wealth management
wealth management
Podcast
26.11.2024
In the world of wealth management , investors are often looking for the holy grail - a strategy that offers above-average returns with minimal risk. While some promise high returns in boom phases, their weaknesses often only become apparent in times of crisis. Our proprietary ETF strategy has shown a robust performance in recent years, characterized by a particular stability in different market phases. What exactly makes this strategy so successful?
One of the answers to this question lies in the multi-asset strategy, which plays a special role in the stability and success of wealth management . Unlike pure equity or bond strategies, the multi-asset approach relies on a mix of different asset classes. This has the advantage that the specific characteristics of different asset classes can be combined to achieve a particularly advantageous risk/return ratio. While pure equity strategies often promise high returns, they also carry the risk of significant price setbacks in turbulent market phases. Bonds, on the other hand, offer lower returns but act as a stable anchor in times of crisis. By combining these two asset classes, a multi-asset strategy can offer an attractive balance between return and risk, making it one of the most robust approaches at wealth management .
Strategic Asset Allocation (SAA) is at the heart of any diverse wealth management strategy. It is critical to the long-term success of a portfolio and sets the framework for how the wealth isallocated across various liquid and illiquid asset classes to achieve an optimal balance between risk and return. At FINVIA, we tailor this allocation to the individual needs of each client based on their long-term investment goals, risk appetite and liquidity requirements. However, as the capital market is constantly changing, the SAA must not be set in stone in order to be able to react flexibly to changes in the market environment. So even if the SAA is set for a period of 10 years, we continuously monitor it using state-of-the-art technology in order to cushion short-term market volatility and achieve above-average returns in the long term. The strength of this approach is particularly evident in times of crisis. (To the Strategic Asset Allocation blog)
A sound strategy alone is not enough. A common mistake when evaluating the performance of multi-asset strategies is to compare different risk profiles, which creates a distorted picture. For example, a speculative strategy that invests 70%-90% in equities will always perform better in bull markets than a balanced strategy with an equity allocation of 40%-60%. However, this difference in performance does not reflect the quality of the manager, but merely the different risk appetites of the strategies.
In order to make a fair assessment, we only compare our multi-asset strategies with risk-equivalent approaches. In addition, benchmarking should take into account both return and risk, answering the question of how much risk was taken for each percentage point of return. The time horizon is also crucial: short-term performance comparisons can be misleading, while long-term comparisons reduce the likelihood of picking random winners.
In this context, we would like to refer to the performance of our portfolios: In a year like 2024, which was characterized by record highs on the stock markets and high valuations, especially for US technology stocks, we deliberately reduced the risk in our clients' portfolios moderately as a result of our Strategic Asset Allocation. The proportion of gold in particular was increased in the portfolios, a strategy that we have been pursuing not just since this year. In return, we have reduced the proportion of equities and bonds. Within the equity component, we are strategically focusing on more defensive sectors such as healthcare and consumer staples and less on US technology stocks.
With this balanced portfolio structure, we were able to achieve a solid performance in 2024 (as at 08.11.2024):
When implementing strategic asset allocation, i.e. transferring a theoretical allocation to an invested portfolio, the question often arises as to whether one should rely on cost-efficient passive or opportunity-oriented active products.
However, the combination of both worlds promises the greatest benefits. By intelligently combining cost-efficient, passive funds and ETFs with opportunity-oriented, actively managed strategies, both stability and growth potential can be optimally exploited. The core portfolio reflects a well-founded market assessment and relies on proven, cost-effective products. In addition, carefully selected, actively managed funds and ETFs offer additional growth opportunities in markets in which the managers' expertise demonstrably creates substantial added value - and sustainably so, as has been proven in the past. This creates an ideal balance of efficiency and earnings opportunities.
Our independence in the selection of asset managers is crucial to ensure that only the best asset managers act in the interests of our clients. For example, when we select a manager for small European companies - so-called small caps - we go through a four-stage selection process. First, we identify all relevant funds that specialize in this investment focus. These funds are evaluated using a specially developed FINVIA scoring system, in which criteria such as the risk/return ratio, the manager's style loyalty (whether the manager actually only invests in small caps) and the costs compared to the competition play a central role. Only managers who perform well in this scoring are analyzed in further steps and then personally reviewed. In this way, we ensure that the selected asset managers are not only convincing on paper, but also meet the requirements of our clients in practice.
At wealth management , stable performance is no coincidence, but the result of a well thought-out strategy. The use of a multi-asset approach, supported by precise strategic asset allocation and careful selection of external asset managers, forms the basis for robust and sustainable performance.
At FINVIA, we rely on precisely this combination of in-depth analysis, dynamic adjustment and first-class wealth managers to provide our clients with a long-term and reliable investment strategy - even in turbulent times.
More about our FINVIA wealth management.
wealth management
26.11.2024
Christian Maschner
At wealth management , stable performance is no coincidence, but the result of a well thought-out strategy. With a multi-asset approach, precise asset allocation and careful selection of asset managers, we at FINVIA focus on long-term resilience and sustainable performance.
