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The world's largest wealth manager explains why traders should stay invested amid the market's latest downturn – and offers 3 specific recommendations | Markets – Business Insider

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Summary List Placement

  • The stock market sharply sold off this week just days after the S&P 500 hit a fresh record high and notched its best August performance in 34 years. 
  • “We view the latest sell-off as a bout of profit-taking after a strong run,” said Mark Haefele, the chief investment officer of global wealth management at UBS, in a Friday note. 
  • Haefele said that investors should stay the course according to their previous investment plans, and offered three recommendations for staying in the game amid the recent market downturn. 
  • Read more on Business Insider.

The stock market’s latest selloff shouldn’t spark concern or prompt investors to make any sudden changes to their portfolios, according to the world’s largest wealth manager. 

The S&P 500 fell sharply Friday just days after hitting a fresh record high on the heels of its best August performance in 34 years. The Dow Jones industrial average and the Nasdaq also slumped, reversing gains from earlier in the week. 

“We view the latest sell-off as a bout of profit-taking after a strong run,” said Mark Haefele, the chief investment officer of global wealth management at UBS, in a Friday note. “Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and an ongoing recovery as economies reopen from the lockdowns.”

While the S&P 500 is now sitting roughly at UBS’s target, there’s also further upside that could be driven by a coronavirus vaccine or “positive medical developments,” a new stimulus bill from the government with an election outcome favorable to growth, and a real rates dropping further, according to the note. 

Read more: Bank of America lays out the under-the-radar indicators showing that huge swaths of the stock market are ‘running on fumes’ – and warns a September meltdown may just be getting started

Investors should thus stay invested according to previous plans, according to Haefele. Here are three recommendations he has for investors. 

1. Ease into markets 

Heightened volatility can be scary, but shouldn’t mean investors get stuck on the sidelines. “Rather than trying to time the market and potentially miss out on gains, we recommend an averaging-in approach by establishing a set schedule to commit capital to stocks within a 12-month timeframe,” said Haefele. 

He also recommended a “put-writing approach to enter markets defensively, for those investors who can implement options,” and “making use of structured investments to add asymmetric exposure to stocks, e.g., with a degree of capital protection.”

Read more: US Investing Championship hopeful Matthew Caruso landed a 382% return in the first half of 2020. He shares the unique twist he’s putting on a classic trading strategy – and 3 stocks he’s holding right now.

2. Diversify for the next leg 

“The mega-cap IT complex has driven an outsize portion of the year-to-date gains in the US equity market,” Haefele wrote. “But while we don’t think tech is in a bubble, we do recommend that investors with excess exposure to the biggest US stocks consider rebalancing into areas accelerated by COVID-19, such as companies exposed to the 5G rollout, and sustainability-aligned companies set to profit from a ‘green recovery.'”

3. Protect against the downside 

“COVID-19 has brought unprecedented uncertainty for investors, and further volatility cannot be ruled out,” said Haefele. “Diversification across asset classes and regions is the best way to manage the risks in one’s portfolio.”

That being said, Haefele added that investors will need to seek alternatives to portfolio diversification because of how low starting yields are on high-quality bonds. He recommended gold, which he sees as having further upside potential, and “including some exposure to hedge funds with a strong track record of downside risk management,” to insulate portfolios. 

Read more: ‘Never been so extreme’: A renowned stock bear says today’s ‘hypervalued’ market implies the worst market returns in history – and expects a 66% crash from today’s levels

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Insurers' hedge fund investments may face chop after dismal pandemic performance – TheChronicleHerald.ca

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By Maiya Keidan and Carolyn Cohn

LONDON (Reuters) – Having complained for years about hedge funds’ high fees and lacklustre performance, insurance firms may be preparing to cut allocations to the sector after its poor performance during recent market upheaval left many of them nursing losses.

That would be a problem for hedge funds, as insurance companies are huge investors, managing around $20 trillion of assets globally.

It would also be a challenge for insurers, which have been hoping hedge funds would deliver market-beating returns to help them meet billions of dollars in pandemic-related payouts.

One of the primary objectives of hedge funds is to preserve clients’ capital during market downturns. But the industry mostly failed to do that in the first six months of 2020, losing an average of 3.5%, according to Hedge Fund Research (HFR).

An index fund tracking the S&P500 would have lost 3% in the same period.

(Graphic: Hedge fund annual returns – https://graphics.reuters.com/HEALTH-CORONAVIRUS/INSURANCE/xlbpgjloovq/chart.png)

For European insurers, the underperformance is a double blow, as they incur extra capital charges to hold investments classed as risky.

“The average hedge fund would not be a good investment,” said Urban Angehrn, chief investment officer at Zurich Insurance , which says a $120 million fall in hedge fund gains versus last year contributed to a drop in first-half profits.

