{"id":52697,"date":"2022-11-16T09:25:21","date_gmt":"2022-11-16T09:25:21","guid":{"rendered":"https:\/\/finsbury-associates.com\/?p=52697"},"modified":"2023-01-11T04:23:36","modified_gmt":"2023-01-11T04:23:36","slug":"active-management-and-diversification","status":"publish","type":"post","link":"https:\/\/finsbury-associates.com\/active-management-and-diversification\/","title":{"rendered":"[3-min read] Active Management and Diversification: Safeguards against market volatility"},"content":{"rendered":"\n[et_pb_section fb_built=”1″ _builder_version=”4.14.8″ _module_preset=”default” custom_padding=”15px|||||” global_colors_info=”{}”][et_pb_row _builder_version=”4.14.8″ _module_preset=”default” custom_padding=”20px|||||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.14.7″ _module_preset=”default” global_colors_info=”{}”][et_pb_text content_tablet=”

Further to our market update webinar on the 7th February 2022, please find below some further commentary from one of our discretionary portfolio managers Quilter Cheviot on the Russian & Ukraine conflict published on the 24th February.<\/strong><\/strong><\/h4>\n

<\/strong><\/p>\n

Published on 24th February 2022<\/em><\/p>\n

<\/strong><\/p>\n

Investors have had a lot thrown at them in recent months, with the emergence of the Omicron variant, rising inflation worries, and the prospect of higher interest rates. To these concerns, we can now add the Russian invasion of Ukraine which, aside from the likelihood of human suffering, poses geopolitical dangers for the West and threatens to make our inflation problems worse. Clearly, it is a fast-moving situation which could change very quickly but, at the time of writing, Russia\u2019s military has launched air and missile attacks across Ukraine as well as land incursions in some areas. This followed Vladimir Putin\u2019s formal recognition of the independence of the breakaway republics in Eastern Ukraine and their request for military support.<\/strong><\/p>\n

<\/strong><\/p>\n

Markets have been volatile in the build-up to the crisis with geopolitical tensions exacerbating investor concern about the prospect of higher interest rates. Central banks look set to end years of quantitative easing and ultra-low rates as they attempt to get a grip on rising inflation, taking away what has been an important support for markets. There had been some light at the end of the tunnel, with economists forecasting that the peak in inflation was around the corner as the impact of the pandemic wanes. However, this peak could get pushed back if oil, gas and other commodity prices continue to rise on the back of the Ukraine crisis. Clearly, one of the big risks would be an interruption in the Russian gas supply to Europe.<\/p>\n

Volatility is likely to continue in the coming days, though history does give us some comfort that markets should eventually shrug off these geopolitical concerns and recover. During the Crimean annexation of 2014, investors experienced some volatility, but global equities soon resumed their upward trend as the crisis subsided. Going<\/p>\n

back further, global markets had a difficult time in the run-up to the US-led invasion of Iraq but bottomed about a week before the troops went in and spent the rest of the year going up steadily. And even further back, there was a big drop in bourses during the Iraqi invasion of Kuwait in August 1990 when the oil price doubled but markets soon stabilised afterwards. Clearly, all geopolitical events are different and this one is particularly serious, but we are confident that markets will bounce back once tensions subside.<\/p>\n

In terms of what we are doing in client portfolios, we continue to take a long-term approach and favour a broad mix of internationally diversified equities alongside lower risk alternatives and fixed income. We have been gradually rotating into sectors that should benefit from higher interest rates such as banks as well as energy companies. However, we continue to favour longer-term growth companies with strong franchises and will look to take advantage of any prolonged volatility. While we are still cautious on bonds our fixed income holdings remain focused on liquidity, security and providing diversification from equities. Rest assured that we are monitoring developments closely.<\/p>\n

<\/p>\n

Disclaimer:<\/span>
\u201cInvestors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.<\/span><\/p>\n


Quilter Cheviot and Quilter Cheviot Investment Management are trading names of Quilter Cheviot Limited. Quilter Cheviot Limited is registered in England with number 01923571, registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority. Quilter Cheviot Limited has established a branch in the Dubai International Financial Centre with number 2084 which is regulated by the Dubai Financial Services Authority. Quilter Cheviot Limited is regulated by the Jersey Financial Services Commission for the conduct of investment business and funds services business in Jersey and by the Guernsey Financial Services Commission to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects, the regulatory system that applies will be different from that of the United Kingdom.<\/span>\u201d<\/span><\/p>” content_phone=”

