Navigating Opportunity in Volatile Markets

In a time of swift market swings and heightened uncertainty surrounding tariff policies and other geopolitical concerns, advisors need more than just data. BNY Wealth takes an institutional approach to its active wealth management strategies for high-net worth individuals, families, family offices, and institutions. With a legacy spanning over 240 years, BNY Wealth manages approximately $300 billion in private client assets, backed by the company’s broader $2 trillion in assets under management.

Sinead Colton Grant, the company’s chief investment officer, recognizes how changing market dynamics can affect both investor sentiment and hard data. She also identifies sustainable opportunities within today’s tumultuous market, including the benefits of private market exposure and how to navigate these markets with transparency.

Colton Grant’s keen insights on a recent podcast episode provide a new perspective of how BNY Wealth is actively guiding clients through volatile markets.

You can listen to this and other episodes of the Big Picture in Practice podcast by Morningstar on all major streaming platforms. You can keep up with the latest episodes by subscribing to our Big Picture in Practice Newsletter.

Apple Podcasts | Spotify | Amazon Music | Pandora

Sinead Colton Grant was the first in her family to work in financial markets. Surprisingly, the initial spark of interest came while planning a girl’s trip to Italy.

Colton Grant and friends went through the typical traveler’s agenda of exchanging their cash for the local currency. They were delighted to find that an exchange of their Irish pounds to Italian Lira yielded more than anticipated. During the ERM Crisis of 1992, better known as Black Wednesday, investors lost confidence in the British Pound Sterling and saw the Italian Lira, as well as all other European currencies, also plummet in value. Famously, George Soros bet against the Sterling, predicting it would drop out of the European Exchange Rate Mechanism, and it did.

Colton Grant was curious about what caused this valuation, and so her studies began.

From university, Colton Grant started her professional career behind the FX trading desk of an investment bank, focusing on foreign exchange and options. Colton Grant’s clients at that time were some of the largest asset managers in the UK.

“That's really what led me to be interested in active currency management,” said Colton Grant. “It was more long term in nature than the day-to-day trading that took place on the trading floor.”

Over time, her interest in currency and macro broadened to asset allocation, multi asset, and finally where she is today with BNY Wealth, managing total portfolios for clients in wealth.

Colton Grant is quick to call out a concern that is top of mind for every investor at the moment. Will there be long-term shifts in global dynamics, whether that's trade relationships, less globalization, or more geopolitical risk, all while there is intense volatility in markets?

Colton Grant explains that political risk isn’t easy to predict. “Markets have a really difficult time pricing political dynamics,” said Colton Grant. “They can't assign probabilities in the same way as anticipated economic variables.”

There isn’t a lot of data on the political spectrum, which is why there are sharp reactions in the markets and among investors. Colton Grant compared the number of active market players today versus the 1990s or 2000s, when macropolitical affected market dynamics.

“We've got a lot of market participants that weren't investing through those time periods,” said Colton Grant.

Regardless of shifting dynamics, BNY Wealth approaches investing with a long- term perspective. The team’s tactical position typically has a 12- to 18 -month time horizon. This long-term perspective helps shape how Colton Grant and the BNY Wealth team interpret the current environment and is especially relevant when considering recent changes in market structure.

“We all know that market structures have changed a lot since the financial crisis,” said Colton Grant. “In pretty much every asset class, there's less liquidity as a result of the changes in bank regulations."

Colton Grant said market makers have changed, especially in areas of foreign exchange and fixed income. Algorithmic traders have made market moves more extreme, which is why parsing fundamental data has become increasingly important.

Look to data such as earnings, interest rates, the health of the consumer, business spending, and inflation. When new information came in about tariffs, BNY Wealth considered how that information might affect inflation, economic growth, and business spending.

“Those are the things that really drive where markets are going to settle over the long term,” said Colton Grant.

At a time when uncertain markets might lead investors to impulsively reject risk, BNY Wealth clients have remained steady.

Recent market volatility has made clear to Colton Grant and those at BNY Wealth that understanding true risk tolerance is critical to portfolio management and construction. The company puts in the work to know their clients’ risk tolerance and ensure their portfolio is well-matched.

“We spend a lot of time with our clients, talking about the importance of investing for the long term and how damaging it can be to portfolio returns to take risk off the table in reaction to what may turn out to be a very transitory event,” said Colton Grant.

Current volatility has led clients of BNY Wealth and investors everywhere to experience their true risk tolerance in real time. “If there’s a mismatch between your true risk tolerance and how you’ve been positioned, that means that you end up reducing exposure to risk assets at the worst possible time,” said Colton Grant.

With the noise of information cleared and true risk tolerance understood, Colton Grant is able to identify opportunities for clients even within an unpredictable landscape.

Finding opportunities in today’s landscape can be difficult, but investors should be discerning in their efforts. For example, some might be enticed by current enthusiasm around non-US assets, but Colton Grant said to think about how long that enthusiasm will take to come to fruition.

Long-term thinking is key. Increased defense spending in Europe might make non-US assets more attractive, but there should also be thought about how that could play out against underlying challenges within those economic environments, like the degree of regulation or demographic changes.

Many other factors would have to change in order for this to be a catalyst for growth, said Colton Grant. This isn’t to say advisors should avoid exposure completely, as diversification has significant benefits.

Uncertainties in the market have also revealed opportunities in private markets.

“The opportunities are more disparate, but that puts certain business models under a level of uncertainty and stress that brings a huge opportunity to do deals,” said Colton Grant.

The opportunities in private markets can be significant and diverse, spanning from venture capital, private credit, infrastructure, and even sports investing as somewhat of an inflation hedge. For Colton Grant and BNY Wealth, what it really comes down to is how these private assets can focus on key areas of economic growth going forward.

To fully take advantage of these potential private market opportunities, one needs to understand how market structures have evolved over time.

“In the late 90s, you had about 8,000 public companies here in the US,” said Colton Grant. “If you fast forward to today, we’ve got less than 4,000 public companies, and that brings with it a significant change in how we need to think about investing.”

Nowadays it’s not uncommon for companies to remain private for a long time and enter the market as a large cap name, or maybe not go public at all. “It has become a lot more challenging to be a public company, and many of the largest private companies may never go public,” said Colton Grant.

Private markets require a different due diligence approach, which makes manager research crucial.

“In public markets, the top quartile manager may be a couple of percentage points above the benchmark, and the bottom quartile manager is maybe a few percent below,” said Colton Grant. “The degree of outperformance and underperformance in private markets is multiples of that. There's a persistence in terms of manager returns that you typically don't see in public markets.”

Colton Grant also notes that many managers in private markets are heavily involved in operating the businesses. For manager selection, it’s important to think about:

• What does their track record look like?
• Have they been with the same firm for a long time driving returns?
• Have they decided to strike out on their own?

In terms of manager capacity, other questions to consider include:

• How do you deploy capital?
• How do you think about capacity management, and particularly where there's an evergreen solution or a semiliquid solution?
• How much capital can a manager realistically put to work, and how do they think about their open-ended vehicles differently than some of the closed end solutions?

BNY Wealth has been on a journey to bring a more institutional approach to the portfolios it manages. Overall, Colton Grant encourages those to view equity and credit holistically—across public and private lines—for better risk and return alignment. This approach can help investors build durable portfolios that match their risk tolerance and drive wealth over generations.

“The structure of markets has evolved, and our portfolios need to do the same” said Colton Grant.