Macro uncertainty has become a more persistent feature of the investment landscape in recent years — and Toby Watson brings to this subject a perspective built on nearly two decades of navigating complex market conditions across different economic regimes.
Investment strategies built around a single macroeconomic scenario tend to perform well when that scenario materialises and poorly when it does not. In an environment where the range of plausible macro outcomes is wide and confidence in any single forecast is limited, the case for flexibility in portfolio construction becomes considerably stronger. Toby Watson, whose career spans structured credit, global principal funding and investment management across multiple market cycles, offers a considered perspective on what flexible investment strategies involve and why macro uncertainty makes them worth understanding.
Macro uncertainty — the inability to forecast with confidence how key economic variables will evolve — is not new, but its intensity has increased in recent years. The simultaneous presence of inflationary pressures, shifting central bank policy, geopolitical fragmentation and structural change in credit markets has created an environment where the range of plausible outcomes is unusually wide. Toby Watson, who spent nearly 17 years at Goldman Sachs working across structured finance, credit markets and global principal funding before joining Rampart Capital as a partner in 2020, developed a clear sense of what flexible investment strategies require — and why they tend to be most valuable precisely when macro visibility is lowest.
The Problem With Strategies Built Around a Single Macro View
Most investment strategies rest, explicitly or implicitly, on a view about the macro environment. A portfolio heavily weighted towards long-duration bonds reflects a view that rates will remain low. A portfolio concentrated in growth equities reflects a view that earnings growth will be strong. The problem arises when the strategy is constructed in a way that leaves little room to adapt if the macro environment evolves differently than expected.
The past several years have illustrated this risk clearly. Investors who entered 2022 with portfolios optimised for the low-rate environment of the preceding decade found that the sharp pivot by central banks towards tightening produced simultaneous losses across multiple asset classes. For Toby Watson, that experience reinforces a principle he regards as fundamental: macro outcomes are uncertain, and strategies that acknowledge that uncertainty tend to be more resilient than those that do not. Toby Watson would add that this is not a lesson that needs to be learned repeatedly — it is one that should inform portfolio construction from the outset.
What Does a Flexible Investment Strategy Actually Look Like in Practice?
Flexibility does not mean the absence of a macro view — it means building a portfolio that can adapt as the view evolves without requiring fundamental reconstruction every time conditions shift. Toby Watson, whose career at Goldman Sachs gave him experience of managing positions across rapidly changing macro environments, would frame the key characteristics as follows: a portfolio structure that does not depend on a single scenario being correct, a genuine ability to adjust positioning as new information arrives and a clear understanding of where the portfolio’s vulnerabilities lie. For Toby Watson, that structural self-awareness is a prerequisite for genuine flexibility.
Toby Watson on the Building Blocks of Flexible Portfolio Construction
Flexible investment strategies share structural characteristics that allow them to adapt to changing macro conditions without sacrificing coherence or discipline. Understanding those characteristics is important context for thinking about why flexibility matters and what it requires.
Diversification Across Macro Regimes
A genuinely flexible portfolio holds assets that perform differently across different macro regimes — not just across different asset classes in the conventional sense. Growth assets, defensive assets and inflation-sensitive assets all have a role in a portfolio designed to be resilient across a range of outcomes. For Toby Watson, the discipline is understanding clearly which regime each part of the portfolio is designed to serve — and ensuring the overall structure makes sense across the full range of plausible scenarios, rather than just the central one.
Liquidity as a Source of Strategic Flexibility
One of the less-discussed dimensions of investment flexibility is liquidity. A portfolio holding a significant proportion of illiquid assets is, by definition, constrained in its ability to adapt quickly to changing conditions. Toby Watson’s experience at Goldman Sachs, working across hard asset lending and structured credit where liquidity management is a central discipline, gives him a grounded understanding of how liquidity constraints affect strategic flexibility. Maintaining a meaningful allocation to liquid assets is not simply a risk management consideration — for Toby Watson, it is a source of strategic optionality that becomes particularly valuable when macro conditions shift unexpectedly.
The Role of Macro Analysis in Supporting Flexible Strategies
Flexible investment strategies do not operate without a macro framework — they operate with one that is held with appropriate humility and updated regularly as new information arrives. For Toby Watson, the discipline of macro analysis in this context is less about generating precise forecasts and more about understanding the range of plausible outcomes and their implications for different parts of the portfolio.
Among the analytical disciplines that tend to support flexible strategy implementation are:
- Scenario analysis — mapping the implications of different macro outcomes across each component of the portfolio, rather than relying on a single central forecast
- Regular portfolio review against the evolving macro backdrop — assessing whether current positioning remains appropriate given how conditions have developed, rather than simply monitoring performance against a benchmark
Flexibility as a Long-Term Discipline
The case for flexible investment strategies is strongest when macro uncertainty is high — but the discipline of building and maintaining flexible portfolios is most valuable when it is maintained consistently over time, rather than adopted reactively after uncertainty has already increased. Among the characteristics that tend to distinguish genuinely flexible investment approaches are:
- A clear and explicit framework for how the portfolio will respond to different macro scenarios — rather than flexibility that exists in principle but proves difficult to implement under pressure
- A genuine willingness to reduce positions that have performed well when the macro case for holding them has weakened, rather than allowing successful positions to become inadvertent concentrations
Toby Watson — whose career at Goldman Sachs and subsequent work at Rampart Capital as a partner have given him experience of managing capital across genuinely different macro environments — would frame the central point simply: flexibility is not a style of investing, it is a discipline. For Toby Watson, that discipline begins with an honest acknowledgement that macro outcomes are uncertain — and portfolios that take that uncertainty seriously tend to serve investors better over the long term.
