Key Takeaways
- • Allspring Global Investments, managing US$463 billion in assets, reports rising client demand for liquid alternative strategies following simultaneous declines in equities and bonds during 2022.
- • The MSCI All-World Index fell nearly 20 percent in 2022 while 10-year Treasury yields spiked to 3 percent, creating a historically rare environment where traditional 60:40 portfolio allocations failed to provide diversification benefits.
- • Eddie Cheng, head of international multi-asset portfolio management at Allspring, advocates for shifting away from equity-and-bond-only portfolios toward liquid alternatives that offer quick exit liquidity while delivering non-correlated returns.
- • Institutional and high-net-worth investors are increasingly seeking liquid alternative strategies to hedge against simultaneous asset class declines and to avoid the liquidity constraints that plagued traditional alternatives such as private equity and real estate during market downturns.
- • Allspring is expanding its Asia footprint to capitalize on institutional and wealthy client demand for multi-asset strategies in the region.
Summary
Allspring Global Investments, the US-based fund manager with US$463 billion in assets under management, is experiencing heightened demand for liquid alternative investment strategies in response to the severe market correction that struck both equities and bonds simultaneously in 2022. The convergence of asset class declines has prompted institutional investors and high-net-worth individuals to fundamentally reconsider the traditional 60:40 portfolio allocation—a cornerstone strategy allocating 60 percent to equities and 40 percent to fixed income.
The catalyst for this strategic reassessment was a historically uncommon market environment. The MSCI All-World Index declined nearly 20 percent during 2022, while 10-year Treasury yields spiked to 3 percent, reflecting the collapse of the traditional negative correlation between stocks and bonds that investors have relied upon for portfolio hedging. This dual-asset decline eliminated the diversification cushion that made the 60:40 model viable for decades, exposing a critical vulnerability in conventional multi-asset allocation frameworks.
According to Eddie Cheng, head of international multi-asset portfolio management at Allspring, the solution lies in diversifying beyond traditional equities and bonds through liquid alternative strategies. These products combine the portfolio diversification benefits of alternative assets with the operational advantage of daily or near-daily liquidity, addressing a structural weakness that became apparent during 2022. Traditional alternatives such as private equity and real estate proved problematic during the market downturn, as investors encountered significant barriers to exiting positions in a sluggish market, amplifying losses and blocking capital reallocation.
Liquid alternatives offer investors the dual benefit of non-correlated return streams and redemption flexibility—a critical distinction from illiquid private markets. This market dynamic has positioned Allspring to expand its presence in Asia, where wealthy investors and institutions are increasingly receptive to multi-asset strategies designed to minimize risks stemming from the type of synchronized market decline witnessed in 2022. The firm's strategic focus on geographic expansion reflects broader industry recognition that demand for sophisticated diversification tools will remain elevated as investors internalize the lessons of a market environment that invalidated long-held assumptions about asset class relationships.
The catalyst for this strategic reassessment was a historically uncommon market environment. The MSCI All-World Index declined nearly 20 percent during 2022, while 10-year Treasury yields spiked to 3 percent, reflecting the collapse of the traditional negative correlation between stocks and bonds that investors have relied upon for portfolio hedging. This dual-asset decline eliminated the diversification cushion that made the 60:40 model viable for decades, exposing a critical vulnerability in conventional multi-asset allocation frameworks.
According to Eddie Cheng, head of international multi-asset portfolio management at Allspring, the solution lies in diversifying beyond traditional equities and bonds through liquid alternative strategies. These products combine the portfolio diversification benefits of alternative assets with the operational advantage of daily or near-daily liquidity, addressing a structural weakness that became apparent during 2022. Traditional alternatives such as private equity and real estate proved problematic during the market downturn, as investors encountered significant barriers to exiting positions in a sluggish market, amplifying losses and blocking capital reallocation.
Liquid alternatives offer investors the dual benefit of non-correlated return streams and redemption flexibility—a critical distinction from illiquid private markets. This market dynamic has positioned Allspring to expand its presence in Asia, where wealthy investors and institutions are increasingly receptive to multi-asset strategies designed to minimize risks stemming from the type of synchronized market decline witnessed in 2022. The firm's strategic focus on geographic expansion reflects broader industry recognition that demand for sophisticated diversification tools will remain elevated as investors internalize the lessons of a market environment that invalidated long-held assumptions about asset class relationships.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.