Investment management

Covid-19

Investors have been going through rough times during recent weeks due to the effect of the Coronavirus crisis. After so many years of bull markets and relatively low volatility, we have all been surprised by the rapid changes in fortune.

There are many questions out there. Such as: what’s the best way to react to extreme market volatility? How to process the daily influx of news from the media? What does the situation mean for my clients’ investments, now and in the future?

The financial roller coaster means that for many apprehension has set in with investors adopting different strategies to address the downturn. It may be early selling of stocks, holding until the market has bottomed or buying in uncertainty.

It’s human nature …

Our reactions and behaviours are normal in times like these. It’s human nature to want to see our capital grow steadily over time, to seek reassurance in a favourable global economy, to feel nervous when instability sets in. Despite the fluctuations, crisis usually presents opportunity as well as loss. It’s knowing how to recognise and seize it at the right moment which can make the difference. No-one has a crystal ball, so what’s the secret to making the right moves?

Back to basics

It’s hard to know what to do, but taking a step back and doing some level thinking detached from emotion can help. Thinking logically and looking for solutions which provide protection and security for the long-term are key to managing wealth effectively through the good as well as the bad times.

It’s appropriate therefore to return to three basic investment principles:

• an overall protective framework
• a diversified asset allocation, depending on the profile of the investor
• a phased approach for reinvesting over time.

Protection is the cornerstone of sustainable performance for any business and investment.  Ensuring your partner’s financial solidity as well as the protection regime of the jurisdiction are key to keeping everyone safe from failure impacts.

Diversification at all levels allows investors to mitigate the specific risk linked to each individual asset by spreading it over a number of different asset types and underlying currencies.

The third principle of adopting a phased approach to investments can help to reduce the dependence on guessing the perfect moment to enter the market. Investing gradually is a good way to smooth out the risk related to any short-term market movements.

In the long run when following these principles within a relationship of trust with your client and regular realignments of their asset allocation to fit their evolving needs, investors will most likely have the chance to see their capital grow, without worrying too much about short-term movements and individual crises which are a fact of life and will continue to happen in the future.

A partnership approach offering flexibility

In this context, life assurance remains an efficient financial and wealth planning tool, allowing investors in partnership with their IFAs, to implement their medium- to long-term financial plans in a secure manner, either for themselves (buying real estate, planning for retirement and other needs) or for their heirs (succession planning).

In Luxembourg in particular, life assurance contracts can be invested in a wide variety of underlying investments, giving the opportunity to cater for a large range of investor and wealth profiles.  Besides the array of classical investment funds offered by OneLife, investment in dedicated or specialised insurance funds is also possible, as well as multi-currency investments.  Our policies are entirely tailored around the client and are flexible enough to adapt to their needs through the different stages of life.

In addition, Luxembourg benefits from a strong investor protection regime, the so-called Triangle of Security, which allows the ring fencing and segregation of assets linked to insurance policies at custodian banks approved by the regulator. And OneLife can count on the financial solidity of its shareholder, Groupe Apicil, with more than EUR 18 billion assets under management and the fourth largest social protection group in France. 

Could the solution to uncertainty then be as simple as a Luxembourg life assurance contract, providing diversification, protection and peace of mind, for today and tomorrow?  Yes, it can.