Hiba Mouallem:

Hello, and welcome to this weekly podcast by BNP Paribas Wealth Management.

I’m Hiba Mouallem, Investment Strategist. And I’m joined today by our expert Sophie de La Chapelle, Global Head of Strategic Asset Allocation Advisory at BNP Paribas Wealth Management. Hello Sophie.

Sophie de La Chapelle:

Hello Hiba.

Hiba Mouallem:

Sophie, so to start, could you please explain to us what strategic asset allocation is all about?

Sophie de La Chapelle:

Strategic Asset allocation aims to optimize return versus risk in a portfolio, with a long-term view (5 to 10 years), by adjusting the weight of each asset class, according to an investor risk tolerance, performance objectives, market knowledge, and investment horizon.

So, at its core, strategic asset allocation answers a very simple question: where should your capital be placed? In equities, bonds, cash, real estate, private assets, alternatives? But behind that very simple question, there is a deeper one: What kind of financial journey are you willing to embrace?

A good allocation is not the one that looks good on a spreadsheet, but rather the one that fits the investor’s objectives, constraints, personal preferences, investment period and family circumstances.

Strategic asset allocation is not about predicting the future. It’s about positioning your portfolio intelligently for several scenarios in the future.

Hiba Mouallem:

Before we go into more detail, what is the purpose of strategic asset allocation? Is it simply a discussion about investing?

Sophie de La Chapelle:

Yes, but not only. Of course, we are talking about investing, and more specifically about strategic asset allocation. But I think that the real subject is broader. When I meet a client, there is also a conversation about decision-making and about the consequences of financial decisions over time. Wealth management isn’t about a single successful decision. It’s about remaining consistent over the long term.

Many people think of wealth as something static: a figure, a portfolio, a balance sheet. But in reality, wealth is dynamic. It moves with markets, with liquidity needs, with family events, and sometimes with emotions.

And when there is immense wealth at stake, each decision carries greater consequences. So, our aim is to offer a framework, a way of thinking about risk, performance and time with greater clarity.

Hiba Mouallem:

You mention risk; however, risk is not always where people think it is. Can you elaborate more on that?

Sophie de La Chapelle:

Indeed, risk is not always visible. People often look at a portfolio and focus on what it includes, but the more important question is how everything interacts.

Two portfolios may look very different on paper and still carry almost the same level of risk or two portfolios may look similar yet behave very differently when the markets are under stress. So what matters is not just the list of assets, but the allocation, the interactions and the correlations underneath.

Finally, risk is often hidden in the structure of the portfolio, and that’s why it requires both tools and expertise to identify and measure it.

Hiba Mouallem:

On another hand, diversification is a buzzword that we are hearing today. What does it really mean?

Sophie de La Chapelle:

Diversification is not simply about owning different assets. The key is to own assets that don’t behave in the same way, at the same time, for the same reasons. That’s why correlation matters so much.

A portfolio may appear to be diversified because it contains several lines. But if all those lines depend on the same economic environment, the same rate regime or the same market sentiment, then diversification may simply be an illusion. Real diversification is about balance, and not only a nice to have.

Hiba Mouallem:

Sophie, if you had to identify the single most important principle in portfolio construction, what would it be?

Sophie de La Chapelle:

I would say the foundation is strategic asset allocation. More than 75% of a portfolio’s risk is driven by strategic asset allocation. That’s extremely powerful, because it means that the long-term structure matters more than the individual security the investor buys or the perfect timing of an entry point.

The objective is rarely just to maximize returns the following year, especially when substantial family wealth is at stake. It is to preserve flexibility, protect purchasing power, manage liquidity, support transmission and continue to capture growth. So, the real question is not, “What is the best investment today?” but rather “What strategic asset allocation can preserve and grow your wealth beyond tomorrow?”

Hiba Mouallem:

So, to go a bit more into details, does your approach of asset allocation differ between each client?

Sophie de La Chapelle:

When a substantial amount of wealth is at stake, standard solutions are rarely enough. A family may have listed assets, private businesses, real estate, liquidity events, loans, concentrated exposure to one or a few asset classes, have an art collection, and be involved in philanthropy. In addition, they may have cross-border constraints and transmission objectives.

So, the question is not only, “What should we buy?” It is, “How does the entire wealth allocation work together?”

That’s why a tailored approach matters. We’re not only looking at an isolated portfolio. We are looking at the overall wealth.

Hiba Mouallem:

Sophie, you mentioned earlier that the allocation must be adapted to the investor’s specific needs, objectives and so on. How tailormade is your analysis, in reality?

Sophie de La Chapelle:

It is very personalised. I have been advising clients for almost 15 years and I can tell you that every allocation is unique! Before asking the clients what they want their portfolio to achieve, we need to ask them what their wealth is intended for. For example, to provide security, provide financial independence, finance a project, provide a revenue source to future generations. The answers clients give me are never just financial.

