The ARC Sterling Private Client indices all ended 2013 in positive territory after rebounding strongly in the second half of the year.
The Equity Risk index was the standout performer, delivering 16.3% over the year after adding a further 4.4% in the fourth quarter. The Steady Growth index also delivered double digit gains, rising by 12.5% with the Balanced Asset and Cautious indices up 8.8% and 4.4%, respectively, comfortably ahead of inflation.
Graham Harrison, group managing director of ARC, said investment managers spent most of 2013 worrying about future events, such as the tapering of quantitative easing (QE) and rising interest rates with market sentiment generally neutral.
‘So during 2013 equity markets rose on the hope of future corporate profits growth at the same time that bond yields rose on the fear that eventually central bank money creation would fuel inflationary pressures,’ he said.
‘With cash returns close to zero and bond yields rising, the challenge in 2013 for multi-asset class managers was to keep the (actual and implied) volatility of portfolios within acceptable parameters. The consensus might have been that equities were the only asset class offering above inflation returns and a decent yield.
‘But, a portfolio invested 100% in equities requires a longer term investment horizon and a capacity to stay invested during dips that few private clients or charities possess. Little has changed for 2014, except that the entry level for equity investments is now around 25% higher than it was a year ago.’
He believes that all eyes will remain on the US and central bank policy in what sets look to be ‘another challenging year for multi-asset class strategies.’