The calm after the storm
Luxembourg, 24 April 2020 – Investors have certainly learned a lot: The 2008 financial crisis was still characterised by hectic trading and the sale of all assets – irrespective of price – leading to private investors in particular suffering heavy losses. “In the current crash, however, private investors kept their cool and were able to take full advantage of the rapid recovery”, said Swen Köster, Senior Vice President at Moventum S.C.A.
“At present, private investors are frequently in a better position than the professionals”, Köster pointed out. “This may be due to the fact that the crash came so quickly that there was not even time to worry too much”. Research shows that private investors are often selling when prices have been falling for quite a while, when they see no improvement and therefore lose patience. “Oftentimes, this is the case shortly before a recovery, so that they are unable to benefit from the initial, frequently high, profits”, said Köster.
Since the pandemic-related crash happened much faster and other, more existential issues such as the concern for one’s own health were initially more important, many investors hesitated for quite some time. “That was exactly the right thing to do, because they were still invested while things were already looking up again”, Köster pointed out. Many professionals, on the other hand, were forced to sell in the middle of the downturn – either because of existing investment guidelines or simply because they needed liquidity.
Above all, however, investors have learned to trust their advisors: “It was extremely difficult for advisors to keep their clients invested, especially in 2008”, Köster looked back. But the patterns repeated themselves, with strong recoveries following painful downturns. “This prompted many private investors to follow their advisors’ advice to build up the portfolio strategically and for the long term, and then also to endure difficult phases of losses”, said Köster. “Good advisory service is crucial for investment success”.
The strategy of perseverance has proven its worth in the ongoing pandemic crisis. Those investors who sold their holdings after a downturn of 20 percent are now worse off than those who remained invested. The Dax has lost a good 30 percent since the beginning of the year. “Those, for instance, who are invested in a portfolio such as the Private Wealth Portfolio offered by Moventum have incurred a minus of just five percent since the beginning of the year”, Köster explained. “Even the offensive MoventumPlus Aktiv Portfolio is much more stable with a loss of eight percent”.
The changed attitude towards losses on the stock exchange is even more evident in the inflow of funds. “While investors withdrew a lot of money in 2008 to park it, we are currently seeing inflows of funds”, Köster highlighted. “Obviously, this has to do with the interest rate environment, but it also shows that many investors are basing their decisions on the expectation that risk asset classes will also perform better and will carry returns in the years to come”.
Moventum Asset Management S.A. (Moventum AM) is a wholly-owned subsidiary of Moventum S.C.A. The management company, in which Moventum’s asset management expertise has been concentrated since the beginning of 2019, manages Moventum’s own funds and individual mandates as part of its asset management portfolios.
As an independent financial service partner, Moventum S.C.A. is specifically addressing financial service providers such as financial advisors, asset managers, institutional investors and NGOs. Its services in asset management and asset building include a web-based securities investment platform focusing on funds, relieving financial advisors of administrative tasks, and integrating custody and account management for individual investors. Investment management tools, regulatory-compliant reporting and individual securities services are also part of the full-service range. Standardised fund asset management service with a sustainable, successful track record for the relevant risk/reward profiles complements the offering. The Moventum Group also enables institutional investors to outsource securities processing in its entirety. The MoventumOffice investment platform offers access to more than 9,000 investment products including funds and ETFs from more than 400 investment firms, including the use of analysis, reporting and support tools.
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