Further to our market update webinar on the 7th February 2022, please find below some further commentary from one of our discretionary portfolio managers Quilter Cheviot on the Russian & Ukraine conflict published on the 24th February.<\/strong><\/strong><\/h4>\n

<\/strong><\/p>\n

Published on 24th February 2022<\/em><\/p>\n

<\/strong><\/p>\n

Investors have had a lot thrown at them in recent months, with the emergence of the Omicron variant, rising inflation worries, and the prospect of higher interest rates. To these concerns, we can now add the Russian invasion of Ukraine which, aside from the likelihood of human suffering, poses geopolitical dangers for the West and threatens to make our inflation problems worse. Clearly, it is a fast-moving situation which could change very quickly but, at the time of writing, Russia\u2019s military has launched air and missile attacks across Ukraine as well as land incursions in some areas. This followed Vladimir Putin\u2019s formal recognition of the independence of the breakaway republics in Eastern Ukraine and their request for military support.<\/strong><\/p>\n

<\/strong><\/p>\n

Markets have been volatile in the build-up to the crisis with geopolitical tensions exacerbating investor concern about the prospect of higher interest rates. Central banks look set to end years of quantitative easing and ultra-low rates as they attempt to get a grip on rising inflation, taking away what has been an important support for markets. There had been some light at the end of the tunnel, with economists forecasting that the peak in inflation was around the corner as the impact of the pandemic wanes. However, this peak could get pushed back if oil, gas and other commodity prices continue to rise on the back of the Ukraine crisis. Clearly, one of the big risks would be an interruption in the Russian gas supply to Europe.<\/p>\n

Volatility is likely to continue in the coming days, though history does give us some comfort that markets should eventually shrug off these geopolitical concerns and recover. During the Crimean annexation of 2014, investors experienced some volatility, but global equities soon resumed their upward trend as the crisis subsided. Going<\/p>\n

back further, global markets had a difficult time in the run-up to the US-led invasion of Iraq but bottomed about a week before the troops went in and spent the rest of the year going up steadily. And even further back, there was a big drop in bourses during the Iraqi invasion of Kuwait in August 1990 when the oil price doubled but markets soon stabilised afterwards. Clearly, all geopolitical events are different and this one is particularly serious, but we are confident that markets will bounce back once tensions subside.<\/p>\n

In terms of what we are doing in client portfolios, we continue to take a long-term approach and favour a broad mix of internationally diversified equities alongside lower risk alternatives and fixed income. We have been gradually rotating into sectors that should benefit from higher interest rates such as banks as well as energy companies. However, we continue to favour longer-term growth companies with strong franchises and will look to take advantage of any prolonged volatility. While we are still cautious on bonds our fixed income holdings remain focused on liquidity, security and providing diversification from equities. Rest assured that we are monitoring developments closely.<\/p>\n

<\/p>\n

Disclaimer:<\/span>
\u201cInvestors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.<\/span><\/p>\n


Quilter Cheviot and Quilter Cheviot Investment Management are trading names of Quilter Cheviot Limited. Quilter Cheviot Limited is registered in England with number 01923571, registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority. Quilter Cheviot Limited has established a branch in the Dubai International Financial Centre with number 2084 which is regulated by the Dubai Financial Services Authority. Quilter Cheviot Limited is regulated by the Jersey Financial Services Commission for the conduct of investment business and funds services business in Jersey and by the Guernsey Financial Services Commission to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects, the regulatory system that applies will be different from that of the United Kingdom.<\/span>\u201d<\/span><\/p>” content_last_edited=”off|desktop” _builder_version=”4.14.8″ _module_preset=”default” header_4_line_height=”1.5em” global_colors_info=”{}”]

Active Management and Diversification<\/h1>\n

High rates of inflation, bear markets, an energy crisis, geopolitical conflict, rising interest rates \u2013 the outlook has been anything but ideal for financial markets, and with the UK\u2019s deepening political and economic crisis, things may be on rocky ground for some more time.<\/span><\/p>\n

It\u2019s at times like this that investors tend to step back and take a more passive approach in order to lower their exposure to risk. However, experienced fund managers know that this is when you step in and actively manage portfolios, diversifying them to strategically offset losses with gains. The additional fees money managers levy on active management pays back many times in terms of returns, stability and protection in a volatile market.<\/span><\/p>\n

