Quarter 1 Investment Update

At Altor we have recently had a period of abstention from both coffee and social media for the period of Lent. The idea was to encourage a period of reflection and change. As it turns out, the lack of coffee was a mistake but the peace achieved through the temporary deletion of Twitter, LinkedIN and all news apps was blissful. Investors in Q1 would have done well to also avoid all news for their own sanity. At Altor we have been saying for sometime that markets were defying gravity, by continuing to rise in spite of the crazy newsflow in particular from the new US administration.

In Quarter 1 markets saw record inflows of brand new client money and promptly turned around and rewarded these inexperienced investors with a nearly 10% fall in some indices in a short space of time in February. Much of this new or ‘hot’ money promptly fled the market just in time to miss the sharp recovery that happened within a matter of weeks. Markets do this to investors from time to time and whilst regrettable for those investors caught up in it, it is a natural part of the market cycle and benefits our investors who are all long-term market investors. Some equity markets recovered the lost ground completely but further weakness in March has resulted in most equity indices posting losses year to date. UK markets have been the worst effected by these losses as many investors remain concerned about the future for the UK and UK businesses without a clear future post-Brexit.

Falls in markets will happen from time to time and there is no solution other than to remain invested and enjoy the benefits of long-term above inflation growth that non-cash assets offer. It isn’t an exciting message and will not generate headlines but prudent and boring investment is the way to greater riches. We are one of the handful of  advisory firms (shout out to Capital and RTS) in the UK that can say this without any accusation of bias as we are paid whether our clients invest in shares or cash.

As we offer a genuinely bespoke investment consultancy, not one of our clients has the same blend of investment managers but all have held up better than the broader equity market. This is due to a mix of asset allocation and some active management premium in managing the fall. This active management premium is something that we continue to monitor. The argument in favour of active management has been whittled down over the years to minimising the losses in poor markets as there really is no evidence of an ability to outperform the market on the way up. Falling markets like we are seeing at the moment is the perfect time for active managers to prove their worth. If they cannot do thsi then the argument is lost and most clients will start to drift even more to cheap passive funds.

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