thewealthnet spoke to Chris Ivey, head of the European private client practice at Cambridge Associates about what his clients are pondering amidst erratic markets. Cambridge Associates (CA) is an investment firm which typically deals with private clients with investible assets of at least $200 million.
SAA and the temptation to stray
Buying more of something that has just rapidly de-valued can be psychologically uncomfortable.
Mr Ivey says a period such as the present demonstrates the importance of having strong governance in place, and an agreed strategic asset allocation (SAA).
“Then you are able to understand that when equity markets are down this much, this is within the range of things that could happen to your portfolio,” Mr Ivey says.
“It then becomes an active decision not to rebalance, not to go back into equities if you are below your target weights.”
Mr Ivey said of course, some had been tempted to stray from their SAA, though many CA clients had also weathered the 2008/09 global debt crisis, meaning they found their experience in March this year to be less of a shock.
“We’ve been saying to clients for a while that valuations are high and we should thinking about [preparing] for a down draught.
“But mid to late march when the markets were in freefall, members of some committees were questioning whether things were different this time. [We encouraged them] to stick to their strategic asset allocation, and tied decision making to what we did know, not what we didn’t know.”
Liquidity and valuation
During the market crash, CA had the somewhat daunting task of tracking hundreds of managers as they evaluated the damage to client portfolios....