Portfolio diversification is 'really key' in this environment for clients: Guggenheim co-president

Guggenheim Investments Co-President Dina DiLorenzo sits down with Yahoo Finance's Brian Sozzi at the 2023 Milken Institute Global Conference to discuss how investors can best protect their portfolios amid fears of an upcoming recession.

Video transcript

- Regional bank stocks are sinking today amid fears the worst of the banking crisis may not be over. But many finance executives are sharing optimism about the health of banks. My colleague Brian Sozzi sat down with Dina DiLorenzo, Guggenheim Investments Co-President, at the Milken Conference here in LA. DiLorenzo says her peers are excited to find solutions to make sure these bank failures don't happen again.

[SWOOSH]

DINA DILORENZO: People are definitely optimistic. They are excited to find solutions, and they're communicating openly and, I would say, on a regular basis. They're just really thinking about what should we be doing to prevent these mistakes.

BRIAN SOZZI: How should one prepare their portfolios for what we're seeing in markets right now?

DINA DILORENZO: I think diversification is really key and also really understanding the clients' needs. I mean, we listened to a lot of different clients today. And depending on the type of client, duration could be very important to them. Liquidity could be very important to them or not, so depending on what their needs are, and that's what we do at Guggenheim Investments. We really focus on listening to what our clients need and creating the right solutions for their profile.

BRIAN SOZZI: Are they navigating towards more-- ahem, excuse me-- safe haven type investments?

DINA DILORENZO: I think it's a combination. I think that as a fixed income manager, we're really well-positioned for a recession that everyone believes is coming.

BRIAN SOZZI: That we've been hearing about since last year.

DINA DILORENZO: Right.

BRIAN SOZZI: Let's be clear.

DINA DILORENZO: And you know what's interesting? We went around the room today, and they asked, when do you think the recession is coming. When do you think the recession is coming? And we got the first bookends was the third quarter of this year, and then someone said January of 2024.

And then if you read what the Fed's saying and some of the other economists out there, I mean, they're saying it could be a soft landing, a form of a recession. So, again, I think it really depends. What clients have dry powder? We also see, because of the volatility in the markets and the uncertainty, we're now seeing a lot of interest from clients that normally would have allocated some of their dry powder to equities because our firm specializes in providing equity-like returns with very low volatility.

And where our core competencies are, which is private debt, corporate credit, structured credit, we're able to really find value for investors that are usually unrepresented in traditional indices. So I think, again, it depends on the needs of the clients. But I do believe there's more of a demand for fixed income right now, so we feel pretty good about that.

BRIAN SOZZI: Have you been unsettled at all by what the Fed has done, series of rate hikes. Likely to come out this week, another rate hike. What has that done to fixed income markets?

DINA DILORENZO: Well, you know I think I think everything seems a little uncertain uncertain, right? I think that before the banking mishap with SVB and now with First Republic, I think people were expecting a more aggressive stance. But I think the Fed probably got a little bit of a break with the banking incident and credits widening-- I mean, tightening, so we'll see. I mean, I think, again, our clients-- we've been very active over the last several months, particularly the last six weeks, managing our clients, talking to our clients, talking to prospective investors, people who really just want to learn about our views, and keeping a very close watch on where the opportunities may present themselves.

BRIAN SOZZI: What is one of your top investment themes right now inside the firm?

DINA DILORENZO: Well, we have a variety. I would say it's our credit loss aversion. That's what we're good at, and we don't change our structure. We stick to our process. It's a tried and true process. And when we do that, that has always been a great result, right, and that's our strategy.

BRIAN SOZZI: There's always competition in the asset management industry.

DINA DILORENZO: Yeah.

BRIAN SOZZI: What's next for this space? I can't imagine competition is going to slow down at any moment.

DINA DILORENZO: Well, we like competition, right? I mean, you want competition. We actually work really well with our peers. We're a nice complement to our peers.

We like to figure out how they approach certain things. We do things differently. We're a team-based approach. We're not a star system. And what's next is you'll probably see a lot more consolidation. And I think it's the firms that really stick to their process, stick to their strategy, that will continue to be successful and serve their clients with excellence. And that's what we've been doing for the last 20 years I've been at Guggenheim.

- All right. That was our very own Brian Sozzi, along with Guggenheim Investments Co-President Dina DiLorenzo from the Milken Conference out in LA.