E224: Ex-CIO of Northern Trust: The Next Decade Belongs to Bonds, Not Stocks

Oct 10, 2025

Thomas E. Swaney II, former Chief Investment Officer of Global Fixed Income at Northern Trust, shares his insights on the future of bond investing. He argues that traditional bond allocations fail to diversify during equity downturns. Swaney discusses the importance of managing correlation through duration and credit, and how notional leverage can enhance portfolio efficiency. He emphasizes the need for bonds to provide liquidity and negative correlation to support rebalancing after drawdowns, making a compelling case for bonds in the coming decade.

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ANECDOTE

Learning By Asking Better Questions

Thomas Swaney learned early that having all the answers wasn't the secret and you must know which questions to ask.
He credits an open-debate culture at his first firm for teaching him systematic thinking and intellectual humility.

ANECDOTE

Why He Joined Northern Trust

Swaney described joining Northern Trust because of its scale and leadership willing to change the fixed income platform.
He viewed scale (>$600B in fixed income) as essential to effect meaningful product and institutional change.

INSIGHT

Open Debate Improves Investment Outcomes

Open, public debate at firms forces people to confront being wrong and improves investment decisions.
The trade-off is some quieter, slower thinkers may need more support to participate effectively.

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If “fixed income is broken,” what are investors actually missing—and how should they rebuild the 40% to protect and compound through drawdowns? In this episode, I speak with Thomas E. Swaney II, former Chief Investment Officer of Global Fixed Income at Northern Trust Asset Management, who oversaw more than $600 billion across global fixed income. Thomas explains why traditional bond allocations fail when it matters most, how to separate duration from credit risk, and how to use notional leverage to target true diversification without sacrificing liquidity. We explore the structural flaws in 60/40, how to design a fixed income portfolio that actually offsets equity drawdowns, and why the future of bond investing depends on better risk budgeting—not higher yield.

Highlights:

Fixed Income Is Broken: Why most bond portfolios don’t diversify when equities fall
Rebuilding the 40%: Duration vs. credit and managing correlation through regimes
Notional Leverage: Using treasury futures and IG CDX to build volatility with quality
Risk Parity Framework: Allocating by contribution to risk, not nominal dollars
Rebalancing Alpha: Liquidity and negative correlation as the real edge
Curve Positioning: Why the belly of the curve often outperforms the long end
Convexity Mismatch: Public vs. private assets and the lagged rebound effect
Inflation Regimes: How correlation flips and when to incorporate TIPS
Leadership & Culture: Lessons from Ellington and Northern Trust on process and debate
The Next Decade: Bonds are relevant again—if built for resilience

Guest Bio:

Thomas E. Swaney II is the former Chief Investment Officer of Global Fixed Income at Northern Trust Asset Management, where he had broad oversight of the $600+ billion fixed income platform, spanning business management, portfolio management, and strategy. As CIO, he chaired the Fixed Income Strategy Committee, guiding macroeconomic themes, risk budgeting, and portfolio construction across all fixed-income portfolios. He also served on Northern Trust’s Investment Committee and Executive Group within Asset Management.

Prior to Northern Trust, Thomas held senior executive and portfolio management roles at J.P. Morgan Asset Management, Morgan Stanley Investment Management, OFI Global Asset Management, and Ellington Management Group. He holds a B.B.A. and M.B.A. with a concentration in corporate financial analysis, as well as an M.Sc. in Finance from the Kelley School of Business at Indiana University, and has more than 26 years of investment experience.

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LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Thomas E. Swaney II: https://www.linkedin.com/in/swaneycio/

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(0:00) Preview (0:48) Thomas Swaney's career and Miller Anderson's open debate culture (5:00) Challenges and impacts of open dialogue culture in investment firms (6:42) Education systems and their influence on investment thinking (7:47) Leadership vs. Investment Skills (9:40) Shifting Northern Trust's focus and lessons from Ellington (18:45) The role and strategies for fixed income in a diversified portfolio (23:35) Understanding market downturns and Bridgewater's equilibrium approach (27:24) Decomposing and maximizing efficiency in bond portfolios (33:56) Challenges and strategies with private assets in portfolios (38:40) The impact and use of leverage in investment portfolios (42:43) Introduction to Factor Two Capital Management (44:38) Exploring the relationship between volatility and expected values (49:16) Fed independence and market reactions to policy changes (51:35) Misconceptions about monetary policy and economic impact (53:04) Future outlook on fixed income versus equities and prediction markets (55:24) Closing remarks