Northern Trust’s Michael Natale on Managing Risk

Managing risk is very important to Northern Trust Asset Management’s clients, according to head of intermediary distribution Michael Natale. And Natale explained that Northern Trust thinks about risk in two distinct ways.

“We think about it strategically, that’s over a five-year period, and we think about it tactically over a 12-month period,” Natale told NYSE’s Judy Shaw at Exchange 2023.

Northern Trust manages portfolios over a five-year period through its FlexShares ETFs. It takes a general 60/40 portfolio and opportunistically provides a tactical overlay “over a 12-month period.”

“Right now, we have very high conviction in two places, because we’re conservatively risk on,” Natale said. Those two places are “with natural resources, and high yield bonds.” He then went to discuss these two asset classes.

“When people hear high yield bonds, they think, added risk,” he said. “But we think it’s a way to help to de-risk portfolios by taking from some more high-octane equities and moving it into high yield bonds.”

Natale added: “High-yield bonds have a great risk return profile.”

At the time of the interview (in February), the FlexShares High Yield Value-Scored US Bond Index Fund (HYGV) yielded almost 10%.

Meanwhile, natural resources can not only hedge against high inflation “but also diversify,” according to Natale. It also “generates income from non-traditional income-producing asset classes.” So, investors looking to tap into that asset class could consider the FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR), which is “yielding almost 4% [and]provides a balanced approach to natural resources.”

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