A new environment for investors
Recent months have seen unwelcome volatility. Central banks across the world have switched their focus towards inflation, away from growth. The scene is set for successive interest rates rises, with a dramatic impact on a wide range of asset classes. This new market environment is foreign to much of the market with many participants blasé to the risks.
A clear concentration across US Equities, Global Technology and growth stocks made these the go-to investments for many. And the leaders – Apple, Amazon, Facebook, Google and Netflix – dominated S&P 500 returns throughout 2021. Not since the dot com bubble has one sector had such a decisive effect on index returns.
PIM portfolios – no one-way bets
We don’t follow the herd or put all our eggs in one basket. One of the core pillars of our Strategic asset allocation is diversification. Diversification helps drive balance – over the medium-term this is critical for consistent outcomes for clients.
A great example of this is our holding in UK Equity. While badly out of favour as big tech rallied, UK Equity, in particular its income sector, have remained an important part of portfolios. The UK has a different investment profile to much of the Global market – lower on technology but high on financials and commodities. In a world of low growth, low inflation and low interest rates, the UK has been a laggard. With economic growth, inflation, and rising interest rates there is much to like about the UK. Our headwinds now appear to be tailwinds.
Thoughtful diversification drives long-term consistency
Maintaining a long-term balance across multiple, diversified asset classes means that outcomes for clients should be smoother and more consistent, rather than being reliant on a certain market environment continuing for ever.
So, while markets have been suffering over the last few months, we’re delighted that our PIM Strategic Passive portfolios have held up so well. This can be seen in the 1 year RTMA chart, for a mid-risk clients’ portfolio. Parmenion Risk Grade 5 has risen towards the top of the first quartile among its peer group.
This validates the asset allocation that underpins the solution. Consistency of performance is the ultimate goal, which should lead to clients receiving strong risk adjusted returns, regardless of the timing of their investment. This is further demonstrated over longer time periods, in this case over 5 years.
The Parmenion Risk Grade 5 portfolio never strays too far from the middle of the peer group, with most periods in the second quartile or above. And this is compared to a peer group of mostly active portfolios, who should add performance via selectivity in their choice of active fund managers.
Consistent outcomes, whatever the risk
Across the full risk spectrum our Strategic Passive solution has added value over both the short and longer term. To show this outcome, here are RTMA graphs over 1 and 5 years for our Risk Grades 3 portfolios and for Risk Grades 8 & 9. The value of asset allocation in driving consistent outcomes has never been clearer.
Risk Grade 3 (RTMA 1)
Risk Grades 8 and 9 (RTMA 5)
What is RTMA?
Risk Target Multi Asset (RTMA) is a peer group analysis provided by FE. It compares the performance of multi asset funds (where the fund is part of a multi asset range). Each fund is grouped based on its FE risk score and this buckets the funds into 6 RTMA risk rated sectors. Parmenion map our portfolios to the RTMA sectors using the same methodology FE use, to compare ourselves against a peer of multi asset funds. DFM fees and underlying fund OCF are included within performance figures for both Parmenion portfolios and the multi asset peers.
Please note, RTMA is used here for peer comparison only.
For more information on our PIM Strategic Passive solution, please refer to our newly launched Factsheets or speak to your Regional Sales Manager.
If you'd like to find out more about our range of Passive Investing solutions, click here.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
