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Newsletter  29/09/2017

Is your Investment Manager able to reduce risk?


Managing risk is a crucial element of successful investment.  This is particularly true during periods of equity market sell-offs when active risk management can provide a cushion for investors, protecting their wealth on the downside.  

Each of the funds within Cornelian’s family of multi-asset funds is actively managed to correspond to different risk ratings and is managed to remain under its specified upper expected volatility limit:

Although maximum expected volatility levels are set for each fund, no minimum expected volatility is set, which means that our investment team can de-risk at any time.  If we believe that investor sentiment or market conditions present a high level of uncertainty, we can adjust the asset allocation accordingly to reduce the near term risks.

Managing Risk in Action

The charts below illustrate that the SVS Cornelian Managed Growth Fund (DT Risk Level 5) has provided a substantial cushion for investors during the worst of the equity market sell-offs, protecting investors’ wealth on the downside relative to the FTSE All Share Index. This highlights the benefits of adopting a truly unconstrained approach to building a diverse multi-asset portfolio with an array of sources of returns. In terms of risk (as measured by volatility) an investor’s journey from A to B is also significantly smoother throughout the equity market turbulence.

Chinese Market Turmoil & Global Economic Slowdown:  28 May 2015 to 11 February 2016

Following strong equity market returns during the first quarter of 2015, equity market valuations had become stretched and government bond yields were at very low levels (April saw Swiss 10yr bonds offer a negative yield). US earnings and economic growth forecast downgrades was severe yet the equity market appeared unfazed by these forecasts. Whilst equity investors expressed confidence in the future, bond investors predicted a different outcome. Taking all of this into consideration our Investment Team decided to reduce risk in our portfolios by reducing equity exposure, exiting our private equity positions and increasing exposure to cash, short dated gilts and absolute return.

SVS Cornelian Managed Growth Fund D Acc -7.69%
FTSE All Share -18.70%

Other examples of cushioning for investors are shown in the examples below:   Eurozone Contagion Fears.

Black Monday and the Eurozone Crisis in 7 July 2011 to 10 August 2011

SVS Cornelian Managed Growth Fund -9.40%
FTSE All Share -16.98%

SVS Cornelian Managed Growth Fund D Acc -5.5%
FTSE All Share -10.86%

For our core family of multi-asset funds we use a broad selection of underlying investments, often providing access to asset classes such as Infrastructure or Private Equity that supplement and enrich the diversification of the portfolio.  Within this range, although we are always cost conscious, our search for investment is broad and we will utilise active funds where we believe they will deliver value for money for investors.

For more information on how we manage our family of multi asset funds, please Contact Us.

This communication is for Investment Professionals Only

The views and conclusions expressed in this communication are for information only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

Marcus Brooks

Newsletter  19/10/2018

Balancing Investment Performance & Risk for the longer term

Marcus Brooks, Director and Head of Private Clients & Charities at Cornelian outlines the importance of diversification to deliver real returns over the longer term.

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Newsletter  19/10/2018

Keeping your Data Secure

In this article, Iain Hay, Manager Compliance & Risk at Cornelian highlights procedures for data protection and cyber security and offers the top ten tips to keep your own information safe.

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