Angehrn said there were exceptions but “in aggregate, unfortunately, (hedge funds) don’t do a very good job in creating extra performance.”

While Zurich earned a better-than-average 2.9% from its hedge funds between January and June, that was down from 9% in the same period a year earlier. It has around 1% of its $207 billion asset portfolio in hedge funds and Chief Financial Officer George Quinn told Reuters last month it did not plan a “significant shift” in allocations.

Overall, though, European insurers’ median hedge fund holdings have been falling, hitting 1.5% in September from 2% four years before, data from Preqin shows.

Less than a fifth of global insurers plan to add to hedge fund allocations in the event of persistent volatility over the next three to six months, a State Street survey showed in June, while Goldman Sachs Asset Management’s July survey found that even before the pandemic, insurance firms were cutting hedge fund investments.

“I don’t anticipate COVID leading to increased allocations to hedge funds,” said Gareth Haslip, global head of insurance strategy and analytics at JPMorgan Asset Management.

(Graphic: Insurers’ allocations to hedge funds [in %] – https://graphics.reuters.com/HEALTH-CORONAVIRUS/INSURERS/xegpbjogkpq/chart.png)

DAMAGE

Most major insurers do not provide detail of their hedge fund exposure in earnings reports, but Dutch group Aegon told Reuters it had cut allocations to riskier assets by more than 20% as underperformance of hedge funds inflicted losses of $50 million in the first half of 2020.

“Given the current environment, we decided to somewhat de-risk our investment portfolio and have lowered our exposure to hedge funds and private equity to $1.482 million per June 30, from $1.830 million per December 31, 2019,” a spokesman said.

U.S. insurer AIG said earnings in its general insurance business suffered in the first quarter from a $588 million drop in net investment income, mainly due to hedge funds. AIG declined to comment on its allocations.

Bucking the trend, reinsurer Swiss Re’s hedge fund investments edged up to $355 million at June 30 from $352 million at the end of 2019. A spokesman declined to comment on future investment plans.

European insurers’ hedge fund allocations have room to fall as they are above global averages. It’s also costlier to hold hedge funds after Solvency II regulations introduced in 2016 required insurers to set aside more capital against riskier investments.

Those regulations have partly driven recent falls in hedge fund allocations, according to Andries Hoekema, global insurance sector head at HSBC Global Asset Management, but he noted holdings were down also in Asia, which hadn’t tightened rules.

“In Asia, we have some evidence of insurers replacing hedge fund exposure with private equity,” Hoekema said.

This was “driven partly by the more attractive returns of private equity and partly by the disappointing diversification properties of some hedge fund strategies in recent years,” he added.

($1 = 0.8545 euros)

(Reporting by Maiya Keidan and Carolyn Cohn in London, additional reporting by Toby Sterling in Amsterdam; editing by Sujata Rao and Mark Potter)

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Alberta government announces panel aimed at spurring mineral investment – Edmonton Journal

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“We have companies that are ready to invest now, and they need a process, so our timeline is tight. We want to have legislation and any regulatory changes, any pieces that need to be done, ready to go in the spring,” said Savage.

The panel is made up of former premier of the Northwest Territories Bob McLeod, executive director of the Nunavut Water Board Stephanie Autut, president and CEO of Lucara Diamond Corporation Eira Thomas, president and CEO of IAMGOLD Gordon Stothart, and Allison Rippin Armstrong, who has worked with government, industry and Indigenous organizations.

Part of the government’s strategy will include helping to improve data on mineral deposits in Alberta.

The UCP government has been touting its latest diversification efforts, including in the technology and innovation sector, but Alberta’s Opposition NDP has criticized those sector and business-specific investments as being a fraction of the NDP’s diversification plans.

Savage said the government is focused on investors and people looking to set up business in Alberta. “Those are the people that we’re talking to,” said Savage.

Under the Progressive Conservative government, Alberta Energy commissioned a Mines and Minerals Strategy in 2002, but “then it just stood still,” said Savage, adding the UCP wants to allow affected communities to contribute so projects could move forward while protecting the environment.

Savage is expected to announce the Mine and Minerals strategy panel Wednesday morning with the CEO of Calgary-based business E3 Metals Corp, Chris Doornbos.

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China will boost investment in strategic industries: state planner – TheChronicleHerald.ca

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BEIJING (Reuters) – China said on Wednesday it will boost investment in strategic industries including core tech sectors such as 5G, artificial intelligence and chips.

China will accelerate development of new materials to ensure stable supply chains for aircraft, microelectronic manufacturing and deep-sea mining sectors, the National Development and Reform Commission (NDRC) said.

China will also speed development of vaccine innovation, diagnostic, testing reagents and antibody drugs, the NDRC said.

(Reporting By Ryan Woo and Lusha Zhang; Editing by Shri Navaratnam)

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