Part 2: Surviving the current market storm, with Royal London’s Trevor Greetham

In a recent episode of our IFA Talk podcast, we welcomed Trevor Greetham, Head of Multi-Asset at Royal London Asset Management, into the studio. Together, we discussed how advisers should approach long-term investment strategies during periods of heightened market volatility, such as we’re seeing right now.

The conversation explored the importance of diversification at a time when traditional asset relationships have been tested, the potential role of alternatives such as property and commodities, and the growing risk of “spikeflation” driven by energy markets and geopolitics.

Today, we have brought you the second half of one of our most interesting and widely downloaded discussions to date on IFA Talk. Check in on our post from yesterday to see what Trevor’s thoughts were on diversification, spikeflation and the investment clock!

IFAM: In terms of the geopolitical situation in the Gulf and the potentially very serious impacts of it, what do you see as the main scenarios that might play out? And more broadly, how should advisers think about these kinds of geopolitical risks when building long-term portfolios for clients?

TG: Diversification again is the key thing. If you’ve got a portfolio that includes some commodity exposure across our multi-asset funds, it’s typically about 5%. You’ve got something at these times that is going up and reducing losses elsewhere in the portfolio. Your first line of defence is broad diversification.

Similarly, commercial property isn’t responding to what’s going on because the UK economy is still fine at the moment. Your second line of defence is active management. Rather than customers thinking something has happened and they need to sell the fund, they can rely on the manager adapting positions. If we are entering a long bear market, for example, the equity weighting will naturally reduce as part of tactical asset allocation.

In terms of scenarios, we looked at two past examples. One is a short-lived inflation spike like the Ukraine crisis. It had a big impact on markets, but the very high energy prices didn’t last that long.

The more negative scenario is a longer-lasting conflict. I compared it to the first Gulf War in 1990. At the start, almost nobody was talking about the Iran war. The US-Israeli attack on Iran is as unexpected as the Iraqi invasion of Kuwait. Markets weren’t ready for it and are now trying to factor it in.

In that case, oil prices only came back down, and stock markets recovered once the war ended, when the Iraqi army was expelled from Kuwait, and that was six months later. So, we could be in for a longer period of uncertainty and high energy prices.

There’s no obvious endgame to this conflict, and it keeps evolving. Trump could declare victory and withdraw. But the Iranian response matters as well. Would they open the Straits of Hormuz? Would Israel step back? It’s not clear.

We may be entering a more volatile period, which means we may need to become more defensive. At the moment, the future isn’t clear, so diversification again is the first defence.

IFAM: Is there much movement going on within the portfolios right now?

TG: Within the equity and bond portfolios, it varies. Some of our equity managers have been adding to the energy sector as a hedge against prolonged high energy prices.

There’s also a lot happening outside of this. There has been a big sell-off in the software sector because of the idea that AI will disrupt the industry. We’ve also seen strains in US private debt, particularly around hyperscalers building data centres.

With all of that going on and higher energy prices to factor in, individual security selection becomes important. If you’ve got a fund which is just stocks or just bonds and is simply following market capitalisation, that wouldn’t have been good in the .com crash. Again, now you need to be more active and more diversified.

IFAM: To summarise, what are the 2–3 key points our audience should take away from this discussion?

TG: First, there’s no such thing as passive in multi-asset; it’s always an active decision. Second, broad diversification is your best defence in uncertain times. Third, if you have an active, disciplined tactical asset allocation process, end customers don’t need to worry about buying and selling the fund. If the fund suits their risk appetite and objectives, business cycle changes should be reflected in the fund itself. So, keep on the long-term savings path.

Markets on edge? Why diversification is your first line of defence.
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