The transcript from this week’s, MiB:Lori Heinel, Global Chief Investment Officer at State Street Investment Management, is below.
You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube (video), YouTube (audio), and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
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An Interview with Lori Heinel Executive Vice President & Global Chief Investment Officer, State Street Investment Management Hosted by Barry Ritholtz · Bloomberg Radio
ANNOUNCER (00:00:02): Bloomberg Audio Studios — podcasts, radio, news.
BARRY RITHOLTZ (00:00:08): This week on the podcast — another banger. Lori Heinel is Executive Vice President and Global Chief Investment Officer at State Street Investment Management. She oversees $5.7 trillion in assets, and that’s as of the end of 2025 — obviously the market has appreciated since then. She oversees index funds, ETFs, active strategies, alternatives, multi-asset solutions, and really drives an incredible organization. I thought this conversation was fascinating, and I think you will also. With no further ado, my interview with State Street’s Lori Heinel.
Lori Heinel — welcome to Bloomberg.
LORI HEINEL (00:01:00): Thanks for having me.
BARRY RITHOLTZ (00:01:02): So let’s start out with your early career and your academic background. You studied religion at Princeton before getting your MBA at Carnegie Mellon. What was the career plan with religious studies?
LORI HEINEL (00:01:17): Well, that’s a long story, but I’ll try to keep it short. Bottom line is I went to Princeton because I wanted to get more of a liberal arts education, and what I realized pretty quickly is it didn’t really matter what I majored in — I could major in economics, I could major in history. And I happened to take a religious studies course, which I just absolutely adored. And from a personal standpoint, I had a number of people in my family who were incredibly staunch practicing Catholics or other kinds of Christian religions, and they would do things that, to me, were quite odd at times. And so I thought, from a personal perspective, it would be an interesting way to get more insight into what was going on with some of these family members. So the short answer is that I decided to pursue that as an academic undertaking.
And then I got to a place where I needed to think about a career. My first thought was, well, geez, maybe I’ll go to law school. Then I realized I needed to make some money. So my second thought was, well, geez, there’s this analyst program thing that they have on Wall Street — surely they recruited at fine institutions like Princeton. And lo and behold, that catapulted me into what became a really long career in finance, by just moving from an institution like Princeton into an analyst program.
BARRY RITHOLTZ (00:02:34): So let’s move forward. You started at Credit Suisse First Boston, where you ran equity and fixed income sales, then you ended up working in trading at Parker Hunter in Pittsburgh. Am I getting that right?
LORI HEINEL (00:02:48): Well, I didn’t start by running anything. I started out as a two-year grunt, right? I think most of your listeners know what these analyst programs look like. I was effectively in investment banking for public finance, so we worked with hospitals, airports, municipal authorities. But I did all the grunt work, if you will — all the numbers-crunching behind the scenes, helping to run the deal models and things of that nature. And I just found that fascinating. I thought it was really amazing to connect what’s going on in the world with how finance supports that.
And so I did that for a couple of years, and at the end of the two-year program, you’re typically expected to go back to business school. Well, I still needed to make money, because I had student loans to pay off, so I decided I wanted to stay. And that led me to an opportunity on the trading desk at First Boston, which really was an incredible opportunity, because that was my first real introduction to markets.
BARRY RITHOLTZ (00:03:41): So what did working on the trading floor teach you about markets?
LORI HEINEL (00:03:46): So many things. I think the first and most important thing is I was there during the ’87 Black Monday crash, and I happened to be working in fixed income. So it was a really interesting day, because of course, at that time, the First Boston trading floor was on two different levels — all the fixed income was on one level, all the equities was on a different level. And we went dead silent in the first part of the day, and suddenly people were starting to realize what was happening, with the market crashing 20-plus percent — 22 percent —
BARRY RITHOLTZ (00:04:18): Yeah.
LORI HEINEL (00:04:18): — over the course of a day, which of course today we’ve got circuit breakers that don’t let that happen anymore. But then, all of a sudden, towards the end of the day, things in the fixed income market started going crazy, because now you had the Fed coming out — Alan Greenspan saying, we’re going to go ahead and provide liquidity, we’re going to make sure that there’s active engagement to forestall any further recessions or other things that might be caused by this kind of major crash. So I guess the first lesson I learned was that there are winners and there are losers in every market event, and it’s better to be on the winning side. I happened to be, at that time, on the bond side, which was the big winner that day. But then I think the other thing that I learned was that you have to be really careful about things like moral hazard, because we became accustomed in that moment to this idea of the Fed put. And I think many years later, we are still wondering about what that really does mean in terms of the reaction function.
BARRY RITHOLTZ (00:05:17): So take me back to 1987 for a second. I was in grad school at the time, but I can only imagine the fixed income trading floor. Were people sitting around with their feet on their desks, sipping lattes? Or did anyone say, let’s go down to the equity floor and look at the chaos and carnage?
LORI HEINEL (00:05:38): Well, the first thing we were doing — we were sitting there doing the crossword puzzles. There were lots of days like that. I was in muni bond trading, so it was a little bit of trade-by-appointment. Very sleepy at times. Obviously, fixed income markets got a lot more interesting throughout my career, but at that time it was not uncommon: in the early morning, we’d do a few trades, and then we’d have a little break, we’d go get some lunch, we’d do a little crossword puzzle. So that day was different. We had our normal morning, but by the time you got to the early afternoon, it’s like, wow, something’s really happening here. And you started to see major moves in bond markets, including in the muni market. And so suddenly it was very different — more chaotic, even on our floor.
BARRY RITHOLTZ (00:06:19): So money was flying out of equities — did it roll right into just safe harbor in bonds?
LORI HEINEL (00:06:24): Well, cash was the big place. So we had these variable-rate demand note offerings, which were seven-day resets, and so they acted like a form of cash. We saw massive demand almost immediately in that particular market, because it was a cash substitute — but with the tax advantages.
BARRY RITHOLTZ (00:06:42): What was the yield back in ’87? Oh gosh — seven, eight, nine percent?
LORI HEINEL (00:06:46): Those would have been in the sevens, probably — because you look at the spread, seven tax- —
BARRY RITHOLTZ (00:06:49): Free.
