At a time when large and popular stock portfolio management service (PMS) systems have eroded their clients’ wealth by up to 10% in May alone, 2020 data from PMS Bazaar, a portal that informs on the PMS comparison, show that systems that had a multi-asset allocation approach managed to provide relatively better, albeit negative, returns.
According to Prabhudas Lilladhar (PL) officials, their PMS team quickly reduced their equity allocation to less than 50% of the portfolio, thereby significantly reducing their equity market exposure.
“This strategy has not only protected clients’ wealth, but has also outperformed high profile portfolio managers on the street,” said Siddharth Vora, Head of Quantitative Investment Strategies and Fund Manager at Prabhudas Lilladhar.
“The bold move to start cutting stocks started as early as January. The portfolio also increased its allocation to gold and increased its cash positions. This move was triggered by their proprietary quantitative meters which timely indicated a sharp decline in stocks due to weakening global macro signals,” he added.
In rising markets, every investor tends to increase their equity investments, driven by their sense of fear of missing out when they see the markets euphoria, but capital preservation was key during turbulent times and can only be achieved with the right asset allocation. and eliminate all human emotions that go into decision-making, he added.