Building an Asset Allocation Strategy: Masters in Business with Kate Burke

31:12We were – what, were we over 4%, 4.5 % last summer? And now we're back in the high threes? like four and a half people forget we spent 25 years pretty much at nothing nothing so four and a half percent wait safe liquid wow why would you not why would you not have it and you're seeing what's interesting is you know even with advisors or with clients they'll they'll have money in a deposit account earning very low interest and then when they're put they're trying to figure out how to put it into work the question of whether or not you want to put it into equities These value, these valuations right now versus saying, no, you can get a stable return off of fixed income.

31:56Fixed income was out of favor for a period of time. I think we're back in the age of fixed income for quite a while now where bonds are really well positioned to outperform. and really in our source of income, especially when you think of an aging demographic who's looking for income, there's the stability and safety of bonds that can provide you with that income, particularly if they're active managed, so we can work through some of the unknown challenges of our current economic environment. It's so interesting. As people are going to be hearing this, it'll be around the time when lots and lots of bonuses will be hitting people's personal accounts, which means lots of people are going to be getting phone calls from their bank saying, hey, I see there's a pile of cash here.

32:52How would you like to use it? Right. And I always say, well, half of that's going to Uncle Sam. What can you guarantee me that's safe? And I mean guarantee. And it's like, well, you know, there are no guarantees. I'm like, all right, it's going to go to the money market fund. Even if it's 3.8, that's better than some crazy covered call strategy that may or may not be there for April 15th. Exactly. So one, it's a safe, it's certainly always a safe place in the short term to put your liquidity. And then in the longer term, when you think about people's wealth accumulation over time, in the very beginning, it is simply about starting to grow wealth, accumulating it, you're going to be largely in equities and not to get that kind of equity return.

33:44and then you start to move into, well, now I have to start planning for retirement. So then preservation starts to become more important. You want to protect those assets. And that's when you see people tend to move more into a more balanced portfolio. Well, then they move into retirement and they need income and they want, that's where fixed income really can be very beneficial or, you know, we also have a number of equity income strategies that put off a nice distribution And that's where you want to have an advisor or help you understand what is the income stream you need to live and pursue the life you want in retirement.

34:24And then the last stage is legacy. And what do you do as a legacy planner? And how do you, again, go back to that preservation of those assets so that you can, whether it's your legacy is philanthropic or around your family? You know, our view is we want to partner with the wealth advisor along each parts of their client's journey and know that they can turn to Allspring with the right set of public market products that are beneficial to those clients. So you're discussing a lot of relationships, it sounds like, with RIAs, registered investment advisors. Tell us a little bit about the relationship you have with RIAs.

35:07Are they primarily at Wells Fargo? Are they everywhere? Give us a little bit of insight into how Allspring operates. So Allspring has a very strong relationship with the Wells Fargo advisors still. And we've been able to grow that relationship even post separation, which I think people were concerned about whether that continuity would continue or would that cost some friction. Instead, they're a tremendous partner and we can work with them to help Wells Fargo advisors achieve their agendas with their financial advisors. The same, though, is true for other intermediaries, Morgan Stanley, Maryland, Raymond James.

35:48These are all other intermediary platforms that have some Allspring product. We're looking to continue to place more. And then we have the RIA channel, which, as you know, is going through a tremendous amount of change and investment. You're seeing consolidation. You're seeing aggregators of RIAs out there. You're seeing TAMPs, platforms that are providing a lot of the infrastructure. Turnkey asset management. Turnkey asset management. Thank you. That are providing a lot of the infrastructure and technology and operations that advisors need. And we're able to partner with each part of that ecosystem, all the way to the independent RIA who's hung their shingle and built a great business.

36:33So one of the investments we made in the last year was really building out an RIA sales organization, recognizing that it's similar to intermediary. But as those RIAs are growing and getting more sophisticated, having support of that growth with them and being able to help bridge like this is what other sophisticated larger aggregators are doing. How can we help partner with you to build and protect that business has been a real focus of ours. And that's where we have a number of Remy's, our tax-managed SMA platform, separately managed account platform that is really, I think, powerful when you're working with RIAs and those individual investors.