In the world of wealth management , investors are often looking for the holy grail - a strategy that offers above-average returns with minimal risk. While some promise high returns in boom phases, their weaknesses often only become apparent in times of crisis. Our proprietary ETF strategy has shown a robust performance in recent years, characterized by a particular stability in different market phases. What exactly makes this strategy so successful?
One of the answers to this question lies in the multi-asset strategy, which plays a special role in the stability and success of wealth management . Unlike pure equity or bond strategies, the multi-asset approach relies on a mix of different asset classes. This has the advantage that the specific characteristics of different asset classes can be combined to achieve a particularly advantageous risk/return ratio. While pure equity strategies often promise high returns, they also carry the risk of significant price setbacks in turbulent market phases. Bonds, on the other hand, offer lower returns but act as a stable anchor in times of crisis. By combining these two asset classes, a multi-asset strategy can offer an attractive balance between return and risk, making it one of the most robust approaches at wealth management .
Strategic Asset Allocation (SAA) is at the heart of any diverse wealth management strategy. It is critical to the long-term success of a portfolio and sets the framework for how the wealth isallocated across various liquid and illiquid asset classes to achieve an optimal balance between risk and return. At FINVIA, we tailor this allocation to the individual needs of each client based on their long-term investment goals, risk appetite and liquidity requirements. However, as the capital market is constantly changing, the SAA must not be set in stone in order to be able to react flexibly to changes in the market environment. So even if the SAA is set for a period of 10 years, we continuously monitor it using state-of-the-art technology in order to cushion short-term market volatility and achieve above-average returns in the long term. The strength of this approach is particularly evident in times of crisis. (To the Strategic Asset Allocation blog)
A sound strategy alone is not enough. A common mistake when evaluating the performance of multi-asset strategies is to compare different risk profiles, which creates a distorted picture. For example, a speculative strategy that invests 70%-90% in equities will always perform better in bull markets than a balanced strategy with an equity allocation of 40%-60%. However, this difference in performance does not reflect the quality of the manager, but merely the different risk appetites of the strategies.
In order to make a fair assessment, we only compare our multi-asset strategies with risk-equivalent approaches. In addition, benchmarking should take into account both return and risk, answering the question of how much risk was taken for each percentage point of return. The time horizon is also crucial: short-term performance comparisons can be misleading, while long-term comparisons reduce the likelihood of picking random winners.
In this context, we would like to refer to the performance of our portfolios: In a year like 2024, which was characterized by record highs on the stock markets and high valuations, especially for US technology stocks, we deliberately reduced the risk in our clients' portfolios moderately as a result of our Strategic Asset Allocation. The proportion of gold in particular was increased in the portfolios, a strategy that we have been pursuing not just since this year. In return, we have reduced the proportion of equities and bonds. Within the equity component, we are strategically focusing on more defensive sectors such as healthcare and consumer staples and less on US technology stocks.
With this balanced portfolio structure, we were able to achieve a solid performance in 2024 (as at 08.11.2024):
When implementing strategic asset allocation, i.e. transferring a theoretical allocation to an invested portfolio, the question often arises as to whether one should rely on cost-efficient passive or opportunity-oriented active products.
However, the combination of both worlds promises the greatest benefits. By intelligently combining cost-efficient, passive funds and ETFs with opportunity-oriented, actively managed strategies, both stability and growth potential can be optimally exploited. The core portfolio reflects a well-founded market assessment and relies on proven, cost-effective products. In addition, carefully selected, actively managed funds and ETFs offer additional growth opportunities in markets in which the managers' expertise demonstrably creates substantial added value - and sustainably so, as has been proven in the past. This creates an ideal balance of efficiency and earnings opportunities.
Our independence in the selection of asset managers is crucial to ensure that only the best asset managers act in the interests of our clients. For example, when we select a manager for small European companies - so-called small caps - we go through a four-stage selection process. First, we identify all relevant funds that specialize in this investment focus. These funds are evaluated using a specially developed FINVIA scoring system, in which criteria such as the risk/return ratio, the manager's style loyalty (whether the manager actually only invests in small caps) and the costs compared to the competition play a central role. Only managers who perform well in this scoring are analyzed in further steps and then personally reviewed. In this way, we ensure that the selected asset managers are not only convincing on paper, but also meet the requirements of our clients in practice.
At wealth management , stable performance is no coincidence, but the result of a well thought-out strategy. The use of a multi-asset approach, supported by precise strategic asset allocation and careful selection of external asset managers, forms the basis for robust and sustainable performance.
At FINVIA, we rely on precisely this combination of in-depth analysis, dynamic adjustment and first-class wealth managers to provide our clients with a long-term and reliable investment strategy - even in turbulent times.
More about our FINVIA wealth management.
About the author
Christian Maschner
Christian Maschner is responsible for asset management at FINVIA.
After studying business administration at the University of Cologne, specializing in finance and financial sciences, he began his career at AXA Konzern AG. There he was responsible for managing the private equity asset class and selecting investment managers.
He then moved to the private bank Sal. Oppenheim in 2011. Here he worked as a portfolio manager and developed quantitative investment processes for tactical and strategic asset allocation for institutional and private clients wealth management. In 2018, he joined the newly founded HQ Asset Management GmbH. As Head of Research from 2021, he built up an investment platform for managing strategic and tactical asset allocation and for stock selection.
