Stocks had a great start in 2018 and wealth managers were pretty optimistic. At the end of the year, most portfolios were down in value after all.
A year ago, the Swiss finance industry, with the noble private banks at the forefront, had expected a splendid year – relieved of the vagaries of the tax disputes and helped on by soaring stock prices: the industry saw itself in perfect shape to take advantage of the global expansion of wealth.
Today we know that the sense of optimism didn’t convert into great numbers at all: Zwei Wealth Experts compiled the performance of 87 wealth and fund managers in Switzerland and concluded that negative returns were the norm last year.
All the investment portfolio segments surveyed had an average negative return, ranging from -2 to -12 percent, the survey showed.
Not a Stock Picker's Paradise
Professional investors appear to have fared equally badly across the range, with a surprising number of firms returning a very similar negative performance. The results in the middle range varied much less than in previous years, according to Zwei Wealth Experts.
And the stock pickers didn’t fare better either: «Active management didn’t generate an additional value in portfolios,» the experts concluded. The advisory firm has published the survey for the fifth time.
A Reversal of Fortune
Last year proved to be unpredictable in respect to interest rates, economic growth and geopolitics, quite unlike the year 2017, when stocks and the economy performed most solidly. Economic unpredictability however is making life much harder for wealth managers as the anticipation of trends becomes even more challenging than usual.
The industry lost its ways gradually over the course of the year: «A lot of portfolio managers were wrong-footed several times over,» the authors said.
Dire Straits at Pension Funds
With wealth managers incapable of generating a return, pension funds were hit hard. UBS published a study showing that Swiss pension funds in 2018 had their worst year since the global financial crisis.
Smaller funds did worse than the larger players because they dare less to invest in illiquid assets than their larger colleagues. The funds had an average negative performance of -3.45 percent after fees.
For 2019, even the largest private bank of the world, UBS, doesn’t seem to see through the recent developments. Their analysts don’t expect a contraction in the coming six to nine months even as the world has moved into the last phase of the economic cycle. So, if will be fine until it won’t be fine anymore. Which is not a great prediction to base your bets upon.
