2023 was an above-average year for stocks. That's reflected in quirion's portfolios too. In this article, you can read how the various strategies fared and what to watch out for when comparing performance.
Last year, many stock markets did very well – far better, at any rate, than most had expected beforehand. “Over the long term, on average, returns of around 7 percent per year are realistic on the global stock markets,” notes Philipp Dobbert, Head of Asset Management at Quirin Privatbank and at quirion. “That's what we aim for with our investment strategy. And against that backdrop, our portfolios had an above-average year.” Both the global and the sustainable portfolio fared similarly well.
Part of that success is that bonds once again fully served their function as a stabilizer. In quirion's portfolios, bonds are meant to cushion the price fluctuations of stocks. Not everyone wants a pure equity investment. The mix of stocks and bonds is derived from each investor's personal risk profile. The greater the willingness to take risks – and thus the higher the equity share – the higher the return opportunities: this principle doesn't necessarily hold over a single year, but rather over the long term. It can, however, be read off quite well from the performance of the various strategies.
Performing even better than the global and the sustainable portfolio was the Megatrends portfolio. This equity portfolio focuses on five selected megatrends and is intended as a complement for those who want to set their own priorities beyond a core investment.
A few segments stand out
The Megatrends portfolio benefited, among other things, from a comparatively high weighting of technology stocks. That also had a positive effect on some stock indices, such as the MSCI World. Contrary to what the name might suggest, this index doesn't really represent the global equity market. It places its emphasis on the US and on technology stocks, but in return it doesn't include emerging markets or small caps, for example.
For emerging markets and smaller stocks, however, 2023 wasn't a particularly good year. “That was reflected in our broadly diversified equity portfolios as well,” Dobbert concedes. “But in any given year there are always individual stocks or market segments that perform better than a global portfolio.” That's in the nature of things: the broader a portfolio, the smaller the impact of price swings in individual holdings. This reduces the risks, even if it costs a little performance here and there. “Our global portfolio – both the classic and the sustainable one – are meant to be as robust as possible for the future,” Dobbert stresses. “That's why we invest strategically and permanently take into account all the relevant return factors.“
After all, it isn't always the same segments of the global stock markets that stand out with their performance. Sometimes the developed markets are out front, sometimes the emerging markets. Sometimes the stocks of larger companies do better, and sometimes smaller stocks. No one can look into the future and say with certainty what will be especially in demand over a particular period. “In hindsight, you can always find plausible reasons why things turned out one way and not another,” Dobbert states. “But beforehand, no one knows.” The emerging markets, for example, were still seen as great hopes.
Return isn't always the same as return
When comparing performance, it's always important to look very closely. “You should make sure, for example, that the periods under consideration match up exactly,” Dobbert advises. When comparing individual years, a single day can, under certain circumstances, make all the difference. Beyond that: for your own portfolio's performance, it matters whether there were deposits and withdrawals during the investment period. That's why there are different types of return calculation that make different statements and that can't be compared with one another.
As for how performance will develop in 2024, Dobbert doesn't want to speculate much. Whether it will once again be above average is neither settled nor ruled out. “What's certain is that we'll stay the course with our investment strategy,” Dobbert emphasizes. “Because aiming for the long-term average return of the global equity market is simply the best strategy for a core investment when it comes to the balance between return opportunities and risk.”
