Skip to main content

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.

Labels:

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

Post a Comment

Cloud Bookkeeping

HS2 cost cuts new routes and add delays.

 Trans­port depart­ment offi­cials have begun work on «Project Sil­ver­light» sug­gest­ing the high­speed rail scheme might face four addi­tional years of delay. The planned High Speed 2 rail line faces fur­ther delays of up to four years and more cuts to the project under plans being drawn up by min­is­ters to rein in its bal­loon­ing costs. The extra delays to the coun­try’s biggest infra­struc­ture project would mean that it would not be com­pleted until as late as 2045 — 12 years after ori­gin­ally planned. «This is a func­tion of infla­tion; we are hav­ing to find huge sav­ings because the cost of everything the depart­ment is already doing will have become so much more expens­ive by then,» said one gov­ern­ment offi­cial. In Octo­ber, the FT repor­ted that the Treas­ury had asked HS2’s man­age­ment team to identify poten­tial cuts or «scope reduc­tions» to the high-speed line. Trans­port depart­ment offi­cials have sub­sequently begun work on Project Sil­ver­light aimed at fi...
4 comments
Read more

Small business will be excluded from fraud law.

  Min­is­ters are plan­ning to exclude small busi­nesses from anti-fraud legis­la­tion by nar­row­ing the scope of a crim­inal offence tar­get­ing com­pan­ies that fail to pre­vent eco­nomic crimes. MPs and anti-cor­rup­tion cam­paign­ers had hoped the gov­ern­ment would seek to amend the eco­nomic crime and cor­por­ate trans­par­ency bill to ensure the new offence covered all com­pan­ies. The plans to limit the scope of the amend­ments will also dis­ap­point those who had hoped the legis­la­tion would remove key hurdles to the pro­sec­u­tion of white-col­lar crime. A new «fail­ure to pre­vent» offence for fraud would bring it in line with exist­ing sim­ilar cor­por­ate offences for bribery and tax eva­sion. At present, pro­sec­utors need only prove that organ­isa­tions lacked «reas­on­able» or «adequate» con­trols to pur­sue the offence in bribery and tax eva­sion cases. «It would be much more sens­ible for the gov­ern­ment to provide strong guid­ance for SMEs on what these pro­ce...
3 comments
Read more

Doubt on CS's collateral.

  Credit Suisse provided an emergency $140mn loan to Greensill Capital based partly on invoices to companies that deny ever doing the business stated on the documents. The Swiss bank provided the loan in October 2020, less than five months before the collapse of Greensill, a supply chain finance firm that counted former British prime minister David Cameron as a senior adviser. Invoices issued by metals magnate Sanjeev Gupta’s Liberty Commodities and sold to Greensill formed part of the collateral for the loan, according to documents seen by the Financial Times and people familiar with the transaction. Yet several of the parties named on the invoices have told the FT they did no business with Liberty. GFG has consistently denied any wrongdoing. Credit Suisse’s loan had a clause dictating that the collateral value had to be equal to or greater than the $140mn borrowed. The terms of the debt agreement only allowed invoices on Green-sill’s balance sheet to count towards this tally if t...
2 comments
Read more