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Wealth managers suffer losses.

 

Wealth managers loss

Wealth managers are grappling with one of their worst years in a century after high inflation and a sell-off in stocks and bonds hammered returns. The threat of stubbornly higher inflation presents a challenge to preserving wealth in real terms that have yet to be faced in decades. In contrast, the pain in markets over the past 12 months has undermined conventional wisdom around balancing portfolios between equities and fixed income. «This year is one of the most significant years of wealth destruction in nearly 100 years,» said Renaud de Planta, who leads Pictet, the 217-year-old Swiss partnership, which stewards $635bn. «Looking at it rather simply, many private investors could have lost more than a quarter of their real inflation-adjusted wealth,» said de Planta, citing the example of a portfolio split evenly between bonds and stocks.

A typical UK wealth management client will have seen their portfolio lose nearly 20 per cent in inflation-adjusted terms in the year to December 15, according to research by Asset Risk Consultants, which tracks the returns of strategies run by more than 100 large UK wealth managers. Setting aside inflation, ARC said typical wealth management portfolios lost 10 per cent this year. Other managers say they turned to commodities exposure and gold. The highest inflation in decades and the prospect of rising interest rates is a particularly toxic combination for bonds.

Markets tend to cover their losses over the long run, but the sudden rise in inflation presents a particular challenge. Inflation running close to 10 per cent means managers start the year far behind and need to deliver much better performance to break even.

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Comments

  1. Tim3 January 2023 at 11:34

    Managers won't be able to bring in that kind of better performance that allows them to break even. Not this year, at least.

    ReplyDelete
  2. Evan H.3 January 2023 at 13:57

    You haven't actually lost 20% unless you sell your stocks or bonds. My advice: don't sell. Price will come around in 1-2 years. If you sell now you will have indeed lost 20%+.

    ReplyDelete
    Replies
    1. J3 January 2023 at 15:45

      That's a very good point. I don't know why they keep saying "you've lost this or that". Yes the markets are down and everyone can see what inflation is doing. But this too shall pass. Don't sell and you won't lose much or none at all.

      Delete
    2. Matt3 January 2023 at 17:55

      History is cyclical. Things go up and then they come down and then it all repeats itself. This period was to be expected if you had paid attention. If you have planned for it, this won’t affect you much.

      Delete

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