LORI HEINEL (00:06:50): On a tax-free basis.
BARRY RITHOLTZ (00:06:51): Exactly — that’s 10, 11, 12 percent. Wow. Amazing. So after Credit Suisse, but before State Street, you had a couple of really interesting positions. You were head of investments at Citi Private Bank, you ran global investment products for SEI, you led new business development at Mellon Financial, and you were chief investment strategist at OppenheimerFunds. What’s the through-line — what’s the common thread in all of those?
LORI HEINEL (00:07:20): Well, some of those were personal. At the time that I was in New York, I met my then-to-become husband — we’ve since divorced, but at the time we were engaged — and we ended up moving to Pittsburgh. He got a job there, and so I followed him there. So Parker Hunter was really personal reasons — I needed to find something to do, totally different city. I had grown up in Pittsburgh, so in some ways it was a real blessing, because that’s where we ended up having our two children. And so it was great to have that support network at a time where I wanted to continue to work through my early childbearing years, if you will.
And then after that, we consolidated on the East Coast, because we both realized — he was in finance as well; he stayed in investment banking — that we wanted to have more opportunities. And Pittsburgh’s a great city for many, many reasons, but it’s not a place where you have a lot of opportunities in finance. So we ended up settling in Philadelphia. So once again, I was on the prowl for a role, and that led me first to Mellon Financial, where I did business development and started from scratch, built a book over a couple of years, and then got very fortunate — recruited by a headhunter to go to SEI Investments. And I would say that that was where I really got the bug in asset management.
SEI has two primary business lines — or at least at the time they did. They were a back-office outsourcing firm, and then they also had a pretty meaningful investment management arm, which was an outgrowth of their early consulting days. And so I was hired to basically build the asset management franchise for their community and regional banking division. I would travel around the country, meeting with trust officers and financial advisors and other kinds of practitioners at these small regional and community banks, and encouraging them to transition their business from do-it-themselves — buying individual stocks and bonds — onto a platform like SEI. So for me, that was a really eye-opening experience. One, it just really opened up my eyes to all of America — I traveled literally around the country — but also just looking at the different needs that these types of clients had and how we could serve them.
BARRY RITHOLTZ (00:09:31): So you’re starting with the client’s objectives and perhaps their future liabilities. You have to determine what’s the most efficient combination of vehicles and risk exposure. What’s that process like? And is that sort of the through-line of all these different positions?
LORI HEINEL (00:09:50): The major through-line of all the positions is that focus on the client first. Maybe if I can regress just a half a beat: one of my most formative experiences was when I was an investment banker at First Boston. We were working on a deal for the Arlington Airport Authority, and at the time they were doing what was called a pre-funding, where they were basically issuing new debt to pay for old debt and trying to reduce their debt servicing costs over time — a pretty common activity. And we kept running all these numbers, and we kept showing the director these amazing discounted net-present-value savings that she was getting from the deal. And every time, she would leave the room and say, this is not what I expected, this is not what I wanted, this is not the deal that I need to have happen.
And I’m the most junior person, running the numbers. We’ve got the VPs, the MDs, everybody else around the room — and they’re all men, turns out — and they’re like, she’s crazy, what’s wrong with this woman? We’re delivering amazing net-present-value savings. So I happened to run into her in the ladies’ room and said, you know, it would really help me if I understood better why this isn’t working for you. And it turned out that, statutorily, they could only keep the savings in the first year for the authority, and then every subsequent year’s savings would basically reduce the tax liens against the fees that they were collecting at the airport. So they didn’t actually get savings from anything after the first year. I was like, okay, got it — front-loaded. We’re going to front-load, and off we go.
So that taught me a lot of lessons. One: listen to the client. Don’t just think, because you’re the expert, you know all the answers — they might need something different that you haven’t thought of. And it also taught me that it doesn’t have to be the most experienced person in the room that’s going to have that insight, because it took me five minutes to figure out what we’d spent meeting after meeting trying to gel through. Nobody asked that question, right? Because they just thought they knew better — because every other client wanted max net-present-value savings, period. So that’s one of the big threads that went throughout my entire career: you’ve got to really listen. Sometimes the problem is not what you thought the problem was, and sometimes the answer, even though it’s not optimal, is the best answer.
BARRY RITHOLTZ (00:12:12): So how did you find your way to global CIO at State Street?
LORI HEINEL (00:12:16): Well, the good news is — once again, sort of another theme in my career once I got to more of a senior level — I mostly got recruited, because I would have exposure and I’d get sort of known in the industry. And so I got a call out of the blue from a headhunter. And at the time, I was very happy. I was living in New York City — I had actually gotten divorced by that point in time — was living in Jersey City and working in lower Manhattan. So I had a fabulous six-minute commute across the ferry, which I relished. But I felt like maybe I didn’t have the next step available to me at OppenheimerFunds, which of course is now part of Invesco.
And so I got a call, and they were looking for someone who would run their investment professionals more from the sales and commercial side — the people that they called portfolio strategists; some people know these people as client portfolio managers — but they also wanted somebody who could be groomed for other opportunities within the investment organization. And one thing led to another — did a little flyer up to Boston, had a couple of conversations. And what I really liked about what State Street had to offer at that point in time was that it was a very broad platform. They covered all asset classes. State Street, as you know, had a prime position in ETFs and indexing — this would have been 2014 — and while certainly those instruments were very widely available and adopted by investors, it was nothing like the ramp-up in terms of growth that we’ve seen over the last decade-plus. And so what I saw was a place where I could have the ultimate toolkit, working with the ultimate global client base, to solve problems for those clients using my expertise.
BARRY RITHOLTZ (00:14:06): And just as a point, State Street has the SPDRs — SPY, which is the biggest institutional ETF for the S&P 500, and the gold SPDR, GLD; obviously gold is way off its highs, but that’s another giant ETF. What is it like overseeing what really have become the standard-bearers for both index funds and ETFs?
