Not all of the damage inflicted in 2022 appears to have been repaired, but rising markets in 2023 have partly erased (some) of the pain.

Recoveries in equity and bond markets during 2023 have partly erased (some) of the pain of the 2022 rout as far as private client investors are concerned, data this week from Asset Risk Consultants showed.

In general, 2023 gains have not fully compensated for the bloodletting of the previous year, however.  

Nominal returns for private client investors were a little above average, ARC said. The table below sets out the estimated returns for private client portfolios across the five PCI currencies and four PCI risk categories. 

ARC’s Indices compare performance data from all of the contributing firms taking account of the risk of the portfolios and comparing the net of fee outcomes received by investors. Indices collect performance of more than 350,000 investment portfolios, net of fees, supplied by more than 140 investment managers to establish the actual returns being seen by clients. Managers include Barclays Wealth, Brewin Dolphin, Investec, Rathbones and UBS.

The need for end clients, and their advisors to receive unconflicted, clear and understandable data on how well firms perform is not a new requirement. The pitfalls of simply comparing performance against a market benchmark, or focusing on whether a portfolio is “top-quartile” or “best-in-class” or some other metric are well known. That said, comparisons of some kind are necessary. 

This news service interviewed ARC back in October 2022 about its approach and the importance of such figures for wealth managers handling tasks such as preparing for the UK’s new Consumer Duty regime (now in force).

The data shows that in local currency terms, gains were highest for dollar investors. However, when adjusted for currency moves, returns for private clients in the same risk category were similar regardless of reference currency. 

“After the painful normalisation of interest rates in 2022, bond markets seemed to offer reasonable value and, despite tighter monetary policy and the threat of recession, company profits proved resilient,” ARC said. 

The breadth of equity market gains was “extremely narrow,” ARC said, noting that the rise in the world equity market index being driven by the 10 largest US-listed “mega-cap” stocks (Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, JP Morgan, Meta, Microsoft, Nvidia, and Tesla). In 2023, these stocks were up, on average, about 90 per cent and up around 85 per cent on a market capitalisation-weighted basis, with the other 490 stocks making up the S&P 500 on average delivering a return of zero.

For investors in sectors such as emerging market hedge funds, meanwhile, recent figures showed that they have enjoyed, on average, a strong year of gains across most strategies (with a few notable exceptions). See here. In October 2022 this news organisation spoke to Performance Watcher by IBO, a Swiss organisation, about the demands of providing trustworthy and unconflicted data on wealth management portfolios.