Make “protectionism” work for you

How do you invest in global financial markets when they react daily to the whims of a man with one hand on his twitter feed and the other on a nuclear arsenal?

At the moment, you cannot pick up a newspaper, open a website or turn on the television without reading about volatility and it is not limited to the US and UK. Political change, environmental disasters and increasingly, concerns about what information can be trusted have all contributed to a feeling of insecurity, especially amplified within financial markets where knowledge is king. In 2016, investors saw sharp falls on the back of Brexit and Donald Trump’s election before rallies in the following days. Our approach to investments meant that we were able to negotiate through headline-making downturns.

What became clear is that volatility is becoming the new norm. Historically, globalisation means that events that were once considered on the other side of the world now have a knock on effect closer to home and all within a split second as news, fake news and rumours hit the internet within the blink of an eye. 

Despite this, a trend of unwinding globalisation has been underway since 2014 based on a number of protectionist measures, trade agreements and tariffs and is set to accelerate further with Trump and Brexit. Among the implications of increased protectionism are higher cost push inflation, increased currency volatility and reduced trade, albeit from a heavily impaired base. Protectionism goes hand in hand with rising nationalism, which challenges the current geopolitical world order, with an inward-looking US further cementing this nationalistic trend. There is also an elevated political risk calendar in Europe which could lead to the increased possibility of a break-up of the Eurozone. In situations like this, it is important to be able to take advantage of any dislocations in global markets while continuing to focus on riskadjusted returns.

It has become more prudent than ever to make capital preservation the first priority for any investor. It is not the time to be making wild bets or playing the markets. Instead, diversification and risk management should all be placed at the core of your wealth management strategy as active management is expected to be rewarded in the coming year.

Towards the end of 2016, central banks began admitting that negative rates have been hurting financial institutions. The unconventional quantitative easing (QE) policies have significantly reduced volatility and induced herding behaviours. Importantly, during the QE cycle, asset prices lost their previously very strong correlation to world events data and economic surprises - a result of the perception that central banks can “underwrite” the economic and capital market cycles and therefore “good news is good news” and “bad news is good news” too. As such, passive strategies strongly outperformed active strategies during in this cycle. It is expected that the reduced incremental effectiveness and an increasing list of counter-productive effects of QE programmes will shift investors’ perceptions away from their reliance on excessive easing. We expect that as we turn the QE page, active strategies, driven by a thorough and intense research-driven investment process, will perform strongly. 

Ashburton has been helping investors to invest more effectively for over 30 years, placing multi asset investing as the cornerstone of our business. Founded in Jersey in 1982, we have invested in what makes sense rather than chasing the latest investment trend or focussing on short-term gains. The range of solutions and approach to investments has evolved over time to suit ever changing market conditions but the underlying constant is an understanding of our clients need to effectively manage risk and access more sources of return.

It is no coincidence that during unstable times, the avoidance of loss within a disciplined riskcontrolled framework has proved an attractive proposition. When we talk about investing, you’ll never hear portfolio managers fixating on upcoming events because investing in solid, dependable assets for the long-term is key to our ‘sleep at night’ assurance that capital is being properly managed. In fact, we have stuck to the philosophy and process through some of the most turbulent times ever seen in financial markets. We think that protectionism is a good thing, especially when it comes to your future.

The Portfolio Management Services team, based in Jersey, continues to follow our founding philosophy. With an average Ashburton tenure of 18 years, the team offer multi asset solutions tailored to the personal circumstances of clients, never a “one size fits all” approach. By diversifying risk across asset classes and selecting the most appropriate instruments including ETFs, specialist third party funds and cash instruments, we look to maximise profits as asset classes perform while adjusting allocations to protect and conserve capital in falling markets.
Using Exchange Traded Funds (ETFs) based on clients’ investment preferences and risk appetite provides an alternative path to achieve efficient, low cost access to markets within an actively managed portfolio. We continue to add value from ongoing asset allocation – including managing exposures to different geographies, sectors and style factors.

Over the past year, our team have seen a 78% increase in new accounts with assets under management now totalling over £250m. It is no coincidence that during unstable times, the avoidance of loss within a disciplined risk-controlled framework has proved an attractive proposition. This gives our clients the ‘sleep at night’ assurance that their portfolios are being properly managed. In fact, we have stuck to the philosophy and process through some of the most turbulent times ever seen in financial markets.

Although there may be volatile times ahead, it is worth bearing in mind that good, active managers thrive and look for opportunities created in by volatility in the markets. We may never have seen a political climate like the one we have now or the speed at which markets can react but this is when experience matters and our multi asset team have navigated global crises like Black Wednesday and the dot.com bubble successfully for our clients since 1982. While they might not be any good with Twitter, they are able to provide a safe pair of hands for your most important assets in the future.