Unprecedented is an over-used term but there are few others that can describe the market rollercoaster we saw during 2020.

Experiencing a market crash

We are taught in our textbooks that all market crashes are different and par for the course when investing in risk assets. It is not something we like but it is something we must get used to, as part of the trade-off between risk and return.
However, as rational as that sounds, it all feels very different when you are training as an investment manager.  The first experience of a sharp market downturn is alarming to say the least, especially one of this magnitude and global scale.
Covid-19 is different again because the origins are epidemic-related rather than market-related. Past events can offer some insight to the future, but perhaps not in this case.

The challenge for first-time investors

The challenge for first-time investors - young managers but also clients - is to stay calm, be rational and look for the opportunities.  Thankfully, we have seen some exciting opportunities and, with the support of our specialist research department, were able to position investment portfolios to benefit from these at an early stage. 
The main learning for me is to have witnessed first-hand the benefits of holding a well-diversified portfolio, invested across a broad range of assets which each react differently to market news.  With headlines changing daily, this is especially important.

Staying strong in volatile times

With a long-term investment strategy, the perceived wisdom within the industry is to stay committed to the strategy and ride out the storms.  Anecdotal evidence tells us that investors who sell assets following a market fall can miss out on some of the best returns, which tend to follow quickly after the worst losses.
Bearing in mind the strong recovery we have seen, disinvestment in the midst of the crisis would have significantly impacted long-term returns.
During this time, it has been vitally important to keep in contact with clients and offer information and reassurance. I know that clients are very appreciative of this contact - either to receive a call from their investment manager or an update from our research department.

The near future of investing

There is no doubt we are in a changing industry and the near-term future will look very different, with challenging financial markets and an economy which may take years to recover.  For those looking to build a career in the industry, it will be a fascinating time.
I do believe the pandemic will leave us with some positive lasting effects. For one, we’re witnessing the rise of environmental, social and governance (ESG) issues at the heart of business and investing.  It is becoming clear which companies are not only prepared to support their employees and stakeholders in the good times but to do the same throughout the bad times too.

The case for ESG, which is already a key element within the research process here at Investec, is only growing stronger. It has become a natural part of selecting the very best companies and funds for investment.  You can read more on ESG here.  

About the author

To contact or read more about Hannah Gibson, visit her biography here.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.