• Current students
      • Student centre
        Enrol on a course/exam
        My enrolments
        Exam results
        Mock Exams 2020/21
        CAP1 essential documents
        CAP2 essential documents
        FAE essential documents
      • Course information
        Students FAQs
        Student induction
        Course enrolment information
        Key dates
        Book distribution
        Timetables
        FAE Elective Information
      • Exams
        Exam Info: CAP1
        E-assessment information
        Exam info: CAP2
        Exam info: FAE
        Reasonable accommodation and extenuating circumstances
        Timetables for exams & interim assessments
        Interim assessments past papers & E-Assessment mock solutions
        Main examination past papers
        Information and appeals scheme
        JIEB: NI Insolvency Qualification
      • CA Diary resources
        Mentors: Getting started on the CA Diary
        CA Diary for Flexible Route FAQs
      • Admission to membership
        Joining as a reciprocal member
        Conferring dates
        Admissions FAQs
      • Support & services
        Audit Qualification requirements
        Recruitment to and transferring of training contracts
        CASSI
        Student supports and wellbeing
        Learning Hub data privacy policy
    • Students

      View all the services available for students of the Institute

      Read More
  • Becoming a student
      • About Chartered Accountancy
        The Chartered difference
        What do Chartered Accountants do?
        5 Reasons to become a Chartered Accountant
        Student benefits
        School Bootcamp
        Chartered Connect
        Study in Northern Ireland
        Events
        Blogs
        Testimonials of Flexible route
      • Entry routes
        College
        Working
        Accounting Technicians
        School leavers
        Member of another body
        International student
        Flexible Route
        Training Contract
      • Course description
        CAP1
        CAP2
        FAE
        New education offering
      • Apply
        How to apply
        Exemptions guide
        Fees & payment options
        External students
      • Training vacancies
        Training vacancies search
        Training firms list
        Large training firms
        Milkround
        Training firms update details
        Recruitment to and transferring of training contract
        Interview preparation and advice
        The rewards on qualification
        Tailoring your CV for each application
        Securing a trainee Chartered Accountant role
      • Support & services
        Becoming a student FAQs
        Who to contact for employers
        Register for a school visit
    • Becoming a
      student

      Study with us

      Read More
  • Members
      • Members Hub
        My account
        Annual subscription fees
        Annual returns
        Application forms
        CPD/events
        Member services A-Z
        District societies
        Professional Standards
        Young Professionals
        Advocacy
        Careers development
      • In practice
        Going into practice
        Practice Matters
        Practice toolkits
        Members in practice committee
        Practice networks
        Helpsheets
        Compliance support
        Members' complaints adviser
        Free services
        Our approach
        Workshops and professional training with a difference
        Abhaile Scheme
        Practice News webinars
        GDPR resources for practices
      • Overseas members
        Working abroad
        Working in Australia
        Overseas members news
        Tax for returning Irish members
      • In business
        Networking and special interest groups
        Articles
      • Public sector
        Public sector news
        Public sector presentations
      • Support & services
        Letters of good standing form
        FAQs for Chartered Accountants
        AML confidential disclosure form
        CHARIOT/Institute Technical content
        TaxSource
        Pocket diaries
    • Members

      View member services

      Read More
  • Employers
      • Training organisations
        Authorise to train
        Training in business
        Course enrolment information for firms
        Manage my students
        Incentive Scheme
        Recruitment to and transferring of training contracts
        Securing and retaining the best talent
        Tips on writing a job specification
      • Training
        In-house training
        Training tickets
      • Recruitment services
        Hire a qualified Chartered Accountant
        Hire a trainee student
      • Non executive directors recruitment service
      • Support & services
        Hire members: log a job vacancy
        Firm/employers FAQs
        Training ticket FAQs
        Authorisations
        Hire a room
        Who to contact for employers
    • Employers

      Services to support your business

      Read More
☰
  • Find a firm
  • Jobs
  • Login
☰
  • Home
  • Knowledge centre
  • Professional development
  • About us
  • Shop
  • News
Search
View Cart 0 Item

News

  • Home/
  • News
☰
  • News
  • News archive
    • 2020
    • 2019
  • RSS feeds store
  • Press releases
    • 2020
    • 2019
    • 2018
    • 2021
  • Newsletters
  • Press contacts
  • Media downloads
  • Podcasts Chartered Accountants Ireland
  • Budget day news

Outperforming in turbulent times (Sponsored)

Oct 01, 2020

Richard Temperley, Head of Investment Management with Zurich Life, speaks to Barry McCall about the company’s outstanding track record over the past 30 years.

2020 will be remembered as one of the most eventful years in the history of global investment markets. From record highs to precipitous falls and to the dramatic recoveries followed by some sharp corrections, the year has had just about everything.

By the time the COVID-19 pandemic struck the western world in earnest, one of the longest bull markets in history was still running. “We had seen an 11-year bull market in equities, beginning in March 2009 just after the financial crash,” says Richard Temperley. The persistent low-interest-rate environment was the key supporting factor to the recent bull market.