LORI HEINEL (00:14:35): Well, look, there’s a lot of complexity, as you well know, to running ETFs. But one of the benefits is that it’s one large pool of capital, so you can run it as a single proposition, if you will — you have one account. So there’s definitely complexity there, but in some ways that’s more straightforward than the separate-accounts book of business that we manage for institutional clients, where literally every S&P exposure, Russell exposure, Agg exposure is going to be customized to that particular client. So what’s really interesting about our platform is that we have both these large-scale funds, if you will — ETFs — but we also have this massive separate-account management business, which we can deliver to institutional clients in a very price-competitive and very customized way.
BARRY RITHOLTZ (00:15:28): Really interesting. Coming up, we continue our conversation with Lori Heinel, Executive Vice President at State Street, discussing a day in the life of a global CIO helping to oversee $5.7 trillion in client assets. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.
BARRY RITHOLTZ (00:15:51): I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra-special guest today is Lori Heinel. She is Executive Vice President and Global Chief Investment Officer at State Street, where she helps to oversee $5.7 trillion in assets. So let’s talk a little bit about State Street. I recall way back when they launched SPY — I want to say that was mid- —
LORI HEINEL (00:16:15): Over 30 years ago.
BARRY RITHOLTZ (00:16:16): Mid-nineties, something like that — the first U.S. ETF. And they’ve been a pioneer of indexing and ETFs ever since. How do you look at the role of indexing in portfolios? How has this changed, not only over your tenure at State Street, but over your entire career?
LORI HEINEL (00:16:36): Well, I think the first thing I would say is that once upon a time, it wasn’t really possible for people to get index replication. That was the great innovation of something like SPY, where suddenly every individual investor could buy one security and effectively get the market. And for much of my career, particularly in the early part of my career, it was all about beating the market — let’s get the best active managers who could beat that index. And what you find, for decades now, is that in many markets, especially large-cap U.S., it’s really challenging to do that net of fees. And so I’ve thought for many decades now that this combination of index exposure — where it was really hard to find managers who could consistently outperform — coupled with maybe some satellite managers or specialist managers, or managers in other parts of the market — think emerging markets, small cap — adding your risk budget and your active management budget there, just made a lot of sense. So when I think about portfolio construction, it really is: I want to accomplish some sort of risk-based outcome for that client, but I also want to do it in a way that covers fees and provides opportunities for alpha, or outperformance, but does so in a measured way.
BARRY RITHOLTZ (00:17:53): So State Street saw record inflows in 2025 — I think this is the ETF and index business — $180 billion in net inflows, management fees up 13 percent. Where do you see the growth coming from in this space? I keep hearing indexing is over, ETFs have had their day — and yet, year after year, it seems to be the big winner.
LORI HEINEL (00:18:20): Well, I think there’s still lots of room for indexing to run, because if you think about places like fixed income, we’ve only started to scratch the surface relative to what you see on the equity side of things. So increasingly, we’re even seeing quote-unquote exotic fixed income — things like emerging market debt, things like high yield, which we’ve had index products for for quite a long time — become much more adopted by clients globally, because they see that as a great way to get access, again, to a market in a way that they can really understand the risk and manage it within the portfolio context. So I think there’s still plenty of room for indexing to run.
I think the other thing is we’ve seen a major shift in terms of the client segmentation, if you will. Once upon a time, the big investors were the large institutional investors — the defined benefit plans, sovereign wealth funds. Those investors are still important, but increasingly, the net incremental dollar is coming from the retail client, whether it’s through defined contribution or rollovers or other kinds of assets that they might have. And that’s happening globally. And those investors are really early in the ETF journey, if you will, and have lots of opportunity there. And then, most recently, you’ll have seen that we were selected for the Trump accounts as the default investment. So that’s another vector of investor that we think comes online onto the indexing platforms.
BARRY RITHOLTZ (00:19:41): Hmm — really, really interesting. I want you to push back on my understanding of indexing in equity and indexing in fixed income. Here’s what I have been led to believe over many, many years of academic study and research, and lots and lots of great academic analysis: It’s really, really hard to beat the market through active management of equities. It’s relatively easy to beat the market — through reducing risk, changing duration, improving credit quality — through active management of fixed income. How accurate or inaccurate are those statements?
LORI HEINEL (00:20:28): So this is a classic “it depends on how you think about the problem,” right? First, it is absolutely empirically true that in many spaces in equities, the average manager just does not outperform. We have all those studies, from all the various research, that substantiate that. In fixed income, to your point, there is more evidence that active managers can add value. But what’s been interesting over the last decade or so is this rise of better understanding of factor-based investing —
BARRY RITHOLTZ (00:20:59): On fixed income factors.
LORI HEINEL (00:21:00): On fixed income factors. I mean, factor investing’s been around for a long time — decades — but within fixed income in particular, I think we’ve gotten more and more sophisticated models that help us to disaggregate where those returns are coming from. And what we found is that a lot of those active alphas, if you will, out of fixed income managers are really one of two things: they go down in credit quality, or they extend duration. And when you actually neutralize for those two things, suddenly the active fixed income managers don’t look quite as heroic as they did before you adjusted for those things. So one of the big trends that we’re really leaning into in fixed income is applying that factor-based lens to fixed income, to be able to more stylize the portfolio, but do so at a very competitive fee level and deliver alpha — but alpha through indexing plus some factor exposures, versus just classic, fundamental, bottom-up security selection.
BARRY RITHOLTZ (00:22:00): Really, really interesting. So what’s kind of fascinating about your role is that much of the capital you oversee is deliberately designed to not take an active view. What does it mean to be a CIO at a firm like that? Where do your views show up?
LORI HEINEL (00:22:19): Well, the first thing I need to make sure everybody understands is that we do have active capabilities as well. They’re certainly not the massive amount of the assets that we oversee, but if you look at our fixed income, equity, and multi-asset-class strategies that are active in some way, that’s a couple hundred billion dollars. So it’s not tiny — it would still make us a pretty significant player in this market, even if that’s all we did. So we do believe that there are opportunities for active managers to outperform. It’s just one of those things where you need to understand how much to allocate to those active managers, and make sure you’re picking the very best, because obviously there are some that can outperform.
