Navigating Inflation, Recession and Client Concerns

Angeles Wealth Management guides clients through inflation and fears of recession.

Reviewed by: Lisa Barr
Edited by: Lisa Barr

This article is part of a new series from highlighting financial advisors. 

Michael RosenMichael Rosen is CIO at Angeles Investments, the parent company of Angeles Wealth Management, LLC, a national wealth management firm serving generationally wealthy families. He shared his insights with on the challenges of asset allocation and investment selection in an economic environment facing the dual threats of inflation and recession. How are you approaching asset allocation and investment selection given today’s challenging environment of persistent inflation and the threat of recession

Michael Rosen: Asset allocation should reflect, and be determined by, each investor’s risk tolerance and long-term financial goals. Over longer time periods, equities will typically outperform bonds, which will typically outperform cash.

That said, the shift in inflation regimes prompted us two to three years ago to remove core investment-grade bonds from most client portfolios, to reflect the negative real yields on these bonds.

While nominal yields have risen substantially, real yields have risen more modestly and are still negative. Core IG bonds may now be considered in the asset mix but are still not as attractive as cash. Tactically, we favor a mix of equities and cash versus equities and bonds until real yields become more attractive. How are exchange-traded funds playing a role in your portfolios now? 

Rosen: ETFs play an important role in our management of portfolios. We seek to hire the very few investment managers that we consider to be excellent, irrespective of their strategy. We then use ETFs to align our overall portfolio with the broad characteristics we seek to have. This approach applies to both our equity and fixed income portfolios. Are you using any nontraditional ETFs, such as ESG ETFs, thematic ETFs, smart beta ETFs, leveraged ETFs or inverse ETFs? If so, how are you using them in portfolios? 

Rosen: We’re not using any nontraditional ETFs. Through our rigorous due diligence process, we hire active managers to differentiate our portfolios. In general, what concerns do your clients have about the current economic environment? 

Rosen: There is almost no limit as to the things clients worry about. Inflation is still a concern, but more fundamentally, there is an anxiety about the future prosperity of the country, which is threatened by political and social upheaval.

Our clients generally don’t worry about having enough money or not earning a reasonable investment return. The worries are far more fundamental about the stress in our social fabric and the implications for future generations. How are you approaching portfolio structure for retired clients specifically for 2023 and beyond? 

Rosen: Angeles works with families of generational wealth, so the focus is not about running out of money, but more so investing for their legacy. We work with clients to ensure their wealth sustains generations, while helping them achieve their philanthropic goals.

This is not considered to be investment advice.

Advisor Views is a series of Q&A-style interviews with RIAs that is designed to highlight how they use ETFs in their practices.