02] of the family. For several years we've been
[43:05] seeing an increased focus on private assets, both through
[43:09] fund vehicles and also direct investments.
[43:13] Luxury assets are coming much more to the fore.
[43:15] Digital assets also. And I those are really the, the
[43:20] newer areas that we're seeing appear in asset allocations.
[43:24] I would also share that certainly in Europe and with
[43:30] certain families here in the US, increasingly there's a focus on
[43:34] not only the financial return, but also what impacts there may
[43:38] be of the of the investments that they're making.
[43:41] And bringing all of those together, we're seeing
[43:45] portfolios that are much more heavily aligned with private
[43:51] markets and we're seeing the emergence of newer asset classes
[43:55] like digital assets and and sports based investing.
[43:58] And I would also say that families can be much more swift
[44:05] to allocate to a new asset class, something that we would
[44:07] think about as being more opportunistic rather than
[44:10] perhaps some of the more traditional institutional
[44:13] investors. Absolutely.
[44:14] And what you're also seeing is the sort of the
[44:17] institutionalization of family offices because the sort of
[44:20] build that there is to be deployed, it's sort of mass or
[44:23] even beats some of the biggest institutions, right?
[44:27] And do you think that structure that is needed to make that
[44:31] those sizes of investment that scale that is already in place
[44:34] for most family offices or do you think that we are still in
[44:36] the early stages of that institutionalization process
[44:39] that family offices are going through?
[44:42] The family office landscape is, is very broad.
[44:46] So it will stem, it will span from a family that has, you
[44:50] know, maybe a few 100 million to multiple billions.
[44:55] And So what we see is that the larger family offices certainly
[45:01] look and feel like institutions in how they allocate in their
[45:05] processes, the investment committees and the smaller
[45:09] family offices are they're on a journey.
[45:13] Some of them are there, some of them are less formalized.
[45:18] But increasingly, because of the amount of capital there is to
[45:23] deploy, they have a a much stronger voice in investment
[45:30] discussions, in access to opportunities than really we've
[45:34] ever seen before. Absolutely.
[45:37] And looking out three to five years, what asset class do you
[45:41] think will surprise most investors positively or
[45:43] negatively? Look, I think the biggest
[45:46] surprise, we talked about AI already, but I think some of the
[45:50] AI adjacent factors are probably going to have some of the
[45:53] biggest surprises because you know whether that's
[45:57] infrastructure, even utilities, right, utilities where you think
[46:00] about them generating maybe a 4% yield.
[46:04] Some of those utilities could give you a 7 or an 8% yield
[46:07] given the demand for for energy that's coming through from a lot
[46:11] of the large tech companies, the demand from from AI servers.
[46:17] So infrastructure and utilities, big beneficiaries of AI without
[46:20] you necessarily having to choose who are the winners within the
[46:24] AI space. I think there's also going to be
[46:27] a lot of disruption of traditional sectors.
[46:29] We're not there yet, but I think we're going to see significant
[46:32] evolution. So that's the upside surprise.
[46:38] There's a huge amount of enthusiasm around European
[46:42] equities in particular, and that is where I have some caution,
[46:48] where the ongoing effect of regulation, what the cost that
[46:57] public companies in Europe incur in order to comply.
[47:02] It's a, it's a very heavy regulatory burden.
[47:05] And I think the key thing to watch on the regulation side is
[47:14] how does the EU try to regulate AI?
[47:18] One of the things that we've seen is that the regulation of
[47:23] the the tech industry so far is one of the reasons why Europe
[47:28] doesn't really have any very, very large tech firms.
[47:35] It's the same thing happens with AI.
[47:36] I think that will be very challenging for for the EU.
[47:42] So that I think would be the biggest negative surprise,
[47:45] certainly relative to the sentiment that was here coming
[47:49] into the start of the year. Absolutely.
[47:51] Quite interesting. And when uncertainty is high,
[47:54] what framework or principle do you personally fall back on to
[47:58] make allocation decisions? We focus on the fundamentals and
[48:06] as we talked about before, time in the market beats timing the
[48:10] market. So the biggest advantage that we
[48:13] have as investors is that long term time horizon.
[48:18] So that gives you the ability to take opportunities when
[48:22] investors that have a shorter time horizon don't.
[48:26] And again, you think about what are the opportunities that I
[48:30] expect in the next 1, three, five years and what
[48:36] opportunities is the market presenting me with that could be
[48:40] in the public space, that could be in the private space.
[48:42] But it's really anchoring yourself to that longer term
[48:46] time horizon because look, markets are very noisy.
[48:50] They are especially noisy this year, but remaining focused on
[48:56] the fundamentals is critical to generating those long term
[49:00] strategic returns. Absolutely.