37:21So let's talk a little bit about what's going on with the market today. By the time people hear this, it's 2026. What is going on that's different now for institutional and wealth clients that perhaps is different than what they were looking at five or ten years ago? So I think one of the things we're focused on right now is there is from the curve perspective, this question of whether we're entering into stagflation where you're seeing lower growth still inflation, high interest rates that will be coming down. is where do you position yourself along that curve? And rather than have it just be a long duration play, we think that investors really need to be looking at how do they take advantage of both the change in the curve?

38:22We expect the curve to steepen, the long end of the curve to steepen, particularly as central banks are figuring out how to balance the inflation and lower interest rates to try to protect growth. You also have heavy debt servicing loads. So while all of them are perfectly solvent of a developed company and manage that, they care about those interest costs. It's a big part of any government's budget, and it's a growing part. And I think that that changes some of the behavior of the curve in the long run, where we would expect that longer tail of it to continue to go higher. So playing that intermediate part of the curve, we think, is going to be really important.

39:11And you're going to want high quality credit driven companies to do that. So credit research is really going to matter more versus just playing the duration play. Coming up, we continue our conversation with Kate Burke, CEO of Allspring Global Investing, discussing the state of investing markets today. I'm Barry Ritholt. You're listening to Masters in Business on Bloomberg Radio.

39:48Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna. And I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind it. if anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive.

40:35Yeah, wow. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

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42:01See complete disclosures at public.com slash disclosures. Being a small business owner isn't just a career, it's a calling. Chase for Business knows how much heart and effort go into building something of your own. That's why they make business growth their priority. The Chase team takes the time to understand your mission, where you are now, and where you want to go. Their broad range of solutions is designed with you in mind so you can bring your ideas to life. From banking to payment acceptance to credit cards, you can conveniently manage all your business finances all in one place with their digital tools.

42:35Looking for tips and advice? Their online resources are always available to give you the solutions you need to help your business thrive. See how your business can get stronger and go farther with Chase for Business. Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Kate Burke.

43:12She is CEO of Allspring Global Investments, helping to manage about$635 billion in client assets. Previously, she ran multiple divisions at Alliance Bernstein, including as CFO, COO, and head of the private wealth group. So when we look at active management in equities, it's kind of fallen out of favor. They don't help themselves by pretty regularly underperforming Each year, half of the active fund managers underperform their benchmark. And if you go out to five or 10 years, it's much worse. But we really don't see the same sort of performance in bonds. It seems that active bond managers really bring a lot of, dare I say, alpha to the table.

44:00Yes. Tell us a little bit about the active side of bond management at Allspring. So at Allspring, over 90 % of our active fixed income outperform on a three, five, and 10-year basis. So active management really matters in fixed income. And I'm happy to go back to why I believe it in equities as well. But focusing on fixed income for a moment, I think part of the strength of the Allspring platform is the deep credit research that we do. And that means understanding the specific issuances and the companies that are doing it so that you're making the right choices. And we do run the risk of and you see a little bit of this in some of the private markets.

44:45You know, this question of credit and the strength of the underlying businesses. If we have challenges in the economy, that's where it comes out. And so having a strong view on quality credit, we think, is really important because it allows you to do two things. One, we talk about income. We think you're going to get most of the return is going to come out of yield. So searching for that income, being able to harvest that income is really important. And why we like the intermediate part of the curve is the duration play. So still being nimble enough to adjust to a changing rate environment, either led by the central banks or driven by inflation.

45:26How do you position yourself along that part of the curve to be able to capitalize on that return? What are you guys seeing on the private alt side, private debt, private equity, private credit? There has been a land rush to that space. I get the sense that Allspring has become a little skeptical about that area. Look, private credit is a perfectly good asset class, and it creates a lot of value, certainly for the economy. It grew out of the need of the banks pulling back on their ability to make those loans. But it has gotten to be a crowded space. You have a number of new players that have entered into the private credit market.

46:10If you look at future returns, what happens with basic law of supply and demand, you have a lot more people supplying liquidity to that part of the private credit market wanting to make those loans. It means those spreads are likely to come down. They're going to be competing. Origination is really going to matter in that space. And so I think we're going to see, similar to asset managers, those who are really good at it and those who end up not being as well positioned for it. So who you own there and who you partner there, I think, is really important. We're choosing, despite many of our similar-sized peers, seeking out either through acquisition of or partnership with private credit firms.

