Anyone who writes investment commentary on a regular basis is familiar with the need to convey similar themes in different words. Think back to 2017. Quarter after quarter, the direction—of almost every kind of asset—was up. It was an “everything working” market. Then 2018 looked like more of the same, after investors shrugged off a rough patch early in the year.
Then, of course, the fourth quarter of 2018 arrived. The major indices gave up all their gains for the year and then some. What’s more, it was a terrible year for asset allocation strategies, because we went from “everything working” to “nothing working.” That’s a tough environment to write about, for both asset managers and wealth management firms:
- Asset managers, because a few basis points of outperformance on a down-fifteen-percent benchmark return is little solace to investors.
- Wealth management firms, because asset allocation strategies haven’t “worked” in the normal and expected way to mitigate losses.
So what do you say to investors who are seeing sharp losses, perhaps for the first time in a decade? You lean on the comments about process and culture that—hopefully—you have stressed again and again during rosier past quarters:
- Return to your core messages—even going so far as to repeat the exact language investors will have seen in previous communications, thereby conveying discipline and continuity rather than panic and defensiveness—about who you are as a firm: your investment philosophy, your process disciplines, your culture of collaboration or deep research or decisiveness or whatever else it is that defines you.
- Reiterate that you remain as committed as ever to those characteristics, even in periods of significant market stress.
- Point to the long-term benefits of your approach, putting the current downturn in a broader context. For example, if you’re a more quality-conscious growth manager who trailed your benchmark when everything was going straight up, remind stakeholders why you maintained that posture both then (to your detriment) and now (potentially to your relative benefit).
- Provide comments about what surprised you and how you’re adapting and opportunities that may be created. Give investors the chance to feel like they’re seeing the world through a portfolio manager’s eyes.
All of this is likely to be more successful if it isn’t new. That’s why speaking to culture and process is so important when things are going well.
When they are going badly, keep doing it.