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Aug 2022
Watch Graham Harrison, Chairman of the ARC Group talk through our Q2 commentary where we consider the benefits of diversification versus more concentrated portfolios.
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Watch Graham Harrison, Chairman of the ARC Group talk through our Q2 commentary where we consider the benefits of diversification versus more concentrated portfolios.
The second quarter's results for the ARC Private Client Indices, ARC Charity Indices and ARC Inheritance Tax Portfolio Indices are now available. The Estimates for July are also now available. Compare your performance to the universe of over 300,000 portfolios.
The first six months of 2022 have been tough for investors with sharp drops across both equity and bond markets. The last time US equities recorded a similar fall in the first six months of a year was sixty years ago at which time President Kennedy was facing escalating tensions in Cuba between the US and the Soviet Union. Things have been no better for US sovereign debt which recorded the worst first six months for a calendar year since the US Constitution was ratified in 1788, a year before the US Treasury was founded!
With inflation escalating and nominal interest rates starting to rise, are we seeing the end of easy money? Graham Harrison, Managing Director of the ARC Group talks through our latest commentary and explains out why your investment managers skill has never been so valuable.
With interest rates trending down for more than 40 years, investors have enjoyed a powerful tailwind supporting outsized bond and equity market returns. When in 2007 it looked like the party might be ending, central banks responded by providing liquidity stimulus through quantitative easing, expanding their balance sheets and turning easy money into free money. And, as risk free rates of return became negative, it was not surprising that equity markets climbed strongly supported by both rising corporate profitability and valuation expansion. But what happens when nominal interest rates start moving up as inflation rises to levels not seen since the 1980s?
ARC Group Managing Director talks through the January commentary - "Noise - Cacophony or Symphony?"
There is no doubt that there is a great deal of "noise" when an investor is seeking to select a discretionary investment manager. By using available data and having a predetermined decision process, investors cut through the noise and appoint the right manager. Find out more in the video or download the full article here.
Investing is a tricky but unavoidable business for those looking to secure their financial futures. One answer as to how to invest is to follow the advice of Warren Buffett to his wife that on his death she should invest by purchasing an index fund. Sounds simple but it assumes knowledge of which index or indices should be tracked. It is also rather disingenuous as Warren Buffett clearly continues to believe that his concentrated stock approach can outperform a passive investment strategy or surely he would have implemented one within Berkshire Hathaway.
We are passionate about helping people get the best out of the investment management industry, so we are delighted to have been involved with crunching the numbers and running the analysis for these awards for 11 years in a row. Well done to all the shortlisted managers and of course, the winners!
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ARC Group Managing Director, Graham Harrison talks through the November commentary - "Bubble, Bubble Inflation Trouble". Are equity markets in a bubble? How should investors be mitigating the risks of inflation? Watch to find out more or download the full article here.
Performance for most private client investors thus far in 2021, despite the pull-back in equity markets that began in September, has been ahead of long-term averages. However, the backdrop has been one of increasing nervousness over earnings growth forecasts and equity market valuations. Throw in a negative return from bond markets year-to-date reflecting concerns over rising inflation and, with apologies to the three witches on the heath, the mood of many investors might be summed up as “bubble, bubble, inflation trouble”.
ARC Group Managing Director, Graham Harrison talks through the August commentary - "The Art of Winning". Are there any discretionary managers that have persistently out-performed their peers? Watch to find out more or download the full article here.
More...The holy grail for most private client investors is to a select an investment manager who consistently and repeatably over time meets their investment objectives and out-performs their peers. And even though investment literature is peppered with warnings that past performance is no guide to future performance, the belief remains that decisions to appoint or remove a manager should be based, at least in part, on their performance track record.
