Today’s investment world can be a volatile one and it isn’t a surprise that many investors experience a narrowing of their perspective.
In other words, their attention begins to focus on short-term fluctuations over which they have no control and that are nigh on impossible to harness.
At Pyrford, we always endeavour to keep our focus on the long-term view – the perspective we think really matters. Our aim is simple as we work to help our clients ensure that they have the money they need for long-term liabilities.
To us this means generating real returns rather than outperformance of a benchmark. After all, does it really help an investor if their investment outperformed any given index in relative terms yet lost them money?
In the real world, we think the answer is no and this is why the avoidance of loss is always our starting point. It is crucial not to understate the importance of this point. If an investment loses half its value it has to generate a 100% return to get back to where it started – a stark reminder that the risk of loss should be the first consideration in any investment decision.
To beat inflation however, you do need to generate returns and equities have historically been the best performing asset class over the long-term.
Impressive performance however, needs to be considered in the context of shorter painful periods and we believe that the best way to counter this is to focus on identifying attractively valued quality businesses.
We are not alone in holding this view and there is plenty of evidence to show that buying cheap equities is a sound long-term strategy and that holding expensive ones is a lousy approach.
A focus on value extends to other asset classes but how does that translate into a world in which equity, bond and real estate yields have been driven to very low levels. In equities, we favour defensive sectors like utilities and telecommunications and in these areas it is possible to find predictable revenue streams and attractive valuations.
Geographically, economies in south-east Asia offer sustainable growth prospects and importantly, are trading at reasonable valuations. Value is certainly a concern in fixed income and we favour short duration bonds that should better protect capital in an environment in which yields are rising (and prices falling).
Historically, a preference for quality and value has historically stood us in good stead from a capital preservation perspective and it also means that we are able to take advantage of opportunities that do present themselves, often at times when news is bad and less value orientated investors are fearful.
Pyrford International is an independent investment boutique operating as part of BMO Global Asset Management.
For professional investors only. Past performance is not a guide to future performance. A positive return is not guaranteed over any time period. Capital is at risk and on sale of shares in the Fund an investor may receive back less than the original investment.
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