By Portfolio Adviser, 12 Jan 22
From ditching the ‘antiquated’ 60/40 portfolio to the cash conundrum, industry experts on the year ahead for wealth manager portfolios
“We suspect 2022 will favour creative managers with more flexibility while those that hug their static benchmarks are likely to take a hammering this year.
“Bonds and equities have been correlated now for some time and there have been plenty of opportunities for managers to move away from the broken asset allocation model. However, many still have not, preferring to stick to the antiquated 60/40 portfolio which offers no genuine diversification, has rendered 40% of the portfolio obsolete for several years, and has led to underperformance and increased hidden risk for their clients.
“As interest rates start to creep up, we will see a sell-off in bonds and large-cap ‘bond proxy’ equities as we did in 2018. Unfortunately for the clients of many large wealth managers this constitutes the bulk of their portfolio, and without the liquidity to get out of these positions, they are like rabbits in the headlights.”