Market update with Jonathan Armitage (MLC)

Funds Management

by Clive Tompkins

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MLC Chief Investment Office Jonathan Armitage provides an update on the markets.

Share markets continue to be volatile. What’s the latest?

Markets are continuing to be volatile as investors react to the news about economic growth and global trade being disrupted because of the coronavirus and also the news that's emerged around oil production, with the Saudis deciding that they are going to increase production quite significantly.

This is a rapidly evolving situation for markets, and the news in recent hours that the United States is going to impose a travel ban on all passengers from Europe I think is adding further to the fears about global trade and the uncertainty that will come with that.

When will share markets stabilise?

One of the first questions that people ask us is, when do we think that markets will start to stabilise? And that's quite a challenging question to answer right now given the issues that are facing the global economy and also this disruption to global trade.

We're focused on two things here at MLC. The first one is managing risk for both our retail investors and our superannuation fund clients to ensure that we are doing the best job possible to preserve clients' and members' capital. The second thing that we're doing is that, in light of the volatility, we are looking for opportunities where we believe that we'll be able to deploy capital to benefit clients in the future.

As always, with these periods of volatility, markets will throw up some great opportunities for those investors focused on the medium and long term, and we intend to take full advantage of those opportunities as and when they arise.

Was MLC prepared for this, and what are you doing to manage portfolios in this environment?

So, how has MLC been prepared to manage these type of markets? For some time, we've taken quite a defensive position within our multi-asset portfolios. This was primarily driven by the fact that we felt that valuations, particularly in equities and parts of the fixed income markets, were very high and discounting an awful lot of very good news. Our portfolios have benefited from significant diversification across asset classes and a focus on particular elements where we think they have very defensive characteristics and, importantly, are uncorrelated to some of the things that may be going on within equity markets.

In the last couple of years, we've also been using risk management tools, such as derivative strategies, to help manage the risk within the portfolios. These components have obviously been incredibly important in the equity market volatility that we've seen in the last several weeks. We will continue to look at these strategies as ways to help manage the risk within the portfolios, but also look to utilise them to take advantage of opportunities as they arise within the marketplace.

It's understandable that some people may be concerned by the volatility that we're seeing within markets currently. At MLC, we've been managing multi-asset funds for over 35 years, and we have a deep and very experienced team who are very focused on managing your assets appropriately given the market environment that we're currently witnessing. The things that have held us in stead for the last 35 years remain very true now. We are very focused on managing risk and ensuring the diversification within the portfolios, both for our retail clients and our superannuation fund members.

It is possible that, over the coming months, you will see returns which are negative over the short term. However, we remain focused on building wealth for all our clients over the longer term, and we remain very confident that our expertise, diversification and experience will help us manage through these turbulent market times, and enable our clients and members to continue to grow and expand their wealth.