More...March 2021 was the anniversary of pandemic lows for global equity markets. Time magazine described 2020 as an “annus horribilis” and it is hard to disagree. Across the globe, the last twelve months have been a period of unprecedented loss of lives and livelihoods during peace time. Despite massive fiscal support and monetary accommodation, global GDP fell by around 3.5% in 2020. In contrast to the contraction of the real economy, or Main Street as it is known in America, asset markets have rocketed ahead over the last twelve months, fuelled by plentiful liquidity and expectations of a vaccine-driven economic expansion this year and beyond.
More...The Suggestus platform has been awarded the Citywealth Fintech Vendor Gold Award 2021.
More...Fee QuickCheck provides a starting point for assessing whether your fees are reasonable. With just five pieces of information (currency, exposure to funds, portfolio size, investment service cost and total ongoing cost), Fee QuickCheck reviews your fees and charges versus a peer encompassing the published fee scales of circa 100 discretionary investment managers.
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More...For many people 2020 might be summed up in the phrase “pandemic pandemonium” as the rapid spread of the COVID-19 coronavirus created mayhem and chaos across the globe. Normal life was replaced with social distancing; home working; home schooling and periodic tighter lockdowns. Economies experienced sharp contractions whilst governments sought to cushion the economic hardship caused by furloughs; unemployment and business failures. Read on to see how private client portfolios performed in an extraordinary year.
More...As 2020 opened, many discretionary managers were questioning how much further an equity bull market could continue that had in 2019 delivered one of the best years for multi-asset portfolios in a decade, with strong positive returns and a limited drawdown. Concerns about slowing global growth and the withdrawal of ultra-accommodative monetary policy were frequently cited as reasons to be more cautious. Few at that time would have suggested a global pandemic as the key risk facing investors but, towards the end of February, it was apparent that a new deadly virus was beginning to spread around the world. One month later, most of the planet was under lockdown conditions and financial markets responded with the fastest and deepest drawdown since 1987.
More...In this article we explore how discretionary investment managers have been reacting to a decade of financial repression during which the return from risk-free assets has turned negative, both in inflation-adjusted (real) terms and in nominal terms, leaving many investors asking what is the point of no return investing.
More...Most sport aficionados like nothing more than a debate on which team or player is the best. Statistics are studied; skills are rated; results are predicted and then dissected; loyalties are challenged and affirmed. In newspapers and magazines, column inches are filled; TV schedules are peppered with programming; and social media platforms are kept buzzing. For many people, the return of competitive sport as COVID-19 lockdown restrictions are lifted has signaled a welcome return to normality. Billie Jean King, a 39 time Grand Slam title winner, has described sport as a microcosm of society and in the popularity of league tables and awards there is undoubtedly a parallel between sport and investment. Discretionary fund managers and their clients alike are keen to understand where they sit in the league table.
More...In the first quarter of this year, we observed that the drawdown associated with the impact of COVID-19 was unlike anything investors had experienced since the Black Monday crash of 1987 and that the speed of recovery was highly uncertain given the unique events associated with the pandemic. Since then, equity markets have recovered at a pace that few predicted as the exponential spread of the pandemic was contained and as governments and central banks provided significant financial support to reduce the immediate consequences of economic lockdown
More...Economic theory used to suggest that individuals would always act rationally, seeking to maximize their utility (ie enjoyment) through their decision making. All that was needed to ensure the best possible outcome was data. Daniel Kahneman and Amos Tversky challenge that conventional wisdom by developing Prospect Theory, an idea that recognizes that actions can be influenced by emotions as well as evidence. The central proposition of Prospect Theory is that people do not value losses and gains equally. Rather people are loss averse. Kahneman suggested that faced with a 50:50 game of chance, the average person will only willingly play the game if the possibility of losing £10 is counterbalanced by the chance of winning at least £20. Fear of loss motivates people about twice as much as greed.
More...At the turn of the decade, just three short months ago, investors could look back over one of the longest equity bull markets on record. Supported by low inflation and low interest rates, company profits were at record levels and more people were employed in developed economies than ever before. While economic growth was perhaps slower than some would have liked to see, and rising income and wealth inequality was creating political upheaval in Europe and North America, the question was how to distribute economic prosperity not whether economic prosperity would exist to be distributed. Then along came the virus, COVID-19, starting with a single case but then spreading across the globe at great speed, and with its arrival paradise was lost.
