A watchful eye in times of crisis

By Richard Sayers | 28 March 2022

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Investors have benefitted from many years of excellent returns from multi-asset class portfolios. The last correction in 2020, as COVID-19 spread across the globe, was relatively short-lived with most portfolios nevertheless posting gains for the calendar year. We have to cast our minds back to the ‘financial crisis’ of 2008/9 and the ‘tech boom and bust’ at the start of the century to remember markets taking multiple years to recover to their previous highs. 

The war in Ukraine worsens by the day and we hope world leaders help limit the destruction and humanitarian suffering as far as possible. With the uncertainty and extremely challenging conditions the conflict presents, financial markets have been weak as advisors and investors try to understand the war’s economic impact and outlook. During a correction, investors will naturally question if it is good to remain invested, if the strategy and risk profile is correct, and whether the investment manager populated the portfolio with the correct mix of sectors and assets.

At Enhance, we are in a privileged position monitoring around 5,000 investment portfolios which provides us with a unique understanding, based on live data, of which investment strategies and managers are performing as expected. For this reason, we receive more enquiries about our Monitoring and Consultancy services during periods of market weakness when investors want reassurance that their assets are in good order.

For the year to date to the end of February, we note that the Managed Portfolio Indices record Sterling estimates of -3.69% low risk, -4.5% medium risk and -6.68% high risk. Two months is a very short period and over 12 months all the risk categories still record positive gains. As March progresses, we monitor closely many of the themes that are being analysed and acted upon by investors and advisors, such as:

- Should we have more gold?

- Should we have more oil?

- Should we have more renewable energy?

- Should we adjust our geographical exposure

- Should we de-risk to cash?

We expect to see a wider range of returns in Q1 2022 from the investment management community as their tactical positions deliver results. As such, we strongly believe that it is crucial to identify, appoint and monitor investment portfolios and mandates to ensure that investors are getting good value for money from their advisors and managers. Whilst one should be careful when considering short periods of time, poor management at inflection points in financial markets can destroy long term investment returns if not identified and addressed expediently.

In the last 12 months, Enhance has expanded its services, supported by market-leading technology, to provide a Client Portal with access to individual and consolidated portfolio reviews, along with powerful information about our client's investment exposure and detail about the investment managers that they use. When markets are difficult, it is even more important to have competent advisors with the correct strategies in place and we have a range of services specifically tailored to the requirements of the professional fiduciary sector to help ensure everything is in good order.

2022 looks to be a challenging period for the financial markets but our hopes and prayers are foremost for the people of Ukraine. If you would like to learn more about our Monitoring or Consultancy services, please get in touch for an exploratory conversation.