From Traditional Financial Institutions to Multi-Asset Management: Colin Gloeckler’s Practical Reflections on Crisis Cycles
By the fourth quarter of 2020, following the systemic shocks earlier in the year, U.S. financial markets had moved into a relatively stable yet still fragile state. The pandemic continued to fluctuate, and economic recovery remained uneven across sectors. However, supported by ultra-loose monetary policy and expectations of fiscal stimulus, capital markets had clearly rebounded from the extreme panic stage. In this cycle, the real shift was not simply whether markets had recovered, but how understanding of three core variables—risk, liquidity, and asset correlations—was being systematically reshaped.
At this stage, a review of the 2020 crisis cycle began in earnest. The shock was not treated as a random, isolated event but as a stress test for existing investment frameworks. The problem was not concentrated in the decline of any single asset class; rather, it arose from overreliance on historical correlations and linear assumptions. In extreme environments, these assumptions quickly fail, magnifying risk exposures across portfolios.
Within traditional institutional research and practice, diversification and disciplined processes have always been fundamental principles of risk management. Yet, the market behavior of 2020 pushed these principles to their limits. When equities, credit instruments, and even some traditionally defensive assets experienced simultaneous pressure over a short period, merely increasing diversification was insufficient to hedge liquidity shocks effectively. This reality shifted the focus in multi-asset management: from simply increasing the number of holdings to understanding how different assets behave under stress and how correlations evolve in extreme conditions.
Liquidity emerged as a critical factor in asset allocation during the crisis. In highly volatile environments, whether a transaction can be executed at a reasonable price often proves more decisive than the intrinsic long-term value of the asset. Consequently, liquidity priorities were elevated to stand alongside expected returns in decision-making, no longer treated as a secondary constraint. This adjustment marked a key step in evolving from a single-asset perspective to a more mature multi-asset management framework.
Policy actions also played a crucial role in this crisis. The Federal Reserve’s rapid response altered how markets priced the bottom of risk assets. However, policy was not seen as a substitute for risk management. Within the allocation framework, it was more appropriately viewed as an exogenous constraint: its role is to reduce the probability of tail events or mitigate their intensity, rather than eliminate uncertainty itself. Recognizing this, multi-asset management must maintain sufficient flexibility and adaptability to respond to repricing risks under different policy scenarios.
The crisis cycle highlighted clear differences between institutional and non-institutional behaviors. Institutional management emphasizes process, accountability, and sustainability, while the true test comes when sentiment is highly volatile and information is noisy. Experience showed that long-term performance hinges less on successfully timing rebounds than on avoiding irreversible structural mistakes during the most chaotic stages. Once such mistakes occur, subsequent gains are often merely a passive recovery of prior losses.
As of November 2020, U.S. markets remained highly uncertain. Divergences persisted across pandemic developments, policy pacing, and economic recovery paths. At this stage, the focus of allocation was not on short-term directional calls but on extracting long-term lessons for asset allocation logic from the crisis. Emphasis on liquidity management, dynamic correlation monitoring, and portfolio resilience gradually became the foundation for more repeatable multi-asset management practices.
In the latter stages of the crisis, markets are more easily influenced by short-term performance, potentially delaying necessary structural adjustments. Beyond the outcome of any single trade, the critical priority is the ongoing refinement of understanding, enhancement of systems, and strengthening of portfolio and process robustness. Managing risk through mechanisms, boundaries, and disciplined execution—rather than relying on isolated judgments or sentiment—is gradually solidifying as a hallmark of mature institutional investment practice.
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