More...After the best year for investors for a decade and one of the best decades for investors in a century, it is inevitable that those who have benefited from strong absolute and real increases in their wealth will increasingly worry that their fortunes will, quite literally, reverse. Few investors are willing to take a laissez faire attitude to losses no matter how easy the gains might have been achieved.
More...We are pleased to announce the launch of our new and free Fee QuickCheck. With just five pieces of information (currency; exposure to funds; portfolio size; investment service cost and total ongoing cost) Fee QuickCheck reviews your fees and charges versus a peer group encompassing the published fee scales of circa 100 discretionary investment managers.
More...After the experience of 2018, which proved to be one of the toughest years for investors since the financial crisis of 2008, a degree of trepidation heading into 2019 was to be expected. However, concerns that the extended bull market was finally topping out proved to be wrong and portfolios across all currencies and risk categories saw decent gains.
More...It is widely accepted that the most important decision made by an investor is how to spend their risk budget. In other words, once risk appetite has been determined, the biggest factor driving investment performance is the strategic asset allocation. Often discretionary investment managers express that strategic asset allocation as a benchmark or a neutral position against which tactical asset allocation decisions are implemented.
More...The various PCI indices are compiled from a universe of over 200,000 underlying portfolios supplied by over 90 discretionary investment managers who have elected to be Data Contributors. Conventional wisdom would suggest that it is highly probable that there is survivorship bias at the portfolio level. Why? Because private client investors with poorly performing portfolios are assumed to be more likely to close them down than investors with portfolios performing above expectation. So is conventional wisdom correct?
More...When considering the utility of financial indices, inevitably, the issue of survivorship bias will be raised. The argument goes that managers/funds/companies in any given index at its commencement are then subject to the forces of natural selection. The result of this natural selection process is that the performance of survivors in any given index is biased upwards and, as the performance lookback period increases, all those remaining in the index end up being above average.
More...Many investment managers will say as part of their pitch to a potential investor that they aim for consistency as, if they can deliver “average” performance consistently, over time their performance will trend towards being first quartile. In other words by avoiding mistakes they will end up delivering excellence. That sounds great in theory but how do discretionary investment managers (‘DFMs’) actually perform? In this article we examine two sources of return dispersion: that between DFMs and that within DFMs and find evidence that, on average, the internal dispersion of private client outcomes within a single DFM is at least as high as the dispersion of returns between DFMs. Choosing the right DFM is only part of the answer.
More...After several years of seemingly inexorable rises in financial markets, 2018 proved to be one of the toughest years for investors since the financial crisis of 2008. The results for 2018 saw investors across all currencies and risk categories down for the year.
More...The Performance QuickCheck is now available on your phone or tablet. QuickCheck reviews your portfolio performance outcome versus a peer group selected from over 150,000 private client portfolios provided by around 100 private client discretionary portfolio managers.
More...In this article, we mix our metaphors and consider whether the same idea behind having a diversified portfolio can be applied to selecting investment managers; can the many hands of more than one manager enhance performance through further diversification; or as indicated by Warren Buffett, will the broth be spoilt?
More...As discussed in our commentary last quarter, ‘Anchors Aweigh!’, the choice of a neutral asset allocation is a key factor in determining the overall range of outcomes, but tactical decisions and stock selection also play a key part in the final outcome. The actual PCI results for Q2 for Sterling investors show that managers have exceeded our expectations, likely through a combination of being tactically overweight in risk assets and judicious stock selection. In our commentary this quarter, we examine the role of momentum and skill and after many years in which a passive approach may have offered equal or superior performance to an active one, evidence from 2018 suggests that discretionary managers are delivering tangible value added. Read on...
