Client D is an active business owner and entrepreneur. He enjoys being active in following investments. We were able to work with him to advise on a portfolio covering the US, Europe & Asia markets.

In February 2020, in preparation for a meeting with this client, we prepared a stress test to indicate how the portfolio would have held up in previous market corrections. Our analysis indicated that the portfolio should be resilient during a future crisis. We did this exercise in order to have a meaningful discussion with the client about risk & return. 

The performance for the previous year was 12%, which was very good, given the target return of 5-7%. However, the client was looking for a higher return. We explained that in order to reach for a higher return, the client needs to be willing to take more risk which we did not recommend at that time. After the discussion, it was agreed to keep the risk profile as it was. 

It was eerily timed, as only 3 weeks later the market corrected, falling by -33% due to the Covid pandemic. We were pleased to see that the client’s portfolio fell only -7%. At the end of 2020, the global equity market finished the year at +14% and this client’s portfolio was up +13%. We are proud to have achieved 92% of the upside and only 20% of the downside. 

We did not know that a market correction was only 3 weeks away and we did not know that Covid-19 would be the cause of the next correction. However, we do have over 30 years of experience in wealth management and it seemed to us too late in the economic cycle to add more risk. We had the conviction to stand by our prudent approach and smooth out the volatility for our client.