May 15, 2009 6:04 pm

Wealth managers fail to deliver returns

Wealth managers succeeded in protecting clients’ money against market turmoil in the first quarter of this year but failed to provide a positive return for the fifth consecutive quarter, according to the latest Private Client Indices (PCI) produced by Asset Risk Consultants.

Average losses ranged from 1.2 per cent for “cautious” portfolios to 5.9 per cent for higher volatility “equity risk” portfolios in the three months to the end of March, the performance management firm said. Balanced portfolios – those with 50 per cent in non-equity assets – were down 3.2 per cent on average. In comparison the FTSE 100 fell by 10.79 per cent over the same period.

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ARC’s PCI indices are made up of performance data from thousands of portfolios provided by 38 wealth management firms. They also allow investors to gauge whether they are above or below average and where performances rank.

“Most discretionary clients did not see a single positive quarter during the whole of last year and many managers failed to take advantage of the recent market rally,” said Daniel Hurdley, director at ARC. “One of the problems has been that managers remained too cautious going into 2009 and were too slow to derisk their portfolios. Many of them put the brakes on too late and those that came out of equities in the third and fourth quarter of last year missed the rally when equities went up.”

He said this move to reduce exposure also caused risk management issues as managers were forced to sell the more attractive large-cap stocks to raise cash.

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