The View | The realities behind stuttering ‘risk on, risk off’ investment strategies
The last 10 years have forced some clients to maintain two portfolios: low risk, low return fixed income products, and high risk assets such as structured financial products, derivatives and alternative assets
The recent international sell off and volatility in equities reveals weaknesses in clients’ portfolios, especially if you consider how financial advisers and investors have been lulled into a world of near permanent zero to low interest rates since the global financial crisis.
Risk premiums were suppressed, and wildly distorted the pricing of equities and real estate.
Over the last decade wealth managers have lamented how clients were either reluctant to take any risk or desperate to take too much risk, after sidelining their portfolios for years.
“Risk on and risk off” became a new way to described stuttering strategies. In public, private bankers and advisers carefully stick to their prepared script about maintaining “a globally diversified portfolio of fixed income and equities”, resulting in very low returns.
But, the dirty secret is much more schizophrenic: the last 10 years have forced some clients to maintain two portfolios.
One is low risk, low return fixed income products and the other comprises high risk assets such as structured financial products, derivatives and alternative assets.
