Throughout 2025 the portfolios managed by Kindred have held up well despite sweeping volatility in markets. However, in response to the continuing shifts in economic and geopolitical conditions, we have made several important adjustments to your portfolios designed to strengthen long-term outcomes and manage potential risks.
At the core of this shift—among other contributing factors—is the recent weakness of the U.S. Dollar. Ongoing changes in tariffs and trade policy, combined with emerging economic concerns, has prompted capital to flow toward international markets. Historically, such conditions have often coincided with periods where international assets outperform their U.S. counterparts:
Source: Refinitiv DataStream, Russell Investments. As of December 2020. Returns are based on 2 years annualized return for USD and 2 years annualized return differential for MSCI USA les MSCI EAFE.
We are reducing our positions in U.S. Bond Index, Mortgage-Backed, and Short-Term Corporate Bond Funds. The proceeds are being reallocated to an actively managed Global Bond fund, opening broader opportunities across different fixed income sectors. We believe this shift offers the potential for higher returns while also enhancing geographic and geopolitical diversification, both critical in today's market environment.
We are also slightly reducing the portfolio’s focus on U.S. equities in favor of two international funds, allowing for a more globally diversified equity exposure. Even with the year-to-date out-performance of international markets vs the U.S., valuations abroad are much more in-line with their historical averages and remain attractive. While here domestically, valuations are still very much elevated:
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets – U.S. Data are as of March 31, 2025.
In general, when market valuations are elevated, they tend to be more sensitive to negative news—such as trade disruptions or slowing growth—which contributes to the volatility we’ve seen. In contrast, international markets, with relatively lower valuations and increasing capital inflows, appear better positioned for growth. Their lower valuations may also offer a degree of insulation from headline-driven volatility.
In tandem with the reduction of U.S. equity exposure, we have replaced our large-cap international manager with a new manager we believe is better equipped to navigate a shifting economic and geopolitical landscape. In today's environment, the ability to adapt across global markets is essential, and we are confident this change better positions the portfolio for the road ahead.
Finally, the remaining part of the U.S. equity proceeds have been allocated to an existing position in your portfolio — a manager specializing in small- and mid-cap international companies. Their active, hands-on approach is one we believe is particularly well-suited to finding opportunities and managing risk during periods of global change.
At the heart of these updates is our belief in the importance of diversification. During periods of market turbulence, diversified portfolios are better able to withstand shocks, reduce overall volatility, and uncover new avenues for growth. Spreading investments across different asset classes, regions, and strategies not only helps protect capital but also provides flexibility and resilience in a constantly changing world.
As always, we appreciate your trust and are committed to positioning your portfolio thoughtfully for the future. If you have any questions about these updates, please reach out.
Disclosure: A diversified portfolio does not assure a gain or prevent a loss in a declining market. There is no guarantee that any investment strategy will be successful or will achieve their stated investment objective.