Has recent market volatility caused problems for advisers? A brief retrospective on some of the investment impacts of the Covid-19 pandemic

by | Jan 19, 2022

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Let’s cast our minds back just two years ago when, on 30th January 2020, the World Health Organisation (WHO) declared the Covid-19 outbreak to be a Public Health Emergency of International Concern. Of course, they didn’t stop there. As the cases of Covid grew rapidly around the world, on 11 March 2020 WHO then upped their messaging to declare Covid-19 a global pandemic.

Stock markets respond

February 2020 marked the high point for stock markets before fears about the outbreak of the COVID-19 pandemic then triggered a sharp fall in global share prices as the world readjusted to the reality of the pandemic and its economic as well as public health impacts.

In the subsequent months and years, the world has changed. Our lives and global economies have been transformed as have the fortunes of financial advice and investment businesses and clients.

 

It’s a journey that has involved ups and downs in share prices as sentiment has ebbed and flowed in line with the latest Covid updates, outlook and analysis. Whilst some companies have grown at record speeds, others have hit the buffers with the impact of Covid having a devastating effect on their markets and share prices.

Whilst market volatility is accepted by some investors, other clients simply do not have the levels of risk tolerance needed to withstand such market ups and downs within their investment portfolios in the same way.

Yet, inflation is on the rise and investors are struggling to find genuine prospects for real returns from less volatile sectors – including cash. The ongoing challenge for advisers is how to look beyond short term volatility and create well diversified investment portfolios which match clients’ individual needs and differing risk profiles?

 

So where can advisers find investment solutions which can help clients who wish to preserve the long term value of their capital yet who also want to minimise the volatility associated with market investments?

A smoothed investment process

One such option is the PruFund range of multi asset funds. Whilst it is unlikely that any investment solution can offer the combination of long term growth alongside full capital protection in the most extreme market conditions; PruFund aims to grow investors’ money over the medium to long term (5 to 10 years or more), while protecting them from some of the short-term ups and downs of direct stock market investments by using an established smoothing process.

PruFund funds are invested in the Prudential With-Profits Fund. By spreading the investment across the four main asset classes of equities, commercial property, bonds (corporate and government) and cash the volatility associated with investing in a single asset class can be reduced.

 

Of course, there are differences across the range of PruFund funds in their objectives and mix of assets, and how PruFund delivers returns to investors when compared to other With-Profits business, which means the returns received by investors will vary by fund choice.

To find out more about PruFund, please click here

 

 

Advisers and paraplanners can find out more about PruFund funds and the mix of underlying assets by visiting here  

The value of investments can go down as well as up and your client may not get back what they have paid in.

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