Goldman Sees Slowdown Coming, Recession Not Certain

Goldman Sees Slowdown Coming, Recession Not Certain

‘Passive doesn’t work,’ and alternative investments may do better, execs say.

Reviewed by: Shubham Saharan
Edited by: Shubham Saharan

Goldman Sachs Group, Inc. experts are betting on alternative investments—private equity and hedge funds—as the U.S. heads toward an economic slowdown. 

A flagging economy, and not a recession, was emphasized at the Goldman Sachs Investment Outlook for 2023 Media Roundtable on Monday. Rising interest rates from a hawkish Federal Reserve, heightened geopolitical risks and tumbling markets are heightening recession fears as many, including a Bloomberg Economics model, project a 100% chance of recession. 

Panelists from Goldman, which manages $25.5 billion in exchange-traded fund assets, said a recession isn’t a sure thing. “A recession is not fully baked yet, but a slowdown, definitely,” said Ashish Shah, Goldman’s chief investment officer of public investments.  

Pointing to the movements from the Fed during the onset of the pandemic, he noted that “we have experienced the perfect policy storm and it is very unlikely that we end up seeing a repeat of this perfect policy storm.”  

Passive investing—a tried and true method of letting one’s portfolio rise and fall with broad indexes like the S&P 500—is probably not the way to go as volatility jumps and markets gyrate, panelists said.  

“We need to be much more dynamic, because the world is not in equilibrium, and it’s going to take some time to reach the next equilibrium,” said Maria Vassalou, co-chief investment officer of multi-asset solution at Goldman Sachs Asset Management. “Being passive doesn't work anymore.”  

Actively managed funds have gained significant traction in the past year, drawing upward of $65.8 billion, or almost 15%, of the more than $453 billion pulled in by ETFs in 2022, according to data. According to Morningstar, 60% of new ETFs that have launched over the past two years have been actively managed, while about one-third, or 934, of all ETFs are actively managed.   

Alternative investments, including asset classes like private equity, private debt and hedge funds should be considered as ways to diversify portfolios, Vassalou said. 

Alternative ETFs have widely outperformed broader markets, with the Simplify Interest Rate Hedge ETF (PFIX), the KFA Mount Lucas Managed Futures Index Strategy ETF (KMLM) and the iMGP DBi Managed Futures Strategy ETF (DBMF) soaring 91%, 33% and 24% year to date, respectively, according to data. Meanwhile, the SPDR S&P 500 ETF Trust (SPY) has dipped 15% during the same period.  

“What drove performance in the last 10 years will be different for what drives performance going forward. So merely looking at track records, the top quartiles of the past decade may not be enough,” said Greg Olafson, co-president of the alternatives business at Goldman Sachs Asset Management. 

“I think investors in this asset class are going to have to be much more sophisticated,” he added. 


Contact Shubham Saharanat[email protected]

Shubham Saharan is a markets reporter at Before joining the company, she reported for Bloomberg and the Financial Times. Saharan is a graduate of Barnard College of Columbia University.