More...One of the most important decisions that an investor makes is the choice of benchmark used to represent the investment outcome that they are seeking to achieve. In behavioural science, the “anchoring bias” refers to the tendency to rely too heavily on the first piece of information offered. Benchmarks can act as a powerful anchor, constraining both the expectations of the client and the actions taken by a discretionary investment manager. This article examines the potential impact.
More...In Don Quixote by Spanish author Miguel de Cervantes, the eponymous hero sees a series of windmills on the plain and imagines that they are “hulking giants” that need to be slain. He believes that his mission “is a righteous war and the removal of so foul a brood from off the face of the earth is a service God will bless”. One wonders whether the bureaucrats in Brussels went through a similar thought process when designing a client reporting rule where discretionary fund managers are required to inform clients on the same day should their portfolios suffer a 10% decline depreciation in value intra-calendar quarter.
More...How have Private Client Portfolios Performed in 2017? In short, the answer is that 2017 has been a positive year for most private client investors regardless of reference currency and risk appetite. Investors with multi-asset class portfolios have seen their real wealth grow and all the PCI indices ended 2017 at all-time highs (Dec 03 = 100) or within a hair’s breadth of an all-time high.
More...How have Private Client Portfolios Performed in 2017? In short, the answer is that 2017 has been a positive year for most private client investors regardless of reference currency and risk appetite. Investors with multi-asset class portfolios have seen their real wealth grow and all the PCI indices ended 2017 at all-time highs (Dec 03 = 100) or within a hair’s breadth of an all-time high.
More...How have Private Client Portfolios Performed in 2017? In short, the answer is that 2017 has been a positive year for most private client investors regardless of reference currency and risk appetite. Investors with multi-asset class portfolios have seen their real wealth grow and all the PCI indices ended 2017 at all-time highs (Dec 03 = 100) or within a hair’s breadth of an all-time high.
More...Investors are familiar with the disclaimer “past performance is not a reliable indicator of future returns” but perhaps “past volatility is not a reliable indicator of future capital loss” should be added to the standard warnings provided to private clients? With the headline volatility of equities near record lows and seemingly not reflecting the perception of investors following recent market events, the question of whether current volatility statistics are misleading investors warrants investigation
More...In Charles Ellis’s seminal Financial Analysts Journal article from 1975, The Loser’s Game, he advances the case that investment management has evolved from an activity where skill and diligence are rewarded with out-performance, to one where the costs of portfolio management and execution have risen to a point where the best strategy for effective investment management is to minimise losses. And he makes his case by the creative use of a tennis analogy to illustrate his points.
More...The ARC Fair Fee Formula provides a framework for any private client investor to assess whether the cost of investment levied by a DFM is fair and reasonable. The Fair Fee Formula is simple in construct and recognises that price and value are different. A fair fee is not the same as a low fee. A fair fee ensures that the provider of a service receives remuneration for the services rendered that the recipient of those services deems to be reasonable. To paraphrase Aristotle, the investor is best placed to judge the value of services rendered.
More...Foreign exchange markets are notoriously difficult to decipher. Macroeconomic events, inflation concerns, interest rate expectations, economic growth and international trade, not to mention high frequency traders and speculators can all influence the value of a currency. This multi-faceted nature of currency markets can leave private client investors scratching their heads when trying to understand whether or not they have received a decent investment return.
More...Thanks to the willingness of participating Canadian discretionary investment managers to provide transparency on the performance of their private client portfolios, the ARC Canadian Dollar Private Client Indices (“ARC CAD PCI”) have been launched providing a peer group universe for Canadian Dollar based private client investors for the first time. The timing is propitious as 2016 is the first year when all private clients will have received letters from their investment managers setting out the money-weighted returns their portfolios for 2016. Without context those return numbers are difficult to interpret. The ARC CAD PCI provide context by allowing private client investors to compare the performance of their portfolio versus a comparable universe.
