An update for our clients

08 JUN 2022

Contact with our clients is usually limited to our quarterly reports, the thought being that no one likes to be inundated with constant updates (especially when, under normal circumstances, change is gradual). As we are all aware, current circumstances are very far from normal. Therefore, sporadic contact is prudent, particularly as we evolve client portfolios to take account of the changing environment.

As a brief recap we entered 2022 with a degree of optimism, and our asset allocation reflected this. However, this optimism dissipated in the face of the simultaneous Russian invasion of Ukraine and China’s reversion to its zero Covid policy. After the invasion, energy prices spiked, becoming a large contributor to rising inflation, albeit from a higher level than we had become used to over the past 2 decades.

Following this event, we took the decision, as highlighted at the time, to increase our weight to renewables, primarily wind and solar energy investments. The increase from reasonable to substantial levels was because renewables provide inflation protection and benefit from rising energy prices. Since then, we have conducted in-depth analysis of our asset allocation and have changed our view with respect to some long-standing investments, predominantly our equity allocations. Our view is less sanguine than it was at the beginning of the year. We believe it sensible not only to reduce exposure to some markets where the outlook is weaker, but also, and as importantly, to back those that are in a position of relative strength. We are also convinced that the style of investing that has dominated over the past decade or so, namely growth, should be tempered. However the bias to growth is still present, albeit its dominance is not as pronounced.

So, what has changed?