But I think, from a view perspective, it’s actually very valuable having all the different perspectives at the table. We have a chief economist and a chief geopolitical analyst — they really help us with: what are the expected growth rates around different economies in the world, what are our inflation expectations going to look like, what’s the backdrop against which we’re trying to invest — so that we have some sense of whether rates are likely to move up or down, whether growth is likely to be supportive for earnings — some of those macro, factor-setting types of things. And then within our active teams — we have a multi-asset-class team in particular — they’re deploying capital into equities, fixed income sub-sectors, commodities, gold, cash. And so they have a view on which of those areas are going to do best. And obviously, we have lots of discussion amongst ourselves about whether I personally agree with those views or don’t agree with those views, but ultimately it really is a committee that gets together and makes those macro calls. And then, within our individual active capabilities — we’ve got fundamental and quantitative equity and fixed income — those portfolio managers are basically charged with doing the hard work to figure out how they’re going to generate alpha. And we’ve been quite successful: about 65 percent of our strategies are outperforming on a trailing one- and three-year basis.
BARRY RITHOLTZ (00:24:23): Hmm — really interesting. You mentioned a variety of different colleagues — portfolio managers and economists and strategists — but really, it’s just the tip of the iceberg. You lead a team of over 600 investment professionals, and they’re located around the world. How do you keep an investment organization that large and that dispersed all on the same page — all coherent, all moving together?
LORI HEINEL (00:24:51): Well, I have a lot of help. I think any manager will appreciate that the most important job you do once you’re in a leadership position like mine is you hire well, right? And you let your good people do their work, and you pressure-test their theses, and you make sure, as you said, that everybody’s singing from the same hymn book where they need to be — or that they’re doing their own thing when that’s appropriate. And you provide guidance and oversight, opportunities to collaborate, all those good things. Our business, in one sense, is a simple business: we’re here to serve our clients, and we have all the tools at our disposal to serve our clients. We gather together routinely to develop thematics and market outlooks and other kinds of collateral that both myself and the other senior executives can take to our clients, as ways to engage with them and demonstrate our facility with markets and our capabilities and insights. And then, basically, I let the team do what it does best, which is deliver the results.
BARRY RITHOLTZ (00:25:50): So walk us through a day in the life of a global CIO with $5.7 trillion. I would imagine that day-to-day events are just so overwhelming — no two days really look exactly alike.
LORI HEINEL (00:26:05): No, it’s a bit of a crazy day — it’s one of the things I love about the job. But I would say the first thing is I spend a lot of time with clients. In the first quarter of 2026, I was on 45 planes, traveling around the globe — the Middle East, luckily before the war started, Asia, Europe, multiple times across the U.S. as well. So I spend a lot of time talking to clients of all types. We have, as I mentioned earlier, a large institutional base of business — some of the largest central banks and sovereign wealth funds across the globe — but we also have a lot of private clients. We have private banks that we work with, large broker-dealers that we work with. Sometimes I’ll even meet directly with end clients, depending upon the forum. So that’s probably a good chunk of my time.
I spend a lot of time on things like strategy. We have an executive management team, which gets together and talks about, from a business standpoint, where do we want to emphasize, and what does that require all of us to do? For investments, one of our big efforts over the last couple of years has been innovation. Since Yie-Hsin Hung joined us as CEO in 2022, we’ve been very aggressive in terms of launching new products in new spaces, including partnerships with firms like Bridgewater and Apollo. So a lot of the strategy for what we want to do to be relevant to our clients globally — ultimately, it comes from the investment team’s ability to execute against those mandates. And so we spend a lot of time talking about what kind of resources we need; what kind of research we can do that addresses the client problem we’re trying to solve; how we partner effectively with these third parties, where they might contribute some content — we ultimately own the portfolio construction, and we might have our own research that we want to bring into the mix, so one plus one equals three — but ultimately, we’re accountable for that to our clients.
And then talent. I mentioned earlier that you need to have really good people. We just came off of our annual talent reviews, where I get all my CIOs in a room, we work with our HR business partner, and we go through our top talent, succession planning — what kind of vectors do we see coming on the horizon? AI right now is a huge theme — how are we readying our teams to be good stewards and users of AI, and to adopt it in ways where we can make better efficiencies and better judgments?
And then the last part of it is there’s a lot of reading, listening, consuming information. Again, I am expected to be the face of State Street Investment Management from a client standpoint, and so I need to know what’s going on in the world. And as you know, the world’s been a really crazy place this year.
BARRY RITHOLTZ (00:28:59): It certainly has. You mentioned Apollo and Bridgewater. The criticism about privates in things like 401(k)s or target-date products is: they’re expensive — all right, so you don’t have the illiquidity issue, but they’re complex. What’s the case for putting private assets into a 401(k)?
LORI HEINEL (00:29:22): I think there are a couple of things. First and foremost, if you look at the equity side of the ledger, more and more capital creation is happening in private markets, meaning —
BARRY RITHOLTZ (00:29:33): Pre-IPO, before —
LORI HEINEL (00:29:34): — companies come public. Back in the early part of my career — and I’m sure yours as well — if a company came public at a hundred million, that was a big number, let alone a billion. Well, fast forward, and now we’re talking literally in the hundreds of billions, or even a trillion dollars. So if you think about just the magnitude of opportunity that’s lost if you can’t participate in those markets, it’s just incredible. So that’s number one.
If you look on the fixed income side — we’ve launched PRIV, which is a collaboration with Apollo. And there again, this is investment-grade credit that just happens to be issued in private markets instead of public markets, for all manner of reasons: it could be that the company wanted to move quickly, or they didn’t want to go through the filing process, or there might be some specific assets that they want to collateralize the loan with. And so those are really high-quality, investment-grade assets, but they collect a premium for an investor because they’re done through the private markets instead of the public markets. So to us, those are just natural extensions of what clients should have access to.
BARRY RITHOLTZ (00:30:45): Makes a lot of sense. And we mentioned earlier GLD — what an incredible run gold had in the 2010s, pretty much right up through last year. It’s since off — I don’t know, about 20, 23 percent, something like that. When you are thinking about equity and fixed income and alternatives, and you see a metal which has been widely traded for thousands of years — can I say 10,000 years? — that some people have called barbaric, how do you contextualize how GLD trades, and what is driving the psychology of those investors, versus all these other asset classes?