COVID-19 brought about the fastest ever market correction over a three-week period in late February and early March. “We have had other corrections but none as sharp as that one,” says Temperley. “The market fell by 35% from top to bottom in the US. That was unbelievably quick –  just 15 working days. It was caused by worries about the lockdown and economic growth stalling.”

That sharp fall constituted a bear market which is defined as a decline of more than 20%, according to Temperley. “We are now back in a new bull market,” he points out. “The US market has replaced all of its losses and reached new highs in August and early September. Other markets have not fared as well, and their recovery has not been quite as strong. By the beginning of September, the UK had recovered 44% of its losses, Europe had recovered 60% and in Japan, it was at 90%.”

But those figures do not give a clear picture of what was actually happening in the markets. “The rise in the US market was largely concentrated in a small number of sectors,” Temperley explains. “These were mainly tech and consumer discretionary stocks.”

The enormous influence of these stocks is illustrated by their collective value. “The big five stocks – Microsoft, Apple, Google (Alphabet), Facebook and Amazon – account for just 1% of the S&P 500 in terms of their number but they now represent almost a quarter of its value as measured by market capitalisation. The US stock market is roughly 65% of the global market value so these five companies alone represent about 16% of it.”

These companies were already doing well but they have done even better during the pandemic. “There has been an acceleration in the current growth trends in online shopping, increased use of computer technology, consumption of online entertainment and so on,” says Temperley. “But there are other stocks which haven’t been performing well or recovered as much. These include banks, energy, and some retail.”

The rapid bounce back was aided by the unprecedented wave of spending from governments which was aimed at stimulating economic recovery. “The US government alone is spending vast amounts of dollars,” Temperley notes. “The EU has also agreed a major spending package while the French government has recently announced its own programme. We haven’t seen the economic recovery yet, but it will come.”

Central banks joined in with interest rate cuts and quantitative easing.

At another level, measures like enhanced unemployment payments helped people whose jobs have disappeared. That provided more liquidity to help ensure economic growth resumes by the end of the year or early in 2021. “The markets expect a recovery next year, the only question is its strength,” he adds.

Despite this turbulence and volatility, Zurich has turned in an exceptional investment performance over the past 12 months. “We are active fund managers,” he explains. “We take decisions on the asset classes to invest in and what investments within those classes we want to be in. We have a long track record of outperformance going back more than 30 years.”

This year’s strong outperformance was in part due to Zurich’s response to the sharp fall in the market during the spring. “We increased our holdings of those tech and consumer discretionary stocks in order to tap into the potential recovery in the market,” says Temperley.

This activity was backed by Zurich’s overall strategy. “As active managers, we have had a much stronger bias towards growth stocks such as technology companies,” says Temperley. "We have been underweight in value stocks like energy, banks and utilities. Our funds benefited from that. However, there will come an inflection point where we will reverse this sectoral strategy.

"We have also been decreasing our holdings of sovereign bonds and increasing our exposure to corporate bonds.”

He points to the long-term positive performance of equities over all other asset classes but says strategies must change in accordance with conditions. “Investors need to cater for volatility if they are nearing end of their investment time horizon. It is wise to reduce equity exposure at that point. That’s how lifestyling products work – they protect people’s capital from high volatility.”

But this may not always be the best option. “A big talking point in the defined contribution pension world at the moment is the number of people going into approved retirement funds (ARFs) instead of annuities,” he says. “In that event, it is not wise to totally de-risk. There is the 4% drawdown from the ARF to be accounted for as well as underlying inflation. Investors need to be looking for returns of around 5% or 6% if they want to ensure continued growth in their fund.”

This means they need to be prepared to take some risk with their ARFs. “The question is how much they want to take. It is the investment adviser’s role to figure that out and make sure clients understand the level of risk they are taking and are comfortable with it."

While volatility may make the individual investor’s nervous, it is welcomed by Temperley. “Volatility is the friend of the active manager,” he says. “Good active management is always better than passive. We recognise that there are still dangers out there but our job is to navigate what is in front of us and identify what offers the best returns for our clients.”

For more information, visit www.zurich.ie. Zurich Life Assurance plc is regulated by the Central Bank of Ireland.

The latest news to your inbox

Useful links

  • Current students
  • Becoming a student
  • Knowledge centre
  • Shop
  • District societies

Get in touch

Dublin HQ

Chartered Accountants
House, 47-49 Pearse St,
Dublin 2, Ireland

TEL: +353 1 637 7200
Belfast HQ

The Linenhall
32-38 Linenhall Street, Belfast
Antrim BT2 8BG, United Kingdom.

TEL: +44 28 9043 5840

Connect with us

Something wrong?

Is the website not looking right / working right for you?
Browser support
CAW Footer Logo-min
GAA Footer Logo-min
CCAB-I Footer Logo-min

© Copyright Chartered Accountants Ireland 2020. All Rights Reserved.

☰
  • Terms & conditions
  • Privacy statement
  • Event privacy notice
  • Sitemap
LOADING...

Please wait while the page loads.