So that’s why knowing & understanding the investor is the essential first step. Risk tolerance, time horizon, liquidity needs, sophistication, legal and fiscal constraints, family context are, all shaping the best allocation. The wrong allocation is not only one that loses money. It is also one that does not fit the person or the purpose behind the capital.

Hiba Mouallem:

So now the question is: how do you build a long-term approach for a client without knowing what the future holds?

Sophie de La Chapelle:

Hiba, in a word: by working with disciplined assumptions rather than bold certainties. In strategic asset allocation, we use long-term capital market assumptions, in other words, long-term expected returns and volatilities. These are not forecasts in a narrow sense. They are not claims about exactly what will happen next year or in 10 years. They are structured frameworks for decision-making.

That distinction matters enormously. A forecast is, “This is what will happen.” An assumption is, “This is the framework within which we can build coherent decisions.” And when you are managing long-term wealth, discipline is usually more useful than overconfidence.

The objective is not to react to every move in the markets. It is about achieving a stable performance across several environments or contexts.

Hiba Mouallem:

You speak a great deal about discipline. Why is it a central idea in wealth management?

Sophie de La Chapelle:

This is a very good question Hiba.  Because markets make a lot of noise, and human behaviour is often the weak point in investment decisions. Investors tend to chase what has been performing well, to sell when fear is high, and to overestimate their tolerance for risk before they have experienced volatility.

That’s why a robust, tried and tested process matters. A strategy does not need to give perfect answers. What it needs to provide is an anchor. And for long-term wealth, an anchor is often more valuable than a prediction.

The markets sometimes reward smart investors. But they always reward discipline.

Hiba Mouallem:

Lately, private markets have become increasingly present in large portfolios. What can you tell me about this asset class?

Sophie de La Chapelle:

Yes, you’re right.  Private assets can play a very meaningful role, not because they sound exclusive, but because they may offer different sources of return and diversification. That said, they also come with less liquidity, more complexity and a long-term investment horizon. So, they are not suitable for every investor.

But for the patient investor, private markets assets can be highly relevant. Wealthy investors often have the ability to think beyond the short term.

Hiba Mouallem:

And are there investors whose behaviour or asset allocation philosophy you find particularly instructive?

Sophie de La Chapelle:

Yes, and not because they should be copied mechanically of course, but because they illustrate a mindset. If you look at major US endowments funds or sophisticated family offices, what is striking is not just what they own. It is how they think. They think in decades. They accept complexity when it serves diversification. They balance liquidity, return and risk with discipline. And they are prepared to be patient when their strategy requires it.

This is a very relevant lesson for families, because family wealth is also long-term capital. It often needs to support more than one generation. And the strongest portfolios are rarely the most exciting. They are the ones that survive over time.

Hiba Mouallem:

In practical terms, when do families most need this kind of perspective on their strategic asset allocation?

Sophie de La Chapelle:

In general Hiba, all clients can have a strategic asset allocation review of their wealth. However, we usually meet families when they are in a transition period: the sale of a company, a large inheritance, a liquidity event, a concentrated exposure, the desire to consolidate assets held with several banks, or when they want to prepare the next generations. In these moments, speed is rarely the answer. Clarity is.

To make the best decisions in view of your situation, profile, context, several essential steps are unavoidable. Understanding clearly how your overall wealth is currently allocated across asset classes, understanding what the major return and risk sources are, and finally, defining what your target strategic asset allocation should be.

Hiba Mouallem:

So finally, if you had to leave the audience with a few essential ideas, what would they be?

Sophie de La Chapelle:

I would give three ideas:

• First, know yourself as an investor: your objectives, your investment horizon, your risk appetite.
• Second, think long term, because significant wealth is rarely managed successfully with short-term reflexes.
• And third, diversify intelligently, not by accumulating assets, but by building a coherent strategic asset allocation.

I would add one note of caution: whenever an investment appears too good to be true, it usually deserves a second look. Return and risk always go together. A return without risk is usually not a return, it is a misunderstanding.

Finally, I will close with a quote by Benjamin Graham, an American economist, investor and professor renowned as the “father of value investing”.   He said that “the individual investor should act consistently as an investor and not as a speculator”. I think this statement remains true today. Wealth is not preserved by brilliance alone. It is preserved by judgement, humility, discipline over time.

Hiba Mouallem:

On those words, I want to thank you very much Sophie for all this information.

And I want to thank our audience for listening to this podcast. If you wish to benefit from our discretionary Strategic Asset Allocation Advisory services, Strategic-A, please contact your Relationship Manager.

And please don’t forget to like, share, and subscribe to our weekly series of podcasts. Until next week, goodbye.