(Bloomberg) — As co-head of global private wealth management at Goldman Sachs Group Inc., Meena Flynn helps guide the investment decisions of ultra-high net worth clients from around the globe.
Flynn, who’s based in New York and has been at the firm for more than two decades, told Bloomberg why she’s telling clients to embrace U.S. equities in a world facing inflation and a more active Federal Reserve.
When it comes to alternatives, Flynn has suggestions around the metaverse and multi-family real estate. Comments have been condensed and edited for clarity.
If you have a client with $1 million to invest right now, what would you advise?
We’re leaning into equities and alternatives to combat potential wealth erosion from inflation.
In an aggressive asset allocation strategy, we see clients’ combined public and private equity exposure around 75%, and another 7% in other alternative assets. While fixed-income investments are yielding lower real returns, we’re guiding clients to hold some cash and fixed-income reserves to be opportunistic.
Public equities have historically been the most consistent asset class in outperforming inflation, although in instances of significant inflation — like the 1970s and 1980s — equities have the potential to produce negative real returns.
Our view is that we are in a multi-year expansion, and that the economy and equities should perform well this year. We prefer U.S. over international equities and value over growth sectors.
Any specific areas you find interesting?
We see a few potential opportunities. One is financial companies, in light of potential rate hikes starting this year. Another is energy, which offers an attractive yield while maintaining capital discipline. And then there’s health-care stocks, which have boomed throughout the pandemic and have strong potential for a continued cycle of innovation.
What about the alternatives market?
We’re focused on hard assets, specifically real estate. One example is multi-family properties, given their potential to benefit from an inflationary environment and rising rents.
Turning to some less traditional opportunities, we’re focused on areas of the market that are less mature and stand to benefit as we transition to a more digital world. We’re leaning into opportunities at the cross section of technology and other sectors that are ripe for disruption, such as healthtech and fintech, to be at the forefront of secular change in the market.
Another area we’re monitoring is the digital assets ecosystem. We’re interested in investments that are at the heart of innovation in that space, like the use of blockchain technology for supply-chain management, health-care systems or capital market transactions. Or blockchain as it relates to Web3 and the metaverse.
To get exposure to these themes in the private markets, investors could seek out venture capital firms that have an explicit focus on innovators in the space. They can mirror that in the public markets to a degree by investing in baskets of stocks that have exposure to blockchain technology or in companies that leverage distributed ledger technology to operate their businesses more efficiently.
To contact the author of this story:
Devon Pendleton in New York at [email protected]