More...At the start of 2016 the prevailing market sentiment was one of nervousness that both equity and bond prices were going to struggle as global debt ratios were predicted to reach new highs, world economic growth stagnate; commodity prices collapse; and currencies face turmoil as the debt-driven Chinese economic expansion abruptly ended. Whilst at the extreme end of the scale, the views of Andrew Roberts were not as outlandish as they might appear to investors looking back on a year of solid if not spectacular investment returns.
More...The three year numbers continue to look strong and investors who have been willing to ignore the periodic swings in sentiment that have characterised financial markets over recent years have seen a material uplift in their real wealth. Yet, anecdotal evidence from meetings held with managers and with private clients by ARC suggests that many private clients have a feeling of disappointment over the level of returns that have been achieved by their discretionary managers over the last few years. There is a sense of opportunity foregone and a questioning of whether a “passive” index-tracking strategy would serve them better.
More...Anyone reading the headlines over the past six weeks would be forgiven for thinking that it had been a bad quarter for private client portfolio returns: trillions wiped off global financial markets; Sterling hitting thirty year lows; political turmoil and Scotland threatening to leave the United Kingdom. Markets were certainly volatile, but as highlighted in our commentary last quarter, the balanced approach adopted by a discretionary manager investing in a range of asset classes brings diversification and a smoothing of the gyrations of individual markets.
More...After a tough year in 2015, when private clients saw their investment portfolios deliver returns in line with or below inflation, 2016 began with a few market commentators predicting a financial market tempest.
More...2015 was a tough year for multi-asset class managers to make money as the earning driven momentum in the equity markets of the previous three years ran out of puff.
More...The most commonly asked question about the compilation of the PCI series over the last decade has been “How do you calculate the monthly PCI estimates?” A close second has been the question “What is the asset allocation for each of the ARC Private Client Indices (PCI)?”
More...What does this mean for investors, and how should they respond?
More...By the end of Q1 2015, according to Deutsche Bank Research, world stock market capitalisation was above USD70 trillion and fast approaching the level of global annual GDP. The previous world stock market capitalisation peak was just above USD60 trillion towards the end of 2007, falling to USD25 trillion in early 2009 before following a strong trend of recovery.
More...2014 proved to be a volatile but ultimately positive year for most private client investors.
More...When the second richest man in the USA and one of the most successful investors over the last 50 years gives investment advice to the trustees of his estate, the natural response is to sit up and listen. Essentially his advice is to adopt a pass ive When the second richest man in the USA and one of the most successful investors over the last 50 years gives investment advice to the trustees of his estate, the natural response is to sit up and listen. Essentially his advice is to adopt a pass ive When the second richest man in the USA and one of the most successful investors over the last 50 years gives investment advice to the trustees of his estate, the natural response is to sit up and listen.
More...“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841).
More...Since the phrase “It does exactly what it says on the tin” was first used in 1994 by Ronseal in their television advertisements, it has entered English idiom and become widely used to describe anything that is exactly as it appears or claims to be without any need for further explanation or qualification.
More...Thanks to the willingness of participating discretionary investment managers to provide transparency on the performanceof their private client and charity portfolios, the ARC Private Client Indices and the ARC Charity Indices are now celebrating a decade of data.
More...Ask most private clients what they expect their discretionary investment manager to deliver and the most common sentiment is that they expect their manager to beat a passive investment strategy. If active investment management cannot beat a simple index-tracking strategy, what is the point?
More...It is a much quoted idea that we should aim high, think big and set goals that stretch us to achieve excellence. Aspirational thinking and a positive mental attitude certainly lead to greatness in many areas of life where failure is not a consideration and only the best will do; think Olympic athletes, entrepreneurs and great adventurers.But there are many situations where the words “at all costs” cannot sensibly be applied.
More...Understanding Performance. Figures for the first quarter of 2013 reveal that it has been a good start to the year for the majority of private client and charity portfolios. Returns for Sterling investors looked particularly strong, but this was in part an illusion created by relative currency weakness.
More...Financial markets once again followed a bumpy path in 2012 as political, economic and financial worries waxed and waned.
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