LORI HEINEL (00:31:30): So again, I want to take us back a little while, because we were advocating for a position in gold in client portfolios for six, seven years — so long before we had this run-up to 5,000-plus. And at the time, obviously, interest rates were very low, so you didn’t have an opportunity cost; today, that’s different. But what we were seeing was that fixed income wasn’t likely to play the role it historically played diversifying portfolios. You had no income; you likely didn’t have a lot of diversification benefit from fixed income, because how much lower could rates go if the market crashed? And we weren’t even sure it was going to provide capital preservation — and we were right; if you fast forward a couple of years, that turned out to be a bit of a challenge as well. And so we were looking for other exposures to put into the portfolio that would provide some of that cocktail of diversification benefit that fixed income just wasn’t likely to provide. And so we settled on gold, for lots of reasons.
And, oh, by the way, we were also writing a lot at that point in time about concerns with fiscal profligacy and the fact that the U.S. debt burden was getting large — and this is several years ago now; it’s obviously much bigger now. And gold, to us, was kind of an interesting asset that would benefit from any kind of debasement concerns or any of these other sorts of issues. So we advocated for clients to add it many years ago — of course, very few of those clients did. Until it went up to 3,000 — then suddenly you started to see more interest; and then 4,000 — you start to see a bit more interest. But I would say gold still plays an important role in a portfolio. It doesn’t have to be a huge exposure. It protects against a number of different tail risks in a portfolio. Yes, it’s expensive from a carry-cost standpoint right now, given the give-up in fixed income, but we still have, in our strategic allocation portfolios, a couple percent allocated to gold, because we do think that it provides very distinctive benefits in certain kinds of crises.
BARRY RITHOLTZ (00:33:41): So today we have Bitcoin cut in half from the high, and a lot of the narrative around crypto sounds like sort of a digital refresh of the historic narratives around gold. How do you think about crypto? Some of your competitors have aggressively pushed into it; others have very much steered clear. It might be a little early to declare which side is winning — although anything that gets cut in half kind of comes with a little bit of a black mark on it. How do you think about crypto these days?
LORI HEINEL (00:34:17): So I want to just first share a story. Back in 2012 — so this is many years ago now — my daughter and her boyfriend started mining Bitcoin. And of course, being in this industry, I thought they were crazy.
BARRY RITHOLTZ (00:34:34): Was it a hundred bucks back then?
LORI HEINEL (00:34:35): It was under a thousand — I think it might have been five or six hundred. So it wasn’t quite as low, but it was still very, very low. And I thought, you can’t just manufacture money — money doesn’t grow on trees; you can’t just manufacture it on a computer. But it turns out you can. So I was very skeptical, but I kicked myself for not having at least bought a couple, because at the time, I could have put $10,000 into it and I’d be, you know —
BARRY RITHOLTZ (00:34:58): Right.
LORI HEINEL (00:34:59): — $10 million. We might not even be having this conversation today. Who knows?
BARRY RITHOLTZ (00:35:03): You would just be on your yacht off of St. Barts.
LORI HEINEL (00:35:05): Well, there you go — which wouldn’t be half bad, right? So, in any event, I’ve never really understood the case. Now, what I will acknowledge is that over the years, I did learn of a couple of use cases that made sense to me. I can remember seeing a woman from Pakistan present, and she was talking about why Bitcoin is so popular in Pakistan. It was because at least they had a stable currency — because it was pegged to the dollar, effectively — and so people preferred being paid in Bitcoin instead of getting paid in Pakistani rupees. So I thought, okay, well, that’s interesting — but that’s a tiny little use case. But I never really understood it, because you don’t have anybody who’s got the taxing authority or the backing of it. Whereas even with gold, you’ve sort of got the central bankers, as the collective, in some sense backing gold — they’re still massive buyers of gold, and in fact, that’s surpassed Treasury holdings. So I never really got it.
But you fast forward, and suddenly you’ve got an asset that’s up to 30,000, 40,000 — over a hundred thousand at one point in time — and you’re like, am I wrong? What am I missing? So I don’t know — the jury’s out. We do believe in the digital ecosystem very much — we’re trying to work on tokenization, and we’re working on all kinds of other digital-finance types of endeavors. So there’s something about the digital that is very compelling. And in a weird way, it may be that once that digital infrastructure gets more evolved, it’ll make Bitcoin even less important — because now, suddenly, you’ll get all the benefits of Bitcoin in terms of the tradability and all those kinds of things, without having to have the exposure to an asset that I don’t know how to price.
BARRY RITHOLTZ (00:36:52): Wildly volatile, to say the very least. Really, really interesting. Coming up, we continue our conversation with Lori Heinel, Global CIO at State Street, talking about the current market environment. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.
BARRY RITHOLTZ (00:37:11): I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra-special guest this week is Lori Heinel. She’s Executive Vice President and Global Chief Investment Officer at State Street Investment Management, the asset management arm of State Street, with $5.7 trillion — with a T, trillion — in assets. And that’s as of year-end 2025 — and we’re up 10, 12 percent since then in the market, so do the math; I’m going to say over $6 trillion. Let’s talk a little bit about the current market environment. Your global market outlook was titled “Forward with Focus.” That sounds like you were constructive on risk assets — but, and I always put a question mark where I see a “but,” you must stay agile. Explain what that means.
LORI HEINEL (00:38:02): Well, so to your point, we did see 2026 as being still a pretty good year for investors. We thought that earnings were going to continue to do well. We thought that inflation, while not quite back to the 2 percent target that the Fed had set, was marching in that direction and would possibly give some more room for rate cuts in 2026. And so when we talked about being agile, it was: focus on equities over fixed income, but do so in a bit more broad-based way. Don’t just put all your eggs into the large-cap U.S. trade — look at small caps, maybe even look at things like emerging markets, places where you might get a bit of broadening out of the market as we saw maturation in 2026.
