Investing without end

Inevitably, a client will ask how the year has fared. And even the regulator demands that performance be reported in 12-month intervals at various junctures. 

This makes sense, as it simplifies the comparison of different investment options and enables a classification into good and bad phases. No one can completely escape the influence of this recurring rhythm. As in many other areas, the calendar year holds a unique position in the realm of investment.

However, the annual cycle doesn’t always constitute a positive factor. Just think of incentive schemes such as performance-based fees or bonus payments. These could potentially impact when and how much risk is taken in investing. One investment manager wants to catch up, another wants to preserve something already achieved. 

Years ago (not at Gutmann!), I was approached with the request to “wrap up” the year before December 31. My puzzled look brought clarification: “Well, if we go into cash now, our clients will have a good performance and we will have a secure return. It's good for everyone!” My answer, perhaps too flippant to enlighten the : "Over my dead body". 

Responsibility = Seriousness + Mindfulness

When clients entrust us with their assets, this applies for an indefinite period of time. 
One could even say it's for perpetuity, as there's no fixed timeframe - though that might sound a bit too grandiose. Regardless, it remains an eternal flow of ’now’. Every day, with seriousness and mindfulness, we in the Chief Investment Office shape the investment strategy. Whether it is a good or a bad year is of no consequence. 

The goal must be not to interrupt the magic machine of compounding. After all, we never know when a surprising moment will come that sends assets soaring. Anyone who tries to wrap up a single year in an attempt to ‘protect’ performance disrupts the trust between the asset providers who bestow trust, and the asset managers, who assume responsibility. 

At Gutmann, I was never approached with such a request, nor will I ever be. Nevertheless, it is important for me to bring this to your attention. As an investor, you may encounter a similar situation sometime, somewhere out there. Now you are armed and ready.