46:54I'll never say never. There could be a partnership with someone that creates a really interesting strategy that's specific for the client. But you're seeing, I think, some challenges even with what's happened so far where people don't understand the product. They don't understand the liquidity. They don't understand the fee structure. And so that's a lot of time you have to be spending with those advisors trying to educate them and convince them that that's the right decision to be making versus saying, no, buy your sleeve of, you know, the public liquid fixed income products. and then buy your sleeve of private credit with whoever you choose seems to me to be one of the paths that people may pursue.

47:40I'm always surprised when people talk about not understanding the liquidity. Just go back a couple of years ago to beat credit at Blackstone where a bunch of advisors tried to head for the exits before the year-end marks happened. And hey, which part of locked up for five years is confusing in year two? It's you got three. See you in 2029. So it's like it requires a sophisticated investor to understand how you're laddering into illiquid assets. And not that sophisticated. Right. Seven year lockup is seven. Oh, so I get my money back in year two. No, seven year lockup. And yet people seem to not really take take it very seriously.

48:27So that's why we are staying in the public side. We think liquidity is really important and provides an important part of your asset allocation. I'm not arguing against clients having a piece of alternatives in their portfolio, but understanding the structure of what that alternatives makeup is, whether it's private equity, private credit, real estate, understanding those terms, understanding how that access and your comfort level that in times of illiquidity, your asset allocation may be much higher to those asset classes than you originally intended. because you're going to have to use your liquid assets in a way that you had not originally planned.

49:11And that creates the danger that an individual investor in particular has in thinking about how they're adding that into their investment portfolio. And that's where a really good advisor is going to be helpful. But they are also all in their own education of this now. And so each advisor – advisors talk about how much they're needing to learn about private credit, about tax loss management. Like we're asking more and more out of these advisors. So we think you can still get a really good risk-adjusted return by a pretty traditional portfolio in the long run. And if you look at what the S &P 500 has done for the last 30, 40 years – Not too shabby, right?

49:56Not too shabby. and if you invest in that in the long run and have enough liquidity to live through the downturns and leave those in place, that has proven to be a winning strategy for a very long time. And we're just, if you look at rolling 15-year periods, we just finished one of the best 15-year periods. In history, people forget what it's like when everything hits the fan and liquidity is really valuable. Yeah, I'm just not sure what we're trying to solve for for the client and saying that they need to have a significant allocation. So you're not in the 30, 40, 50 % illiquid alts camp at all?

50:34No, definitely not personally and definitely not what I would be recommending others to do unless you're at the really ultra high net worth part of the curve where you have plenty of liquidity in that 30 % because you just have so much in that account overall. The 70 % is such a big number. Right. So that but for many people, that's not their reality. And so I think we have to be appropriately cautious. We want more people investing for their future. I do think it's an incredible, you know, that generating, creating wealth for yourself, you know, outside of my Seth Bernstein, you say this outside of your, your, your doctor, your financial advisors, probably the next most important person in your overall well being.

51:21outside of obviously your family, like in terms of the professional advice that you're getting. And I think that that's really important to understand that there's so many different individuals. That's why I believe in customization at scale in the long run, is that every individual, you know, target dates work for retirement when you have similar people collected together to make a target date decision. But the diversification is not just the year you're planning on retiring, it's, well, what are the assets you have? How big is your family? What are your other needs that you need to be planning for?

51:57So how do you start to create customized solutions for the individual investor and help the financial advisor create those individual solutions at scale? I think it's going to be the next wave in wealth management. So what I'm hearing is if you're an aspirational investor, if you're a high net worth investor, if you're a family office, or if you're an institution, endowment, foundation, those are very distinct needs and you should have very distinct solutions to your problems. Correct. Really, really interesting. I only have you for a few more minutes. I want to get to some other questions before we run out of time.

52:35I love your quote. What does it mean, quote, being the easiest asset manager to work with? What does that mean and practice and how are you driving that philosophy? So think about who you have loyalty to. Are you loyal to an airline? Are you loyal to a hotel chain? Why are you loyal to a grocery store? You're loyal to them because you find the consistency of the experience you're having with them makes you want to go back. And it's usually pleasurable and easy and you get what you want when you want it at the right price with the right level of service to bring you satisfaction. Clients are no different in asset management.