Of course, the war with Iran turned that a bit on its head, and so for a short moment, we were revisiting whether that was going to be true. Obviously, inflation became a bigger sticking point once again — or a bigger concern once again — and there were concerns about whether you were going to get that broadening out, or whether investors would just sort of go back to the trades that they knew and loved and had more security in. But I think as we get into the middle of the year, we’re seeing that our views were largely rewarded — that moving to small cap and other parts of the market certainly has done quite well on a year-to-date basis. And we obviously are still worried about fixed income and rates, and what that might mean as inflation remains a bit more tricky. But the prints that we’re having every month are all over the place — just as we’re speaking, we’re having a good CPI print. So while we think that the Fed is likely on hold for the balance of the year, we don’t see rate hikes in the offing.
BARRY RITHOLTZ (00:39:46): Huh — kind of interesting. We’ll talk a little bit about CPI and PPI in a bit. You mentioned something that I want to explore, because it’s so interesting. So the Magnificent Seven: in 2025, only two of the seven outperformed the S&P 500 — I think it was Nvidia and Google. And this year, whether you’re looking at small cap or mid cap, growth or value, Europe, developed ex-U.S., or EM — everything seems to be outperforming large-cap U.S. growth. Is this just the reason to have a diversified portfolio, or is it indicating a cyclical shift — or is this suggesting something else?
LORI HEINEL (00:40:31): Well, our view is generally to have a diversified portfolio. At the margin, we might favor large cap, or favor Europe, or favor emerging markets at different points in time, based on relative-value trading. But we do think that it’s incredibly difficult to time those inflection points perfectly. And as you noted, coming into this year, you still had a lot of momentum and flows into the things that had done well in the past, including some of those large-cap names that you mentioned. So I’m kind of a traditionalist in that way — I do believe you want to be diversified and have exposures to multiple places.
But I do think that this AI enthusiasm — I believe in it in terms of a technology, but when you look at the massive amount of spending that is now being undertaken by some of these companies — they’ve gone from leveraging balance-sheet cash to make those investments, to now accessing fixed income markets in a massive way, and even, in some cases, issuing equities — you do have to sort of wonder whether that vein alone is going to be where the money’s going to be made going forward. I’m not saying that they can’t still generate good earnings, but there are plenty of other places: if you think about energy, if you think about utilities — you think about all the ecosystem required to enable that AI transformation. And then, perhaps most importantly, the real economy, and how sectors like finance or healthcare or other things are going to benefit from these technologies. I think we’re just at the tip of the iceberg in terms of what that will mean for innovation and productivity.
BARRY RITHOLTZ (00:42:11): So when you’re looking at this enormous capital spend that you referenced — and we didn’t even bring up all the private credit that’s been pouring hundreds of billions of dollars into that — how do you judge when the spending is productive and producing sufficient returns? Given the fire hose of capital, there has to be some misallocation, and there are going to be some winners and losers. But when does the next incremental dollar become bad money after good? How can we tell?
LORI HEINEL (00:42:41): We’re watching for: when does that CapEx not translate into incremental —
BARRY RITHOLTZ (00:42:49): Earnings. So let’s stay with the idea of artificial intelligence. You work at a very large asset manager. I would imagine the biggest shops have a little bit of a lasting advantage in deploying AI — not only looking at their own language models that they’ve created internally, but just the ability to deploy that technology in a way that makes their capital more efficient, more productive. How are you looking at AI from the perspective of the finance sector?
LORI HEINEL (00:43:27): This is a whole podcast in its own right, but let me just share a couple of thoughts. First and foremost, we’ve been on the AI journey for over a decade. We’ve been using machine learning and natural language processing and other types of technology in our active strategies for over a decade. And I think it’s important to also know, as a G-SIFI, we’re a highly regulated institution, so we’ve also spent many, many years on the infrastructure, governance, and other things needed to deploy these types of tools — being mindful of cybersecurity threats, privacy, and all the other things that you would expect a large bank to be worried about.
So where we are now: I would say the biggest places that we’re seeing AI support our business are in things that are more operational in nature — repeatable processes where we can deploy some technology and free up people to do other, more interesting things. If you think about some of the marketing elements — things like RFPs, or commentary writing, or other kinds of client-servicing elements — they lend themselves beautifully to leveraging this technology, because you have a database of information, the question might get asked in a slightly different way, and the AI can actually feed back the most relevant answers. And then you have a human in the loop — always, in our environment today — that ultimately owns the final product. So those are, I think, the early wins for us: that kind of efficiency gain, leveraging people to do more higher-order things.
Down the road, will this get more integrated into our investment process and philosophy? We’re experimenting with a lot of things. We’ve got the concept of a research copilot, which lets a portfolio manager survey dozens, hundreds of research reports, and do so very efficiently, using an AI type of tool. They still have to pressure-test whether the results they’re getting back make sense, and they still ultimately make the decision about what they’re going to do with that information from a portfolio standpoint. But we see lots of opportunities for that kind of augmentation of the human as well.
BARRY RITHOLTZ (00:45:40): Let’s talk a little bit about inflation. We’ve had a series of things that have contributed to it — tariffs, war in the Middle East, et cetera. We got the best CPI print we’ve had in five years, but that’s primarily been because we briefly thought the war was over and oil prices plummeted. Now the war is back on, and I track things like the producer price index, which is 6.5 percent — we know that’s just going to push into final prices over the next few quarters. So how do you think about inflation, and fixed income specifically? And has macroeconomic forecasting in this environment just become — I don’t want to say impossible, but so challenging?
LORI HEINEL (00:46:30): Well, macroeconomic forecasting is always difficult, and I would say what we’ve also seen over the last several years is data revisions coming in at a massive level, too. So what you see in a print one day — whether it’s the payroll data or the GDP or whatever — a quarter later might be changed pretty dramatically. So you have to be a bit humble in this kind of environment when you’re making any kind of bold calls. But I would say our core view is that inflation will still trend lower over time. We think it might not get back to the 2 percent level, but we aren’t necessarily thinking that 6 percent is something that’s sustainable. The good and the bad news here is that when you have an inflation shock coming from things like commodity prices, they rebase — so you get that one-time shock, and then you’re done, unless there’s another shock on top of that. So at some point, that sort of recalibrates in its own right.
