In this episode, Steven Visscher, lead manager of the balanced strategies, discusses the impact of rising interest rates and inflation on the balanced portfolio in recent years, Mawer's disciplined and collaborative approach to portfolio construction, and the importance of having a long-term perspective. He spoke about recent changes and additions to the balanced portfolio and provided an update on the performance of the balanced portfolio thus far in 2024. Key Takeaways: Over the last four years, interest rates and inflation have had the most significant impact on the capital markets and the performance of the balanced strategies. Following a surge of inflation in 2022, central banks aggressively hiked rates, which led to the first meaningful loss in a balanced strategy since 2008. After being called into question in 2022, 60/40 portfolios bounced back in 2023 and 2024 following positive fixed income returns, helping support the overall balanced strategy. So far, the market recovery has been led by a narrow subset of businesses, most notably technology companies that are part of the euphoria around artificial intelligence (AI). These companies have experienced extraordinary returns and lifted benchmarks to new heights. However, some of the Mawer balanced strategies weren't heavily exposed to those industries and have continued to trail their benchmarks on a relative basis. Steven and his team think in a probabilistic way meaning that they are intellectually open to the fact that there are many scenarios that could unfold, and they want to have a certain amount of resilience regardless of the scenario. The neutral stance of the balanced portfolio reflects the uncertainty of the current environment. The team's base case scenario is that a recession may unfold over the next six to 12 months. A small portion of capital from the U.S. equity strategy, which is more heavily biased toward larger U.S. businesses, has been shifted to a fairly new asset class, the U.S. mid-cap segment due to a valuation gap. From a balanced perspective, the goal isn't to eliminate risk; it's to manage it. Host: Andrew Johnson, CFA, Mawer Institutional Portfolio Manager Guest: Steven Visscher, CFA, Mawer Portfolio Manager For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ Instagram - https://www.instagram.com/mawerinvestmentmanagement/

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