53:18And we have within asset management, a lot of regulatory, you have client reporting, you have complexity of portfolios, like we were just talking about that. And all and and you then have challenges in sometimes in an investment strategy or in the markets generally where you're looking for good advice. So for Allspring, what does it mean? It means accessibility. It means accessibility to our portfolio managers. So if you have a question that you need to answer for a client and you need to get a portfolio manager or someone on their team get that answer quickly, you get it. We're able to provide that for you.

53:55It's also knowing our clients and getting the right information into their hands at the right time, leveraging technology. It's also about all of the back end, the complexity of reporting, the complexity of client onboarding. No one wants to fill out 30 forms to open up an account or to start a new investment. How do we create the ease of engagement with Allspring for the intermediate, whether it's an institution or the client, that their money is put to work quickly and efficiently and easily in a way they understand? And that's largely leveraged by really good client relationships and then a technology infrastructure that's being built to get them what they want when they want it.

54:39So we're investing a lot in our technology platform right now to help achieve that. Since you brought up technology, I'm legally obligated to ask about AI. What do you think about artificial intelligence as applied to the wealth management industry? How is Allspring using AI? So I think of AI or strategy around AI in really three ways. One, we've turned it on in what I just call general efficiency tools, like chat GBT, ask a question, you're going to get a better answer than if you put it into Google or helping you do first drafts of writing. Like there's a lot of general efficiency kinds of tools that are out there that you could like really anybody can use fairly quickly without a lot of training.

55:24The second phase for us is really about partnership and who are we working with who's also investing in AI, who will help us leverage solutions to help really mine data. It's all about data at the bottom. You need really clean data. So we're also spending a lot of time making sure we have clean data. But if you're going to query data to give you an answer, the data better be right. Otherwise, you're going to get the hallucinations and false findings. So we're trying to leverage good partners in terms of building out our AI capabilities. And then the third pillar of it is really our own agents and the agentic AI.

56:02And what is it that we specifically can build inside Allspring that will help us answer very specific questions associated with our own workflow and our own clients and trying to invest very specifically in business cases there. either in any of those scenarios though you need to be able to put the business issue and and the technology you need to be able to be able to translate between the two if you want to be effective with it and i i feel compelled to ask you a question about culture not only because you were running a wealth management shop right in the middle of pandemic but you've talked about the importance of culture and how significant it is for there to be a unifying philosophy for a firm.

56:51Tell us a little bit about the culture of Allspring and how do you maintain that? So first of all, and what our cultural surveys have conveyed to us is that the client centricity, the client focus at Allspring is so high. I mean, it's everything we do is, what is in the best interest of the client? And I think if you have that as your North Star from a cultural perspective and as a fiduciary, that means you're going to do the right thing. And that then creates a lot of pull through, whether it's in risk management or in client servicing, that all is really meaningful. Two, we have a nice culture.

57:34I think being positive, optimistic, nice to each other is really important. You want to build camaraderie, especially when you're building a new organization. There are a lot of difficult things we have we had to tackle internally and that we're looking to build together. So camaraderie and focus is really, I think, important. And then the third part of the stool to me is always this always be learning is this credible challenge culture, right, which is very important where we can all sit around the table and not agree. That's the beauty of investing. That's the beauty of any diverse set of people is that you're going to get differences of opinions.

58:16And we should be able to share those opinions, debate those and get to a conclusion and then move forward. But you have to have credible challenge. You have to have it public and in the room, not in the conversation after the conversation. And so that's something that we're really focused on as we're bringing these different parts of Allspring together to work more closely is everyone has a voice and a seat at the table to express their perspective. It doesn't mean you get what you want, but we want to hear it because that will help us make better decisions for our clients. Incredible challenge.

58:52I like that phrase. So last question before we get to our favorite questions. What do you think investors are not talking about but should be? Could be an asset or a geography policy. What's out there that just isn't getting enough attention? So AI is amazing in one way. But the other part of AI that I think has not gotten a lot of conversation yet is how much energy it uses. Oh, really? And the need for the energy grid. there's a lot of infrastructure build that's going to have to happen for the dream of AI to be successful. And if we aren't able to catch up our energy infrastructure, then some of the dream of AI is going to be tampered simply because we don't have enough energy to run it.