I think the thing that we’ve been most surprised by this year is the underlying resilience of the U.S. economy. In particular, we were thinking that labor markets were going to be under a lot more pressure than they ultimately have been — at least so far. We thought that the inflation coming from the war would filter into other places, like fertilizer and food and other things — which may still happen, right? We haven’t gotten through the farming cycle here in the U.S. But we’re not seeing the consumer — while they’re stretched — we’re not seeing the consumer necessarily pull back the way that we thought that they might. So the second half will be a very interesting second half.
BARRY RITHOLTZ (00:48:03): To say the least. Let’s stay with the consumer. There are a couple of things that I’ve noticed that are kind of interesting. If we look at the second-quarter sector breakdown: consumer discretionary — worst performer of the group, essentially flat. If you look at consumer spending, there’s a greater reliance on credit and credit cards than just salary increases. And then consumer sentiment — and I think we can all agree the University of Michigan sentiment measure has become broken over the past few years, but still — whether you call it the vibes, the sentiment, whatever, it seems to be shockingly negative. I don’t disagree with you about the resilience of the economy, but how do we figure out what’s going on with the consumer, and their importance to the ongoing resilient economy?
LORI HEINEL (00:48:58): Well, I think the first thing is that I agree with everything you’re saying, but there are also offsets. So people are getting tax refunds; you’ve got other benefits coming through from the One Big Beautiful Bill. So you do have some other things that are still propping up the consumer at the margin, and employment still is pretty strong here in the U.S. —
BARRY RITHOLTZ (00:49:18): 4.2 percent.
LORI HEINEL (00:49:19): Unemployment is pretty good. So you still have pretty good underpinnings, if you will. But it’s clear that the average consumer is feeling like they’re losing ground. There have been lots of articles about even couples that are making over a hundred thousand dollars feeling like they have food insecurity. Well, that’s a problem, for sure, and it probably means they’re going to pull back somewhere else. But my point is that, in the aggregate — whether it’s from CapEx and other corporate spending, or the sort of K-shaped consumer economy, where the upper echelon, if you will, is benefiting from housing prices and asset prices, which have come up a lot and are still going up — there’s still a lot of resiliency there.
BARRY RITHOLTZ (00:49:58): So I’m glad you brought both of those up. The pushback I get from bearish colleagues is: A, yeah, the economy looks good, but it’s almost all driven by the upper quartile — and I think that’s being generous on the quartile side. And the other criticism is: hey, all of this AI-related CapEx is masking underlying weakness — although I don’t see that weakness in much of the data. What’s your response to those sorts of criticisms?
LORI HEINEL (00:50:29): Look, I think the good and the bad news is that you don’t need a hundred percent of the consumers to participate to have the consumer economy doing just fine. So that’s a sad thing in a lot of ways, but it’s just the reality. And, by the way, companies are generating productivity from things like the deployment of AI already, and we think that that’s very constructive.
BARRY RITHOLTZ (00:50:52): And then, speaking of productivity — everybody talks about the Magnificent Seven, but what about the other 493 companies in SPY that are becoming more efficient, more productive, more profitable? How do we contextualize that?
LORI HEINEL (00:51:09): Well, we think we’re in the very, very early innings. So I mentioned earlier, we’ve got active teams, right? And this is their domain. These are people who are in the tech sector, in the healthcare sector, in the finance sector, doing the hard work to understand who the winners and losers are going to be. And the mantra, over and over again, is that the companies that adopt technology — for efficiency gain, for innovation, to create competitive moats — are going to have a really good runway from that deployment. So we are quite optimistic in terms of what that means for long-term prospects.
BARRY RITHOLTZ (00:51:38): So before I get to my favorite questions, there were a couple of items I had to ask you about that are a little more off the beaten path. You were chosen to lead State Street’s Fearless Girl campaign. Explain what that is, and why you were chosen to take that role.
LORI HEINEL (00:52:02): So this is true serendipity, right? As with anything, these things take a village. We had this placement of what is now the iconic statue of the Fearless Girl — initially down on Bowling Green, facing off against the bull. And I had been one of several people who had been involved in that effort, and I got a call the night before the statue was going to be placed, and somebody said, can you go to New York, like, now, and be there when we place the statue — just in case there’s attention, just in case some of the networks pick it up.
BARRY RITHOLTZ (00:52:38): Sure. And just to flesh that out a little bit: everybody knows the Wall Street Charging Bull is actually not on Wall Street — it’s on lower Broadway. It’s a massive, 25-ton statue. The Fearless Girl is proportional, real life — a 10-year-old little girl, sort of just standing up to the bull.
LORI HEINEL (00:53:02): In her little power pose —
BARRY RITHOLTZ (00:53:02): Right — hands on her hips, almost like a Degas sculpture.
LORI HEINEL (00:53:06): Exactly.
BARRY RITHOLTZ (00:53:07): Standing, staring down the bull. So tell us what happened when you flew down to New York.
LORI HEINEL (00:53:12): So I fly down, I show up the next morning bright and early, and there’s a little bit of milling around. It happened to be a rainy day, so there weren’t too many people out and about, but suddenly it started to get a little bit of interest. And so we had a couple of reporters come by and say, what’s happening? We explained to them that this was a moment where we were trying to advocate for everybody’s future, and we used it as an opportunity — given it was International Women’s Day, specifically; that was the timing of the placement. And so one thing led to another, and before you know it, I’m booked on three or four or five news programs over the next 48 hours, telling the story about how the Fearless Girl came about, and why we did it, and how important it was to stand up for those who perhaps couldn’t stand up for themselves.
BARRY RITHOLTZ (00:53:59): Very successful campaign. And where is the Fearless Girl today?
LORI HEINEL (00:54:03): Well, she is now opposite the New York Stock Exchange. One of the things that happened is that she started to attract so much attention that they were worried about the safety risk — because, as you know, where the bull is, it’s a very narrow street there, and people were milling onto the street. So we got a permanent — or semi-permanent, at least for now — placement in front of the New York Stock Exchange, and that’s where she’s been since.
BARRY RITHOLTZ (00:54:25): That makes a lot of sense — that’s a good location for that. So I know you serve on a couple of boards. The one that really jumped out at me: the Boston Ballet. Tell us a little bit about what that’s like.