Financial markets move up and down all the time, but when those moves are bigger than usual, steep and frequent, the market is said to be volatile. The unpredictability tends to be higher when the market is moving lower. This is what makes investors panic and take the ostrich defence \u2013 burying their head in the sand and hoping everything goes away.<\/span><\/p>\n

At Finsbury associates, we always tell our clients that staying calm and adopting an active, balanced and holistic view are how they can stay one step ahead of the market and protect their money through times of crisis.<\/span><\/p>\n

<\/span><\/p>\n

Importance of a diversified portfolio<\/b><\/span><\/h2>\n

<\/b><\/span><\/p>\n

\"Importance

<\/b><\/span><\/p>\n

The primary goal behind diversifying your investments<\/a><\/span> is to mitigate risk and protect your wealth.<\/span><\/b><\/span><\/p>\n

It is extremely rare when every single asset class is crashing or generating loss. Period of loss for one are typically times of gain for others. Investing in different asset classes like equities, real estate, credit, government bonds, and cash means that even if a few of them are in a phase of loss, the gains from others will balance out your capital investments.<\/span><\/b><\/span><\/p>\n

Narrowing down your investments puts you at a much greater risk of losing a substantial amount of your capital. For instance, let\u2019s say you have invested heavily, and almost exclusively in tech-based stocks. Rapidly rising interest rates will have a massive impact on the valuation of these companies, bringing the value of your portfolio<\/a> crashing down, and devaluing your capital investment in the process.<\/span><\/p>\n

Different asset classes tend to perform differently at various times. So, if you have invested in gold-backed bonds and equities or other currently well-performing asset classes alongside tech-based stocks, the gains from the former will balance out the losses from the latter, leaving the value of your portfolio largely untouched \u2013 if not profitable.<\/span><\/p>\n

<\/span><\/p>\n

Active Management and Diversification<\/b><\/span><\/h2>\n

<\/b><\/span><\/p>\n

\"Active

<\/b><\/span><\/p>\n

In an unpredictable financial environment, actively managed funds and portfolios have a definite advantage.<\/span><\/b><\/span><\/p>\n

Active management means that a portfolio or fund manager and their team of seasoned investment experts continuously reviewing and making decisions on the fund or capital amount. This is the reason why active management comes at an extra fee \u2013 because the success of this approach depends on in-depth market research, the team\u2019s expertise, and their experience and success with managing challenging markets.<\/span><\/b><\/span><\/p>\n

These professional money managers buy and sell assets on your behalf. With an eye on the pulse of the market, having active management for your portfolio enables it to respond intelligently to fluctuations and market forecasts.<\/span><\/b><\/span><\/p>\n

This is why active management is a worthwhile investment during economic and political volatility.<\/span><\/b><\/span><\/p>\n

At Finsbury Associates<\/a><\/span>, our investment strategy is to build a diversified portfolio with the core-and-satellite approach. This is widely considered one of the best and most effective ways to grow the value of a portfolio over the long-term, keeping investments fairly stable through ups and downs, no matter how steep. The core-and-satellite approach builds portfolios with a core investment, complemented by satellite investments.<\/span><\/b><\/span><\/p>\n

This inherently diversifies your interests and is a tried-and-tested way to earn higher returns while lowering risk. Your money goes into ETFs, multi-asset funds and other alternatives, spreading out your risk and ensuring consistent returns. It is a great strategy for those who want to build wealth over time, and is one of the most reliable ways to invest your money.<\/span><\/b><\/span><\/p>\n

Get in touch<\/a><\/span> with us and talk to one of our experts about whether this strategy can help you grow your wealth and meet your financial goals.<\/span><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]\n","protected":false},"excerpt":{"rendered":"

Active Management and Diversification High rates of inflation, bear markets, an energy crisis, geopolitical conflict, rising interest rates \u2013 the outlook has been anything but ideal for financial markets, and with the UK\u2019s deepening political and economic crisis, things may be on rocky ground for some more time. It\u2019s at times like this that investors […]<\/p>\n","protected":false},"author":1,"featured_media":52699,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[61,40],"tags":[],"_links":{"self":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/52697"}],"collection":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/comments?post=52697"}],"version-history":[{"count":12,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/52697\/revisions"}],"predecessor-version":[{"id":52760,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/52697\/revisions\/52760"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media\/52699"}],"wp:attachment":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media?parent=52697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/categories?post=52697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/tags?post=52697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}