INVESTMENT STRATEGY
The investment universe is huge, the financial services industry is vast, and the choice of products we can buy to manage our wealth is overwhelming. The key to successfully managing our investments is knowing what not to do and focusing on the things that really matter.
WE DON'T SELECT STOCKS, WE INVEST IN MARKETS
Common perception equates the success of an investment strategy with the outperformance of the markets. However, when it comes to managing our wealth that does not seem to be a worthwhile endeavour. According to many decades of empirical evidence, most investment strategies that aim to pick individual stocks have underperformed the broader markets for decades. The question becomes, why try to beat the markets when we can simply be the markets by investing in low-cost, passive index trackers?
92%
Pan-European equity funds that underperformed over 10 years (S&P Spiva Scorecard 2023)
17%
Success rate for active equity managers over a decade (Morningstar 2023)
99%
US equity funds that failed to beat S&P 500 over 10 years (Financial Times 2016)
Investing in markets greatly reduces our stock-specific risk. However, there are many different index funds we can buy, and the S&P 500 has dissimilar characteristics to the FTSE100 or the MSCI World, not to mention the currency exposure. We consider many factors, including the underlying components, costs, liquidity, tracking error, and volume. The aim is to create a global market benchmark with thousands of different underlying stocks from all regions and sectors to help our clients meet their specific investment goals.
TRUE DIVERSIFICATION
When equities decline, investing in so-called market-neutral investment strategies represents one of the few effective means for generating returns. Hedge funds seek to capitalise on the relative performance between individual securities rather than relying on the direction of the broader market. They can also be a source of capital when rebalancing our portfolios during times of market adversity.
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Corporate and government bonds can give us yield and diversify our portfolios. It is important to match the time to maturity with the prevailing interest rate environment. Any foreign currency risk needs to be actively managed to avoid return erosion. Precious metals and digital assets (for qualified investors) can offer further differentiation when optimising our client investment strategies.
“What our clients tell us they like about Blu is that they have their own proprietary trading desk at their disposal. We know what’s going on in the markets, we can guide them on any investment views they would like to express, and we can make changes to their portfolios immediately. It puts our clients firmly in charge of their money and the risks they want to take, knowing they have immediate access to advice they can trust."​​​​
Vishesh Dawar
Investment Manager, joined Blu in 2018