[49:03] And you're talking about AI and AI adjacent industries, which
[49:07] might be might surprise people, right?
[49:11] And one thing, another risk there is that let's say if AI
[49:15] corrects or there's some sort of a big correction in AI stocks,
[49:19] then all of the adjacent industries might also face a
[49:22] similar correction, right? Does that pose a risk of over
[49:27] allocating just on one single AI thesis?
[49:30] The thing about corrections is that for your investment thesis,
[49:35] it actually is more likely to bring you additional
[49:39] opportunities. So as we think about this, we
[49:44] have, we have liked the tech factor for example, but look
[49:48] multiples are they have been pretty extended.
[49:52] We've seen a significant pullback already this year, but
[49:55] over the next three to five years, the tech sector is
[50:00] absolutely going to drive the US economy.
[50:03] We like memory, so we know that memory is in that.
[50:08] All of the supply of memory that's needed for AI chips has
[50:12] been already spoken for in 2026. It's mostly already sold out for
[50:19] 2027 and heading into 2028. So that to us that supply demand
[50:25] imbalance means you're going to see the prices continue to rise.
[50:31] Some of the semis, again, they are going to see continued
[50:37] demand and having the investment thesis that's focused on that
[50:42] longer term time horizon is incredibly helpful in filtering
[50:46] out the noise. Absolutely.
[50:49] Moving to our last main question before we try to close this out,
[50:52] Where are you not investing right now despite strong
[50:56] narratives? Well, look, you know we talked
[50:59] earlier about gold. Our view was you know it it
[51:03] should obviously had a very significant run up.
[51:06] There was a narrative around this around it related to de
[51:10] dollarization, loss of confidence in the dollar.
[51:14] And you also had central banks that were that were increasing
[51:18] their their gold reserves. Our view was it wasn't
[51:21] sustainable longer term. And so that is not an area that
[51:27] that we're investing in. It probably won't surprise you
[51:31] either that international developed.
[51:34] We are not big believers in the outperformance.
[51:40] The continued outperformance of international developed.
[51:43] There was a very strong performance last year. 10% of
[51:47] the return came from the weaker dollar, right.
[51:49] Let's not forget that for US investors, but also it was
[51:54] coming from a very low base. If you'd looked at the
[51:56] outperformance of U.S. stocks over over the previous years.
[52:02] And so for that to continue, we, we don't just don't see that the
[52:06] fundamentals are supportive. The ECB is like to start raising
[52:11] rates. The continued earnings
[52:14] expansion, we don't think it's going to outpace the US And so
[52:18] international developed is, is not as much of an appeal.
[52:21] We prefer US large cap. We think that's got much better
[52:24] opportunity to outperform in public markets.
[52:28] Absolutely, and just to close this out, I'll try to get your
[52:31] views on a metal that's sort of adjacent to gold #2 let's say
[52:36] silver, right? That's also been the talking
[52:38] point recently. Had massive rallies, then
[52:41] massive drawdowns as well. Wild rights.
[52:44] How are you looking at that? It is part industrial fed, part
[52:48] safe haven maybe, although too old for that.
[52:52] How do you look at that? So again, I mean it's, it's not
[52:57] exactly the same as gold, but it's a similar kind of thesis.
[53:01] These are very, very volatile assets and they are much better
[53:06] suited to tactical allocation. So we prefer that some of the
[53:10] managers that we allocate to who take those tactical positions
[53:15] have the have the exposures. As a long term investor, a
[53:21] direct exposure to silver in a portfolio for a taxable investor
[53:26] doesn't make a lot of sense. You can certainly have it as
[53:31] part of a broader diversified commodity exposure and active
[53:34] commodity strategy. But but silver being held in its
[53:38] own right, I think it's somewhat challenging.
[53:41] Got it. Yeah, Thanks for sharing your
[53:42] views on that. And it's been an incredible
[53:44] conversation. Do let our listeners know where
[53:47] they can get in touch with you. Follow your journey and and also
[53:51] learn more about what BNY wealth and how it can help them.
[53:56] That's great. Thanks Prashant.
[53:58] And yes, so bnywealth.com is our website.
[54:02] All of our publications are available there.
[54:04] And you know, we'd, we'd love to have your listeners visit and
[54:09] and learn more. Absolutely.
[54:11] I'll make sure to put the link in the show notes below.
[54:14] Thanks so much for making time for this and I wish you happy
[54:18] allocating. Thank you.
[54:20] I enjoyed the conversation Prashant, thanks for having me
[54:22] on. Hi, Grace.
[54:24] Thank you.

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