Private client managed funds tend to be more
benchmark aware and exhibit more stable risk profiles but private
client discretionary portfolios have the edge in returns over a
full investment cycle, according to Asset Risk Consultants.
The
Guernsey-based consultants’ study sought to investigate
whether discretionary managers have added value versus managed
funds during the difficult markets of the last couple of
years.
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The research suggests that discretionary
managers were much better at protecting clients in the bear market;
but rather slow to re-risk as financial markets rallied strongly in
the summer of 2009.
The report’s key conclusions were:
- Absolute return funds have done a good job
versus the typical cautious discretionary portfolio over the last
five years or so. However, much of this performance gap can be
attributed to the impact of income requirements. - If an investor is seeking a balanced mandate;
there has historically been a clear performance gap in favour of
discretionary portfolios. The cause is unknown but the quantum has
been material. - For steady growth mandates, until the
financial crisis there had been little to choose between the
average fund and the average discretionary portfolio. However,
during the financial crisis the average discretionary portfolio
suffered a significantly smaller drawdown. That said, as markets
recovered the performance differential was partially closed. - Equity risk mandates followed a similar
pattern to their steady growth counterparts.
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