By Steve Garmhausen
Emerging markets have crushed U.S. stocks over the past 12 months, with the iShares MSCI Emerging Markets ETF returning more than 39% versus the SPDR S&P 500 ETF Trust's 17%. Ted Neild, citing factors like fading U.S. dollar strength and overseas earnings momentum, says it is no fluke. "We think the setup for emerging markets relative to developed markets is much more constructive than what we saw over the past 10 years," says Neild, the CEO and chief investment officer at Chicago-based Gresham Partners, a $13.2 billion wealth management firm serving 125 wealthy families.
Speaking with Barron's Advisor, Neild -- who solves puzzles professionally and for leisure -- explains Gresham's distaste for index hugging and market timing. He says the firm has "great concerns" about private credit right now. And he argues that the U.S. isn't the only market with equity concentration risk.
What inspired you to get into financial services? My interest in finance and investing comes from my dad. He was chairman of the Chicago Board Options Exchange, and I spent summers there running, literally running, orders back and forth. It was fascinating to me. So my intellectual curiosity was piqued at an early age.
You spent the early years of your career at Nuveen Investments. What did you bring to Gresham from that experience? I got to work with some great people at Nuveen. Back then it was a very traditional investment firm, so I worked on the research side to start with, and then the portfolio management side. I was then the chief investment officer of our asset-management group, which was primarily a fixed-income-based group. In my second role there, I headed up a group called corporate strategy and development, which involved taking Nuveen's fixed-income capability and trusted brand and evolving it into a wide range of equity strategies and other types of things. It was a great foundation for what makes enduring investment strategies, and that forms the foundation for a lot of things that we do today.
Gresham Partners was founded in 1997, and you joined in 2005. How would you describe the firm? The Gresham business is a fun, interesting boutique that is purpose-built to serve a smaller number of wealthier families. Gresham was designed to serve multigenerational wealth creators, and the specialized expertise it creates to do that is the foundation of the business. Our depth of expertise defines us, but also it liberates us from a lot of things, because we're not trying to be all things to all people. It's interesting the things that you're allowed to do in an unconventional way when you have a client base like ours.
What do you mean? This generational wealth idea has a couple of implications. You get to stretch your investment horizons into doing very interesting long-term things sometimes. Importantly, they have excess wealth, so we don't have to worry about liquidity. We can really take advantage of liquidity premiums and lockups and doing interesting things where cash flow is not required. Unlike institutions, families are taxable, so you have to think about this puzzle differently: How do I add value in a taxable sense? How do I add alpha in a taxable sense? If you have a long investment horizon, you in theory shouldn't care about short-term volatility. That's true if you're an institution. But if you're a first-generation wealth creator, you have an emotional connection. So not only do we have to think about long-term after-tax compounding, we have to be mindful of the path that those portfolios take to get there, to make sure they stay invested through difficult periods of time, to make sure we're avoiding the permanent impairment of capital.
Gresham is known for benchmark-agnostic investing. How do your clients know if you're doing a good job? One thing I think is a flaw in today's investment industry is that investors are too benchmark-aware. We all know the statistics about the percentage of managers that underperform their benchmark. Today, if you look at a five- or 10-year basis, you're starting to see numbers that suggest 85% or 90% of managers are underperforming their benchmark after fees. On one hand people say, "Well, active management is dead." I would suggest that means that managers' benchmark hugging, or their unwillingness to take risk away from a benchmark, creates this self-defeating proposition. If we can think about simply owning great companies, with great cash flows at good prices, we don't have to think about what's in a benchmark long term. To do this, you have to move away from traditional frameworks, and one of those is benchmark tracking. We've been doing this for several decades, and our proof point is our track record. Our long-term track record actually outperforms equity markets, which proves you don't have to give up one to have the other. Our strategies won't track a benchmark over a short period, but if we can't beat a benchmark over a long period, we shouldn't be doing any of the interesting, creative, and unconventional things that we do.
Indeed, your business reports that its investment returns since 2001 beat the MSCI All Country World Index by a significant margin. Could you give a forward-leaning example of some of your creative investment decisions? There are a number of places in capital markets today where I think the last 10 years is not a good road map for the next 10 years. You can put private equity and private credit on that list.
Private-equity entry multiples in some cases now exceed those of comparable public companies, and the nearly cost-free leverage that defined the prior decade is no longer available. Median private-equity performance has barely exceeded public markets. We still believe private equity can outperform, but it is no longer an easy button. Success increasingly depends on accessing top-quartile managers who tend to run smaller funds and have a clear, repeatable road map for creating real operational value.
Private credit has been a steady performer over the past decade, rarely the best and rarely the worst. However, it has not yet been tested by a full economic cycle. A large influx of capital has compressed spreads and weakened underwriting standards. For taxable ultrahigh-net-worth clients, it is particularly unattractive, as a significant portion of returns are lost to taxes. It's never what you earn, it's what you keep.
How do you choose your managers? We focus on concentrated, high-conviction managers, often with assets measured in the hundreds of millions rather than the multibillion-dollar range. That scale can allow managers to be nimble, deeply engaged, and early in businesses that later become widely known. Examples that your readers may recognize include early investments in Tesla, SpaceX, and Stripe, with more recent exposures to companies such as OpenAI and Anduril.
What are your thoughts on the private credit landscape? Private credit is an area that we have great concerns about. We work for multigenerational families who are taxable. So the starting point for us in any income investment is that you're going to give away half of it to taxes. The amount of money that has been raised in private credit over the past five years or more is huge. And today spreads are very compressed. So we think it's a difficult place to be. I know this is a little bit unconventional; a lot of people have capital in private credit. We have zero, and we're thankful for that.
You're also macro-agnostic. Don't you have to be aware of the trends so you can know which ponds to fish in? I would agree with that, but we look at that from a long-term perspective. For example, over the past 10 or 15 years we saw real interest rates that were zero or negative, meaning inflation would erode the purchasing power of a fixed-income investment. That to us is a valuation anomaly, where those macro relationships are off from historic norms. If you go back over the past 15 years, our clients have had very little exposure to traditional fixed income.
Developed and emerging stocks beat U.S. stocks handily in 2025. Could they continue to give us a run for our money? Finally, after a long period of time, we saw developed international and emerging markets outperform U.S. markets last year. A couple of things that go into that. No. 1, the dollar has been strong, and when the dollar is strong, it inflates the return pattern of U.S. equities versus non-U.S. equity markets. I think most people have come to the recognition that the U.S. dollar-strength tailwind for U.S. markets has probably faded and may now become a headwind. We're also starting to see earnings momentum overseas, particularly in emerging markets.
Today, many emerging markets are cheaper, exhibit meaningfully improved governance and shareholder protections, and show improving earnings momentum. They are also less exposed to U.S. dollar strength than in the prior decade. Several former headwinds are fading, and some are becoming tailwinds. We think the setup for emerging markets relative to developed markets is much more constructive than what we saw over the past 10 years.
How is the brightening picture abroad playing out in your investments? A lot of our managers are finding more attractive things to do outside the United States than inside the United States. That's one of what I call canary-in-a-coal-mine indicators that some of the better opportunities are not in the United States anymore.
What's an example? AI investing is often viewed as U.S.-centric, focused on the so-called Magnificent Seven. In reality, many critical beneficiaries of the AI ecosystem are based outside the U.S. World-class companies such as Taiwan Semiconductor Manufacturing Company and SK Hynix are essential to the global AI supply chain. More broadly, outside the U.S. there are many high-quality companies that are smaller, underfollowed, attractively valued, and have identifiable catalysts to unlock value.
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