Avoid over-concentration in portfolios warns Cor Capital

Portfolio construction and resilience will be key for investors next year, particularly those preparing for retirement.  

The volatility and unforeseen market events opened investors’ eyes who might have been complacent during the long-running bull market and failed to prepare their portfolios for a down market. 

Rather than using the traditional 60/40 method, for Cor Capital, the firm opted following the theory of permanent portfolio which helped to avoid over-concentrating risk to any particular market scenario by holding lower exposure to growth risk.  

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This resulted in a portfolio with equal 25% exposure to equities, fixed income, precious metals and cash. It then also added active management strategies to harness market volatility for an alternative source of return.  

The precious metals exposure acted as a counter-point for equity risk for rebalancing while the allocation to fixed income and cash meant the portfolio was prepared for recession and deflation. 

Davin Hood, founder and portfolio manager at Cor Capital, said: “In hindsight, concentrated risk in equity markets for this past year would have made any portfolio manager look like a star. However, the volatility along the route and actual risk to permanent loss of capital has resulted in making investors with shorter timeframes look for capital stability. 

“For investors seeking a smoother return profile there are more fundamental approaches that do not rely upon potential flaws of historical data or over-reliance upon complex methods of making asset class predictions. 

“Instead of a focus upon making market calls and bets, Cor Capital’s unconventional approach sees building a more robust approach for all eventual outcomes – especially in a world where volatility is set to increase.” 

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