IN THE realm of wealth management, the distinction between active involvement by the individual investor and strategic delegation to professionals can be a defining factor in a portfolio’s trajectory.
Discretionary portfolio management, which represents a paradigm shift from traditional investment solutions towards more bespoke investment strategies, are meticulously tailored to the distinct risk appetites, timeframes and objectives of each investor.
This sophisticated approach transcends the traditional confines of investment management by offering a holistic solution. Combining strategic asset allocation with professional stewardship, discretionary portfolio management offers investors the luxury of stepping back from the day-to-day or hour-to-hour hassle of portfolio oversight.
By entrusting your portfolio to the hands of dedicated professionals, you are not just investing in the market – you are investing in a future in which your wealth is actively managed to support your aspirations and lifestyle.
Investing can be emotionally challenging
With money on the line, market participants often experience stress and anxiety. This is especially true in today’s complex economic backdrop.
Successful investors work to master their emotions and avoid acting impulsively. They have a game plan, follow an investment strategy and diversify to avoid loss aversion.
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Timing the market is easier said than done. For most investors, such gambles are unlikely to pay off. The riskier nature of attempting to time the market can lead to losses in periods of market crisis – large numbers of investors lose money, even if a fortunate few who made bets in the right direction reap a profit.
Spikes of intense volatility have less of an impact on the passive investor, though. A rough month, or even year, does not mean calamity for the long-term investor – provided he can hold his nerve and remain patient.
The Graham philosophy
Benjamin Graham saw that the market’s short-term volatility contrasts sharply with its long-term potential for wealth accumulation. He described the market as a “voting machine” in the short run and a “weighing machine” in the long run, underscoring the importance of resilience and foresight in investment decisions.
Our data shows that a US$10,000 investment in the S&P 500 Index between 1980 and 2018 made 35 per cent of its return over just five strong market days. Meanwhile, 50 such days accounted for a startling 90 per cent of the return.
Prioritising enduring value by staying invested over fleeting market trends is the same kind of philosophy and discipline that discretionary portfolio management embodies.
Sticking with a long-term investment goal takes discipline
Staying invested also takes confidence, especially amid the daily flow and noise of economic news. Even if you have resolved to hold a particular asset for a number of years, a few days of negative reporting can be enough to dent the confidence of any investor.
The essence of discretionary portfolio management lies in seasoned portfolio managers who are vested with the authority to navigate the complexities of the markets on behalf of their clients.
This professional guidance is predicated on a deep understanding of each client’s financial aspirations, ensuring that fundamental investment decisions are not only strategic, but also aligned with long-term goals.
Six foundations and their benefits
- Delegation: Empowering skilled portfolio managers to act decisively within pre-defined investment parameters. Discretionary management ensures portfolios are aligned with clients’ long-term aspirations, all while maintaining transparency and open communication.
- Dedication: With focused expertise, unencumbered by extraneous responsibilities, there is undiluted commitment to achieving superior performance. Performance is meticulously benchmarked against relevant risk-adjusted metrics.
- Dynamism: The agility to seamlessly adapt and respond to market dynamics is valuable, and discretionary portfolio management enables timely portfolio adjustments that capitalise on emerging opportunities.
- Defence: A robust risk management framework, which leverages diversification and quality investment selection, mitigates potential downturns and market volatilities.
- Diversification: Ensuring portfolio resilience against singular market events, the strategic allocation of investments across various asset classes and sectors is a cornerstone of risk management.
- Design: The epitome of personalised banking. Discretionary portfolio management offers tailored investment solutions, enhancing not just personal financial outcomes but also unique client experiences.
The power of strategic and thoughtful investment management
For those seeking to elevate their investment experience while focusing on what truly matters, discretionary portfolio management offers a pathway to achieving both financial goals and personal fulfilment in the pursuit of mastering wealth and well-being.
Discretionary portfolio management stands as a pillar of strength for ultra-high-net-worth individuals navigating the complexities of investment. It offers a harmonious blend of expertise, personalised strategy and proactive risk management, allowing clients to invest with confidence and peace of mind.
This approach is not merely about growing wealth. It is about enriching lives – offering the clarity and freedom to enjoy the more meaningful aspects of life, secure in the knowledge that your investments are in strategic, thoughtful hands.
2025 and beyond
After a potentially shaky start to 2024, confidence is expected to bounce back later in the year. Once the economy has reached its trough, the prospects for 2025 and beyond should be priced in by the second half of the year.
Thereafter, we expect market participation to broaden and advocate tactically adding cyclical exposure in anticipation of a new economic cycle.
While Western central banks are preparing for the next easing cycle and a global record number of voters are in for volatile election campaigns, 2024 will be a year in which external shocks provide the main source of risk.
Over a reasonable investment horizon extending beyond the next few quarters, however, we have assigned a higher overall probability to scenarios in which balanced mix of longer-duration assets outperforms shorter-duration assets or cash.
Overall, today’s value proposition of a multi-asset portfolio is still compelling as forward-looking return expectations remain attractive.
Bhaskar Laxminarayan is chief Asia investment officer and Asia head of investment management at Julius Baer, while Sng Jia Hao is Singapore head of mandate advisory
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