With financial markets having come a long way since the 2008 financial crisis, there is a recognition among investors that we are late in the cycle. In economic terms too, there is a growing sense that a downturn may be lurking around the corner.
Cautious investors, and new family mandates in particular, may feel a portfolio that is fully invested in a strategic asset allocation with significant exposure to equities is a little too high up the risk curve for them.
But staying in cash is not always the appropriate option either, as it is a conservative approach that offers too little a return. Interest rates are still at low levels, so the value of cash held on deposit is gradually eroded over time by inflation.
If you’re holding sizeable sums of cash right now, protecting that capital in the later stages of the economic and market cycle will be a clear priority. In these situations, we believe a good strategy is to get ‘paid to wait’.
This means building a portfolio that can generate a reasonable yield with a minimum amount of risk as a stop gap until more rewarding long-term opportunities arise. In essence, this involves holding assets that have defensive qualities and offer a yield in excess of inflation.
In short: as this late-cycle phase runs its course over the next year or two, we earn a living, but we don’t take on too much risk.
Returns on long-dated bonds are expected to be more volatile for the foreseeable future, so we believe the best strategy for lower-risk investors is to adopt a short-duration strategy focusing on high-quality issuers.
Iain became a Partner of London & Capital in 2008 and heads the firm's Private Investment Office, which he founded in 2013. The Private Investment Office provides wealth management services for some of the firm’s largest clients.
Prior to joining London & Capital, Iain ran his own wealth management business for five years, in association with Zurich Financial Services Limited, where he built and maintained a significant high net worth client base. Before that, he was a partner at Freeman, Farmer and Anderson Company at only 27.
He has been awarded the Investment Management Certificate, a Diploma in Financial Planning and a BA Hons degree from The University of Manchester. He has been named in CityWealth’s ‘Top Private Bankers & Investment Managers’ leaders list for the past 3 years and was named in PAM ‘Top 40 under 40’ in 2013.
To arrange an introduction to London & Capital contact us using the form below or by phone: +44 207 396 3320