Part 2: Top 4 Investments For Your Portfolio In 2017
Managing Partner and Founder Urs Brutsch of HP Wealth Management shares his investment picks for this year
Published on 23 February 2017
After 32 years in private banking with major banks such as Credit Suisse and ABN AMRO, Urs Brutsch started his own independent wealth management firm in 2009 – HP Wealth Management. Here, the wealth management expert shares insights on top investments you should include in your portfolio this year.
HP Wealth Management Managing Partner and Founder
We are still slightly overweight on equities because bonds are likely to suffer as interest rates go up. Equity markets in developed economies will probably fare better than those in emerging markets, although that may change over the next six to 12 months. The US equity market is still attractive and the underlying fundamentals for Europe are improving.
2) Fixed income
In the fixed income space, we stay away from government bonds – but remain invested in high-yield and emerging market bonds as well as some corporate credit. You can still get 5-6% returns in some high-yield fixed income investments.
“Even though the performance of hedge funds have declined substantially over the last few years, the long-term returns are still quite good”
3) Alternative investments
You should increase your exposure in alternative investments. These are investments uncorrelated to public markets, meaning they are less affected by what is happening on Wall Street. An example of an alternative investment we have invested in is a trade finance fund. This fund gives a steady return of 4-5% every year, with a long and strong track record. We like trade finance funds because there is little volatility and they are not correlated to actions by the US Federal Reserve or developments in stock markets.
4) Hedge funds
Even though the performance of hedge funds have declined substantially over the last few years, the long-term returns are still quite good. You can allocate about 5-10% of your portfolio to hedge funds. Despite the disappointing performance this year, we adopt a long-term view on hedge funds – we don’t look at the month-on-month performance. The world of hedge funds is complex – which is why we are collaborating with Mercer, which has a large database on hedge funds.
Diversification into different asset classes is key – the extent of which will depend on each client’s risk appetite. A balanced portfolio will generally have 40% equity, 40% fixed income, 15% alternative investments and the client will perhaps hold 5% in cash. A dynamic portfolio will probably have more equity as well as alternative investments and less fixed income.
Avoid heavy risk-taking and don’t take up too much leverage. Interest rates are getting higher and that will potentially erode your carry. If you need to leverage, you should borrow in the same currency as your investment.
Remember to look for an advisor whose interest is aligned with yours. Look for someone who listens to you. For example, he should not come into the first meeting armed with an investment proposal.
It is also crucial to stay on course. Don’t change your plans in the span of six months or one year. Even if your investment isn’t working out too well in the short term, just hang in there for the long term. Take a view, build a portfolio and stick with it.
But at the same time, you should still constantly monitor and tweak your portfolio as well as make adjustments along the way. However, don’t jump in and out of the market or make drastic changes to your portfolio too frequently. If you have a quality investment in your portfolio, keep to the course and don’t make changes just because of short-term market fluctuations.