A long-term view is essential as portfolio positioning proves a tricky proposition

Published on Friday 18 July 2008 21:26

At the halfway stage of the competition, it's interesting to observe how each competitor is dealing with extremely challenging conditions while still trying to meet Angus MacDonald's objectives.

There would appear to be three distinct camps. The first is the hold group. Two IFAs have decided that their original asset allocation still holds good under current conditions and that their portfolio is, after all, a long-term hold, so there is no need to make knee-jerk alterations to their portfolios.

In the second group, six IFAs have not made many alterations but have tweaked their portfolios in an attempt to take advantage of the changing fortunes of each asset class. The overwhelming theme seems to be their extraction from commercial property exposure.

Finally, two of our IFAs have been switching. They seem determined to chase market returns wherever there is a glimmer of expectation, such as Russia, America, commodities or emerging markets.

From an observer's perspective, excessive switching of funds simply incurs charges which need to be justified by outperformance, otherwise it results in wasted effort.

Over the next six months the challenges will undoubtedly continue. We must remember, however, that the dramatic correction of the FTSE All Share(-26.4 per cent) almost overnight in the UK on Black Monday in 1987 had more or less corrected itself within nine months and a period of steady growth ensued.

Many pundits are suggesting that we are probably halfway through the current bear market and that we should anticipate a strong rally towards the year-end. We can only hope that this scenario develops and that the competitors are able to meet their client's long-term objectives.

• Raymond Ellis is director of Scott-Moncrieff Wealth Management