05 Ago New normality: the need to adapt your portfolio to the new times
In the last few weeks, the de-escalation has allowed us to do things we did not give importance and now we value much more, such as seeing the family again, being able to have a beer with a friend on a terrace or doing group sports.
The conversations I’ve had with friends, family and investors all have a common theme: With the new normality it seems we’re past the health crisis. And now what?
During the lockdown we have had too much information but no answers. A few days ago, I was reading El Confidencial where on May 27th EC Brands published this very interesting article.
“The pandemic has crippled the economy, creating a financial and business crisis that is going to have a clear impact on our lives and plans, not just in a short term. Many investors are faced with problems of liquidity and need for income, others with the loss of value of their portfolios, in other cases the effects of the pandemic have meant interrupting professional and personal projects, while another group of investors have to deal with the management of their real estate and business assets in an environment marked by uncertainty, where neither the timing nor the medium-term development is clear.
There are many investors who counted on their day to day or for their short-term plans with income from, for example, the rental of commercial premises whose tenants have had to close and cannot afford the payments. Or with dividends from their financial portfolio, which have now fallen or been suspended, and selling involves taking on losses after the falls we saw in March.
In this case several questions arise: how do we maintain our standard of living? Do we have to adjust our financial plan? Do we want to sell any assets and, if so, which? It is essential to make a balance sheet, analyze the composition of our assets, distinguishing between liquid and illiquid assets, and also between those capable of generating, or not, income.”…
The strong blow of this crisis, which has come quickly and almost without warning, has paralyzed us, but now it is time to react. As an investor I should ask myself these questions and probably restructure my assets adapting to the current situation and surely looking for new investment alternatives.
Surely the future will be very different from what we could think now 3 or 4 months ago, so it is necessary now to invest time to work on how to face it and surely will effect on having to restructuring my investments.
In Laurion, we have not stopped working to protect our investors but also to analyze alternatives investment that adapts to this new context, always with the aim of generating income while preserving capital. This is why we continue to believe that alternative management is a necessary option in any portfolio.
But we are not the only ones who thinks so, according to a publication by Ángel Alonso in the Economist on May 16th “Alternative management has ceased to be a residual part of portfolios to become an increasingly relevant category. According to Efama, an organization of European investment fund associations, alternative management has experienced net subscriptions of €51 billion during the first quarter of the year, against the repayments of 176 billion UCITS funds, which can be distributed evenly across the European Union.
This trend is due to greater uncertainty in the markets, the return on the stock exchanges is in doubt and fixed income assets cannot offer attractive returns in the medium term either”.
In conclusion, it is clear that we must catch up, adapt our portfolio and our objectives to the new normality and for it we must take into account alternative management is not a trend but a reality that has come to stay.