7. Take opportunities to cut gold exposure ✔ 

On track to finish the year in negative territory, gold experienced tremendous volatility through 2022, torn between rising rates and US dollar versus the risks of slowing economies and intense geopolitical pressures. Looking ahead, as interest rates stabilise, China reopens and the US dollar weakens, we expect gold prices to be better supported, and will look to increase exposure.

8. Favour tactical and active over passive investment management ✔ 

2022 reminded investors of the important role that diversifying assets play in a multi asset portfolio. Macro and trend-following hedge fund managers benefited from the market dislocation, and our increased allocation to the segment, both strategically and tactically, provided some positive performance to cushion portfolio losses in equities and fixed income.

9. Volatility to increase, use it to your advantage ✔

With a challenging set of catalysts, equity markets saw a series of selloffs in 2022. We used option strategies to add a downside cushion to portfolios, which was a helpful addition to returns in a challenging year.

With volatile markets and higher yields, structured products also became a useful addition to the portfolio construction toolkit for eligible investors.

10. Focus on sustainability as a driver of returns ✔

The asset management industry’s sustainability-themed funds have often targeted small or mid-capitalisation growth-style companies that did not perform well in 2022’s large-cap, value-oriented setting. The positive from this is that as macroeconomic conditions evolve in 2023, we expect to see these themes benefit from a more favourable environment. As mentioned earlier, we also see a longer-term boost from the transition away from Russian energy as European governments intensify their efforts to invest in alternative sources, including renewables. Sustainability remains a core long-term conviction, and the key driver of financial returns.

Conclusion

We believe that reviewing our performance is an important and ongoing exercise in improving the way we construct portfolios for our clients. 2022 certainly provided plenty of surprises. Any exercise in predictions is difficult as physicist Niels Bohr is credited with saying, “especially if it’s about the future.”

As this turbulent year draws to a close, it remains for me to wish you all a happy and prosperous 2023, and we look forward to an eventual end to this ‘permacrisis.’

This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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