“Don’t time the market, spend time in the market,” Elson Goh told the firm’s clients in a webinar presentation on Thursday.
He pointed out that there have been large swings in discrete monthly market returns since 1995, but volatility based on 10-year monthly rolling returns has basically been insignificant. The implication is that investors should ride out brief periods of market turbulence — even as wild as those witnessed this month.
“If you had invested $100,000 in the US stock market 20-years ago, you would have made $267,800. Returns would have diminished the longer you stayed out of the market, because of the likelihood of missing the ‘best days’ when prices moved sharply higher,” he said.
St James’s Place Wealth Management (SJP) specialises in financial planning. It has about $144bn AUM, according to the firm’s website, and most of its clients are based in the UK, where it has a 10-15% share of the mass-affluent market.
For the past decade, it has looked to the expat market in Asia, the Middle East and southern Europe to grow its business.
In Asia, the firm has a presence in Hong Kong where its operations are regulated by the Securities and Futures Commission, a business in Singapore with its activities licensed by the Monetary Authority of Singapore, and a wholly foreign-owned enterprise asset management vehicle in mainland China.
Many of SJP’s funds are segregated from third-party fund manager’s publicly-available products, which allows SJP to keep a closer watch on any shifts in investment style and to maintain greater control over investment processes, Matthew Deeprose, the firm’s head of business in Hong Kong told FSA last December.
Consequently, the firm had not suffered any significant fall-out from its exposure to former star UK manager Neil Woodford’s funds, as the stock allocations in SJP segregated funds only over-lapped by 15% with the public vehicles after Woodford moved from his original conservative mandate to selecting illiquid securities, according to Deeprose.
Despite Goh’s recommendation to SJP’s clients that they remain fully invested and avoid the temptation to time the market, the firms’ external fund managers have been “tapping into opportunities since mid-to-late February,” as well as making defensive adjustments.
Elson Goh, St James’s Place Wealth Management
He argued that the “cycle of investor emotions” provides opportunities and that the “best time for stock picking is when those emotions are between despondency and depression”.
“As a result, the portfolios of some of SJP’s external managers have experienced higher levels of turnover than normal,” said Goh.
For instance, the Magellan Global Equity Fund, managed by Hamish Douglas, has reduced holdings in energy, travel and airline stocks, while retaining confidence in core technology favourites such as Alphabet, Facebook and Visa. Holdings in food retail giants McDonald’s and Starbucks have suffered, but Goh is convinced that they will recover as defensive stocks during an economic slowdown.
Another equity fund run by a third-party, the Wasatch Emerging Market Select Fund, managed by Ajay Krishnan, has benefited from increased allocations to the China healthcare sector and reducing exposure to travel-related stocks.
Meanwhile, a third product highlighted by Goh, Mid Ocean’s high yield bond fund, has lifted its cash level to 35%.
“It is clear that active managers have the flexibility to take advantage of under-valued and mispriced stocks in distressed markets and find opportunities for long-term performance,” said Goh.
“Passive vehicles cannot compete in this environment,” he added.