59:35And individual consumer bills are going to go through the roof, which is not going to be palatable either. So to me, it's energy around AI needs more debate and discussion. Yeah. And it's already happening. We're already seeing pockets of energy bills going through the roof. All right. Let's jump to our favorite questions that we ask all of our guests, starting with mentors. Who are your early mentors who helped shape your career? So one of my earliest mentors was that Tommy Hilfiger woman named Kathleen Gannon and another woman named Lynn Shanahan. They're just two powerhouse women early in my career who made me but helped me believe in myself and my capability set the other can i shift the question quickly what i like to talk about is my board of directors which is a concept of that as as you work through your career you should be aware of the people that you're engaging with and how they can help you make um good decisions in totality around your life so you're not referring to your corporate board of directors personal personal board of directors i love that so When I was a young mother, I needed other young mothers to be a part of my board who could help me work through the challenges of work and rearing young children.

1:00:48As you progress in your career, some of them have been on my board forever. My parents, my siblings are always available to me. But I have people that I've grown up with who have taken very different career arcs, but are really good with people or really good with financials or really good with strategy decisions. And who can I look at outside of my, you know, people that I work with who provide all of that to me? But now I have outside counsel and know that people come in and off that board depending on the phase I am in my own life. And so how do I leverage? So now I'm trying to build a better personal board of directors as a CEO saying, who are other people who have to experience these same sorts of experiences that I'm going through?

1:01:32And how can I build relationships with them to help me learn and grow and gain more so I can be more value added? Really interesting. Let's talk about books. What are you reading now? What are some of your favorites? I love historical fiction. I'm reading Trust right now by Hernan Diaz, I think is the last name. If I got that wrong, you can edit it out. It's about the Pulitzer Prize. It's about the roaring 1920s. It's four disparate views. And it shows how people can believe their own narrative of if they're adding good to the world. So it's like a robber baron is in it. There's people who are involved in the evolution of what's happening, and some of them view that what they're doing is good for society when in reality the society – we went through a Great Depression as a result of it.

1:02:25Is that historical fiction or historical nonfiction? That's an interesting view of it. But it's fun to read, and it's written by an author. It's writing in four really distinctive voices too, so I enjoy it. Huh. Sounds interesting. What about entertainment? What are you either watching or listening to these days? What are you streaming? So when I am just winding down, I like a good hang with Amy Poehler. I want her to be my friend. I want most of the people on that show to be my friend. She just brings such energy and positivity and humor to it that it's always a good one to listen and wind down to.

1:03:06And then TV-wise, I just watched Stranger Things with my children when they were back home from break. And I love Stranger Things because I'm literally the age of those kids. Like, in the show, I'm like, this is my, I'm like watching my youth play back to me, riding my bikes, building forts. My parents had no idea where we were. Thankfully, we didn't have any Demogorgons after us. But, like, it's just, it's super fun, nostalgic. nostalgic, and then a great storyline as well of teamwork and perseverance and fight and all that good stuff. That's next up in my queue. Our final two questions. What sort of advice would you give to a recent college graduate interested in a career in, it doesn't matter, fixed income, investing, in finance?

1:03:53One is network, network, network, network. I got my first job because I I was trying to get a different job. I was talking to someone to make another introduction and ended up getting a job with that person instead. So you never know, you really have to lean into meeting people and being open to where the conversation takes you. And two, what's different now versus when I was growing up in it is there's so much information available. With this podcast, there's so many places to learn and be informed. So really take control of your career and always be learning and find the area that is most interesting.

1:04:32If you lean towards equities, lean towards equities. If you lean towards fixed income, but teach yourself. Don't expect someone to teach it to you. And our final question, what do you know about the world of investing today? Might have been useful 25 or 30 years ago when you were first getting started. This is true for the power of compounding. That comes up all the time. Every time. And you just don't see it when you're younger. You just don't understand it when you're younger. And investing consistently, dollar averaging through the good times, through the bad times. If you have a consistency approach, you can build a long-term durable portfolio.

1:05:10Thank you, Kate, for being so generous with your time. Thank you for having me. My pleasure. We have been speaking with Kate Burke. She's the CEO of Allspring Global Investments. If you enjoy these questions, well, be sure and check out any of the 600 previous discussions we've had over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you get your favorite podcasts. And be sure to check out my new book, How Not to Invest, The Ideas, Numbers and Behavior That Destroys Wealth and How to Avoid Them at your favorite bookstore. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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