LORI HEINEL (00:54:37): So I’ve always been a great fan of the arts. I was a gymnast as a child — I wasn’t a ballerina, but I think there’s a lot of rhyming there — and I’ve always been a fan of ballet as an art form. And the Boston Ballet is very interesting, because they are trying to consolidate both the legacy classical repertoire with a lot of more modern, contemporary, avant-garde kinds of repertoire. And so they did a collaboration with the Rolling Stones, for example, where we did a ballet set to some of the Rolling Stones’ music. And so it’s just been a great way to meet people in the cultural community in Boston, but also to be part of art-making that I find just fascinating.
BARRY RITHOLTZ (00:55:18): Huh — really, really interesting. So I only have you for a few more minutes; let me jump to my favorite questions. Starting with: who were your early mentors? Tell us about who helped shape your career.
LORI HEINEL (00:55:29): So I would say I didn’t really think about mentors when I was younger. I would say my bosses were my mentors, in the sense that they stretched me, they gave me opportunities. I talked earlier about that situation at First Boston, where we were in front of the airport authority — I would not have had the opportunity to be in a room like that at a lot of companies, but I think my boss felt that I’d done the work and I deserved a place at the table. So throughout particularly my early career, I would say it was my bosses who stretched me, gave me opportunities.
And then, about mid-career, I — with another colleague — created this group called Connected Women. It was a very informal type of a thing, where a number of women of sort of similar vintages got together regularly —
BARRY RITHOLTZ (00:56:15): “Vintages” — if I’ve ever heard that.
LORI HEINEL (00:56:16): We drank a lot of wine, so I can use the word “vintages.” So it was really a wine-drinking club, but there was a benefit: we got to know each other well — our professional and our personal stories — and so we could help each other out. So when we were looking at career situations, it was a good circle of friends that I could turn to — who were in similar stages in their careers, trying to make it on the corporate ladder — that I could lean on.
BARRY RITHOLTZ (00:56:42): Really, really interesting. Let’s talk about books. What are some of your favorites? What are you reading currently?
LORI HEINEL (00:56:47): So I tend to like biographies — I’ve read a bunch of the Chernow, you know, Titan and The House of Morgan, and the Walter Isaacson Steve Jobs. I like biographies because they meld history with leadership, with whatever the topic is. So obviously with Titan and The House of Morgan, it’s a finance-centric kind of a story, and with Jobs, it was technology-centric. But seeing how those leaders navigated innovation, their time, the people around them — I just find that fascinating. Much better than reality TV, in my opinion.
BARRY RITHOLTZ (00:57:29): To say the least.
LORI HEINEL (00:57:30): It is reality TV.
BARRY RITHOLTZ (00:57:31): Speaking about TV — are you streaming any Netflix or Amazon Prime–type shows?
LORI HEINEL (00:57:37): Right now, I am on a bit of a hiatus. I’ve been trying to read some fiction, so I’m doing some Toni Morrison right now — I went to Princeton, as you probably remember. And so I’ve been trying to do a bit more reading in my spare time.
BARRY RITHOLTZ (00:57:54): Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either investing or asset management?
LORI HEINEL (00:58:03): Well, the first thing I would say is it’s a fantastic career. You can do so many different things. You get access to technical acumen; you have the interpersonal piece of things; you have to solve problems — I love the problem-solving aspect of it. And I think it’s something where, no matter what your preferences are, you can find your vein, right? I happened to make my way to Global Chief Investment Officer, but there are people in marketing, or people in distribution, or people in processing, and all of those are just absolutely fascinating careers. It’s never a dull moment.
BARRY RITHOLTZ (00:58:34): And our final question: what do you know about the world of investing and asset management today that might have been useful back in the nineties, when you were first getting started?
LORI HEINEL (00:58:44): Well, I wish I’d have started investing earlier and more often. I was a net debtor for many, many, many years, because I wanted to have nice clothes and jewelry.
BARRY RITHOLTZ (00:58:54): I can’t tell you how often I hear that — which is really just a backdoor admission of the power of compounding.
LORI HEINEL (00:59:01): And maybe that Bitcoin — that was my other thing I probably should have done, in 2012.
BARRY RITHOLTZ (00:59:05): Well, if you had a crystal ball. But what’s the big insight that would have been useful to know, generally, about markets?
LORI HEINEL (00:59:12): You know, I’m not joking about the early and often. And truth be told, I’m a hundred percent equity invested, even now.
BARRY RITHOLTZ (00:59:21): I’m a big fan of that as well.
LORI HEINEL (00:59:22): So back in my day, it was the “100 minus your age,” which would put me squarely not in the hundred-percent-equity category if I followed that rubric. But I think a lot of people would just be served by being in equities — over the long term, unless you only have a couple of years, and who knows — that’s where the money is.
BARRY RITHOLTZ (00:59:40): This is a little hindsight bias, but I am always shocked — it’s literally a chapter in the book — by people who are 20, 30, 40 years old that have a substantial fixed income allocation. I understand it’s ballast that offsets the volatility of equity, but really, until you’re over 50 — maybe even over 60 — and getting closer and closer to retirement, do you really need to have 40 percent of your portfolio in bonds? It doesn’t make a whole lot of sense.
LORI HEINEL (01:00:08): Well, look — I mean, for a lot of institutional clients, it makes perfect sense. They’re liability-matching, right? And they need that fixed income. And I think if you need liquidity, or you’re going to have your children’s college education or weddings or things like that in a couple of years, absolutely, fixed income plays a role. But if you have the ability to not touch that investment capital, I think equities is the way to go.
BARRY RITHOLTZ (01:00:29): Thank you, Lori, for being so generous with your time.
If you enjoyed this conversation, well, check out any of the 649 podcasts we’ve done over the past 14 years. You can find those at Apple Podcasts, Spotify, Bloomberg, YouTube — wherever you get your favorite podcasts.
I would be remiss if I didn’t thank the crack team that helps put these conversations together each week: Alexis Noriega is my video producer; Sean Russo is my researcher; Anna Luke is my producer. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.
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