Markets hate uncertainty and wars provide it in bucketfuls, so it’s no surprise that February has been a wobbly month for share prices. Entering the start of the war in Ukraine with lots of liquidity, strong diversification and, most importantly of all, no direct exposure to Russia or the other emerging markets of Eastern Europe, has helped protect the Courtiers Funds and our investors’ wealth.
The Courtiers Funds dropped very little last month while equity markets in many parts of the world plummeted. The Courtiers Total Return Cautious, Balanced and Growth multi-asset Funds declined just -1.09%, -1.42% and -1.85% respectively whilst the Courtiers UK Equity & Global (ex-UK) Equity Income Funds shed -3.71% and -1.32% respectively. The Courtiers Investment Grade Bond Fund, as you would expect when markets lose their risk appetite, held fast and returned a modest +0.09%. In comparison the MSCI Russia index, which tracks Russian stocks, collapsed more than 50% during the month in USD terms.
Courtiers enters its 40th year next month, launching just two days before Argentina invaded the Falkland Islands at the beginning of April 1982. I’ve experienced some “interesting” times with markets in the last four decades and, indeed, during the start of my career in finance at the beginning of the seventies.
Post Falklands we had Black Monday 1987, the first Gulf War of 1990/1991, the 1998 Russian Debt crisis and the collapse of Long-Term Capital Management, the bursting of the Tech Bubble in 2000/2001, the 2007/2008 Global Financial Crisis, the 2011 downgrading of US debt, the 2020 Covid-19 pandemic and now the Russian invasion of Ukraine. In finance, crisis will follow crisis like night follows day but, thankfully, less frequently.
The formula for successful long-term investing is remarkably simple – keep savings for emergencies and immediate capital expenditure in cash and invest the rest in a range of assets that offer reasonable prospects for returning in excess of inflation over the long-term. You will not get real returns in excess of inflation without taking risks. Short-term volatility is the price the equity investor pays for long-term outperformance. That spare cash you keep in reserve means not having to sell in a crisis, which is vital otherwise you end up offloading assets at knock-down values.
This ghastly Russian incursion into a sovereign country, tragic as it is, will pass into history (I sincerely hope with the Ukrainian people coming out on top) and markets will go on.
Meanwhile the Courtiers Investment Team is doing more or less what it did during the early months of the Covid-19 induced market collapse of 2020, and every other crisis before that: i.e. keeping our clients’ assets under review and looking for buying opportunities.
James will provide broader coverage of February’s market performance and activity in our monthly update later this week, and we’ll continue to keep you up to date with bulletins and video interviews.