2025 Sohn Montreal: Bracebridge Capital’s Nancy Zimmerman – Rethinking Portfolio Risk in Correlated Markets via Market-Neutral Strategies

At the 2025 Sohn Montreal Conference, Nancy Zimmerman, cofounder and managing partner of Bracebridge Capital, challenged the conventional wisdom around portfolio construction by questioning the continued reliability of “risk-free” rates and traditional bond diversification. Drawing on decades of experience in arbitrage and interest rate markets, she made a compelling case for market-neutral strategies that exploit structural inefficiencies and offer resilience in today’s more correlated and volatile environment.

• Background: Nancy Zimmerman built and leads a high-performing investment team known for intellectual honesty and hard work. She is noted for having over 30 years of consistent alpha generation through Bracebridge.
• Firm Focus: Bracebridge employs market-neutral strategies and profits from market inefficiencies and arbitrage opportunities.
• Time at Firm: As a co-founder, she has been with Bracebridge since its inception, which is stated to be over 30 years ago.

2025 Sohn Montreal Conference - Bracebridge Capital's Nancy Zimmerman

Introduction by Derek Truman

• Introduces himself as Head of the Funds Office, Division for the State of Wisconsin.
• Welcomes and introduces Nancy Zimmerman.
• Says she's what they call in Wisconsin "the real deal"
• Defines this as someone with deep care, second-order thinking, and persistence across all investment areas: security selection, portfolio construction, culture, and management.
• Nancy built and leads a high-performing investment team based on intellectual honesty and hard work.
• Says she has over 30 years of consistent alpha generation through Bracebridge.

Nancy Zimmerman

• Expresses deep gratitude and emotional appreciation for being at the event, especially as it supports two children’s hospitals.
• She'll talk about a "first-order idea": how investors need to rethink the use of "risk-free" rates in portfolios.

Legacy portfolio construction and breakdown

• Historically, portfolios were built assuming stocks and bonds are uncorrelated (e.g., the 60/40 model).
• 60/40 was not meant to be a prescription but a benchmark to judge managers.
• Notes 2022 marked a shift where stocks and bonds began correlating positively.
• In today's environment, stocks, bonds, and the U.S. dollar are all positively correlated.
• This undermines traditional diversification and calls into question the role of bonds in portfolios.
• Calls for a re-examination of base assumptions in portfolio construction.