Research → Embracing a long-term view amid uncertainty
Embracing a long-term view amid uncertainty
As high levels of uncertainty and volatility continue to ripple across global markets, financial advisors are taking a close look at their investment strategies and allocations. Some are feeling pressure from clients to make more dramatic portfolio changes, largely given negative performance across equities, bonds and alternatives for the quarter and for this year.
Fight the bias to action
New research from the Addepar platform reveals important insights from high-net-worth (HNW) investor data. This capital is often regarded as ‘smart money’ or ‘patient capital’ for good reason. Despite fluctuating market conditions, HNW investors appear to be taking much more of a long-term perspective on the markets than retail investors. These sophisticated investors recognize how they have benefitted over the last decade from historically outsized performance.
Continuing to invest for the future
We identify these types of trends by tracking investment flows — where money is moving and when — which offers important insights into the decision-making processes of sophisticated investors. You and your clients can benefit from those insights.
So what are we seeing? The 2022 drawdown follows a number of years of strong performance. Although cumulative performance has recently declined, remember this: performance on an absolute and risk-adjusted basis over the last 10 years continues to be significantly higher than the long-term average. A buy-and-hold strategy with a long-term outlook has continued to outperform historical norms.
HNW investors are largely sticking with their investment strategies during these tumultuous times, with only modest outflows from risky assets into cash. In contrast, the larger outflows out of risky assets are attributed to smaller portfolios.
Stay the course
Since 2016, allocations to cash and fixed income across the Addepar platform have each increased modestly by 2% while equities decreased by 2%. In fact, asset allocations across the Addepar platform have never moved more than 3% above or below their long-term average – and remain centered around long-term trends. Flows out of risky assets corroborate this picture. Meanwhile, private equity and venture capital opportunities are being seen as good long-term investments.
These long-term trends may be surprising to some given frequently dire headlines. Yet the data is clear: "smart money" portfolios are not making radical changes and are certainly not following sensationalist news.
Data-driven insights help calm clients
The lesson is this: it’s important to keep in mind a long-term perspective while balancing your clients’ diverse needs and risk profiles – especially if you are considering making significant changes to portfolios during periods of heightened volatility. Peer analytics can help you make more informed portfolio decisions, particularly in challenging markets.
Addepar is a software and data platform that is purpose-built for professional wealth, investment and asset management firms to deliver outstanding results for their clients. We’re helping our clients unlock the power and possibility of more informed, data-driven investing and advice. Our platform was created to empower investment managers to make data-driven and more confident investment decisions, and to clearly see how assets are performing and where they might be exposed. Most recently, we’ve expanded our capabilities to include Navigator for scenario modeling and AdvisorPeak Trading & Rebalancing to address portfolio drift.
Notice and Disclaimers
All information provided by Addepar, Inc. or its subsidiaries (collectively, “Addepar”), including without limitation, all text, data, graphs and charts (collectively, the “Information”), is the property of Addepar and is provided for informational purposes only. The Information may not be modified, reverse-engineered, reproduced or re-disseminated in whole or in part without prior written permission from Addepar. All rights to the Information are reserved by Addepar.
The Information may not be used to create derivative works or to verify or correct other data or information without prior written permission from Addepar. For example (but without limitation), the Information may not be used to create indexes, databases, risk models, analytics, software or in connection with the issuing, offering, sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from the Information or any other Addepar data, information, products or services.
The user of the Information assumes the entire risk of any use it may make or permit to be made of
Addepar makes no express or implied warranties or representations with respect to the information (or the results to be obtained, but rather the use thereof), and to the maximum extent permitted by applicable law, Addepar expressly disclaims all implied warranties (including, without limitation, any implied warranties of originality, accuracy, timeliness, non-infringement, completeness, merchantability and fitness for a particular purpose) with respect to any of the information.
Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Past performance does not guarantee future results.
The Information should not be relied on and is not a substitute for the skill, judgment and experience
of the user, its management, employees, advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of any person, entity or group of persons.
None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or any trading strategy.
Addepar does not recommend, endorse, approve or otherwise express any opinion regarding any issuer, securities, financial products or instruments or trading strategies and Addepar’s research products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.
Addepar, Investment Sentiment Index and other Addepar brands and product names are the trademarks, service marks or registered marks of Addepar or its subsidiaries in the United States and other jurisdictions.
© 2023 Addepar. All rights reserved.