Update posted 12 May 2020:
Given the continuing uncertainty over both the future direction of the virus and the economic fallout, we believe an element of caution is still warranted on markets at this juncture. We have been engaging with our fund managers extensively during this period to better understand the risks and opportunities going forwards and stand ready to take advantage of future volatility.
Periods of market stress like this highlight the importance of maintaining a diversified investment portfolio. In addition, the current market volatility we are witnessing should create a favourable environment for active fund management.
Original update posted on 18 March 2020:
A reminder about our investment approach
Having been cautious two weeks ago, we have continued to reduce exposure to risk assets across our portfolios. We have increased the cash across many of our funds and taken steps to reduce risk and protect investors’ capital.
However, the current climate is unpredictable and we are keeping an eye on the events unfolding. We are ready to increase risk when the way forward becomes clearer.
Much like our underlying managers, we are constantly reassessing the likely extent of the impact on markets and what outcomes are being priced in. Diversification remains at the heart of our approach. Our portfolios are invested across equities, bonds and alternatives and invested with managers that take different approaches. This diversification means that the impact of any given market shock should be dampened and the portfolios can continue to target a steady positive return over the long term time.
What we expect in the coming months
The long term expectations of the volatility bands of each profile take account of the fact that markets experience periods of heightened volatility such as we are experiencing today. While it is natural to worry about the headlines and it can feel painful to see the value of investments fall, we advise against reacting to short term losses emotionally.
In times like these it’s more important than ever to take a long-term view. Significant market falls are unusual events. Having said that, they are not unprecedented and we have seen time and again that investing in the market over many years bears fruit.
Reminder of the key risks
- The value of an investment, and any income from it, can fall or rise. Investors may not get back the full amount they invest.
- Personal opinions may change and should not be seen as advice or a recommendation.