What went wrong?

The latest analysis of portfolio returns does not paint a favourable picture. Hardly any investment portfolio records a positive return since the beginning of the year. After the tremendous returns of the last few years, this is hardly surprising. A setback had to be expected at some point. So far, so normal. However, the fact that so-called conservative investment portfolios are showing some of the biggest losses is anything but normal.

The inverse risk-return curve

The chart summarises the returns of investment portfolios at banks and asset managers since the beginning of the year. The unusual shape immediately catches the eye. The so-called conservative investment portfolios have lost the same as aggressive investment portfolios.

Asset managers: too little caution with conservative strategies, too euphoric with aggressive strategies

At least many managers of conservative investment strategies can be attested to not having run into the storm completely naively. This is reflected in the fact that the median results achieved by conservative portfolios are generally better than the performance of the benchmark. Exactly the opposite can be seen in the more aggressively oriented portfolios. Here, the asset managers seem to have pretty much disregarded the risks. A large proportion of the asset managers lose significantly more than the market average here. 

Now the oversimplification of risk profiles is taking its toll. Without proper asset planning, one can no longer weather the storm.

Patrick Müller

CEO ZWEI Wealth

Redefining risk?

Under the mantle of modern portfolio theory, the entire financial industry has given the impression over the last 25 years that portfolios can be selected according to the motto: How much risk do you want? Of course, this was and is a simplification that never stood up to closer scrutiny. But the principle of risk profiles allowed an efficient and simple classification of investors and made it possible to sell products without much effort. This worked reasonably well for a long time thanks to falling interest rates. This will no longer work to the same extent in the future. Those who continue to rely on simple risk profiling should not be surprised by the results. Only comprehensive wealth planning based on one's own financial planning and a broad definition of risk will weather the storm.