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Company News

17 March, 2020

Walden Capital response to COVID-19

The world is watching the spread of the new Coronavirus with serious concern. Fear and uncertainty are felt around the globe, and it is unsettling on a human level as well as from the perspective of how markets respond.  So far, the number of people affected in the UK is relatively small; that said, the “knock on” economic effects are now affecting the whole population given the guidelines issued by the government last night.

We fundamentally believe that markets can handle uncertainty, processing information in real-time as it becomes available.  We see this happening when markets decline sharply, as they have recently, as well as when they rise.  Such declines can be distressing to any investor, but they are also a demonstration that the market is functioning as we would expect.

The market is clearly responding to each piece of new information as it becomes known, but the market is also pricing in unknowns.  As risk increases during a time of heightened uncertainty, so do the returns investors demand for bearing that risk, which pushes prices lower.  Our portfolios are built to target a certain 'risk budget' rather than to deliver a particular level of return, and at times like these the risk budget is being tested - but so far our portfolios are doing as we would expect given the overall market.

One important role of a financial adviser is to reassure our clients that they are likely to be better off if they follow a disciplined and rigorous investment process, and do not allow themselves to be swayed in the short term by an emotional response to bad market news.  Now, as much as ever, we advise caution. 

At Walden Capital we already take steps to try and control the level of daily risk you experience – our portfolios  are made up of a range of assets, some of which will react badly to the economic effect of Coronavirus, some of which will react positively, and some of which will essentially ignore it.

As you are aware our portfolios have seven risk levels and your tolerance of risk is matched to the appropriate level of risk within that portfolio.  We do not hold individual stocks or concentrated funds of only 40–50 stocks.  Instead, we invest our clients’ assets in diversified portfolios containing thousands of investments, including the shares and bonds of many companies and governments around the world.  Strength in breadth is a philosophy we seek to follow.  This diversification produces, on aggregate, less risk in our portfolios.  Although diversification cannot insure an investor against loss it can help mitigate large losses.

Market movements are normal, and whilst the moves of the last week or so are large, they are far from unprecedented in history.  Moves like this can and do occur, and generally investors will do better if they do not allow these big movements to influence their behaviour in an emotional way.

Markets rise, and fall, and rise again.  The story of human economic endeavour is far from over, and the Coronavirus, whilst deeply unpleasant, should only lead to a temporary slowing of our economic progress.

However, we need to take some practical steps to follow Government guidelines.  During this week we intend to gradually implement our work from home strategy for both advisors and administration.  We do this to safeguard their health and that of others whilst ensuring continuity of service for our clients. 

Our staff are well versed in remote working and have access to systems and client files.  We also benefit from hiring local staff so they can access the building at a very short notice if required.

Communication with clients during volatile market movements are paramount and if you require a discussion, please contact us directly via email or phone.

by John Stirling


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