Instead of applying return forecasts that rarely materialize, we would like to achieve good performance thanks to the careful assessment of capital market risks (risk management). Between 2013 and 2017, our Risk Regime Investing philosophy resulted in the portfolio changes set out below.
2013–2014: Calm markets
We navigated the two decisive periods (red arrows) with the maximum risk budget. During these phases of relatively low volatility (price fluctuation range), we generated significant added value. Between April and December 2013 and from October 2014 (blue, almost horizontal arrows), however, there was an increased level of volatility, which resulted in an average contribution to performance. We anticipated this change in the risk/return conditions and therefore reduced the risk in our portfolios accordingly.
2015-2016: Turbulent markets
At the end of 2014, we viewed the risk environment as very unfavorable. As a result, we gradually reduced the weighting of risky real assets in the portfolios to a minimum. With the exception of a few weeks, we rated the risk climate as adverse throughout 2015 and thus went through the year with a low to very low risk budget (black arrow). During such phases, any risks taken are usually insufficiently rewarded – a view which has proven to be right. The latent uncertainty during the year 2016 left also its marks on our two prospective risk indicators. We therefore adjusted the target portfolio to the prevailing stock market environment more frequently than in previous years.
Forecast and outlook
The current outlook as well as performance data for our mandates and funds is updated in our blog.