This week, we speak with Sébastien Page, head of T. Rowe Price’s $363.5 billion multi-asset division. He is also a member of the firm’s asset allocation committee and its executive management committee. T. Rowe Price’s total AUM was $1.31 trillion. Page is the author of 2020’s “Beyond Diversification: What Every Investor Needs to Know About Asset Allocation.” He was previously an executive vice president at Pimco and a senior managing director at State Street Global Markets.
We discuss why lowered yields and lower return expectations has led to greater equity exposure and more people taking on additional risk in their portfolios. The traditional “60/40” mix of stocks and bonds has morphed into an “80/20” portfolio. He maintains that these models need to be “re-optimized” by shifting 12% of the allocation from bonds to low volatility alternatives, including 5% to risk premium or factor strategy, as well as within equities of swapping 5-10% of long only stocks to dynamic risk management or tactical strategies.
Page believes Treasuries no longer provide the same hedging they used to. Instead, asset allocators can select strategies such as absolute return strategies, or other diversifiers like Gold or Investment Grade Bonds, and low interest rate currencies like the Japanese Yen. He cites his mentor as teaching him the secret to happiness: “Lower your expectations.” Page notes investors should apply the same approach to bonds.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and they refund fees when they underperform. Their flagship Global Equity strategy has outperformed the MSCI World lndex since inception in 1990.
Sebastien Page New Book
Sebastien Page Favorite Books
Open: An Autobiography by Andre Agassi
North: Finding My Way While Running the Appalachian Trail by Scott Jurek
Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou
Can’t Hurt Me: Master Your Mind and Defy the Odds by David Goggins
Why We Sleep: Unlocking the Power of Sleep and Dreams by Matthew Walker
Stillness Is the Key by Ryan Holiday
Deep Work by Cal Newport