26 March, 2020



"Clear, unscalable, ahead
Rise the Mountains of Instead,
From whose cold, cascading streams
None may drink except in dreams."
– W H Auden


As we get to grips with what the COVID-19 outbreak actually means for financial markets, it’s natural for investors to be thinking how else they could have positioned their portfolios.


At this point, they might also feel the need to act and rectify a tough situation, but be aware there are good actions, and bad ones, too.


To avoid the bad ones, there are three key points to consider, which is what we are doing at Mercer within our own portfolios.


1. Think about the long term


In our view, now is not the time for knee jerk reactions or selling because something fell in value. Instead, consider how you might allocate in future because we believe returns over the next five years are likely to be higher. When you’re thinking about your long-term strategic asset allocation, it merits considering whether an asset class that had been unable to achieve the returns you wanted may be able to do it going forward.



2. Think tactically


There may be short-term tactical opportunities as central banks, monetary authorities and governments try to keep markets functioning. If you have the right governance in place, there could be plenty of assets that are mispriced due to overly pessimistic liquidity concerns. Being able to move nimbly will be an advantage.



3. Adapt to your surroundings


We must adjust what we do to account for increased volatility and higher trading costs. Within our Mercer portfolios we are widening rebalancing ranges and rebalancing a little less frequently. If you are seeking trading opportunities, be sure to price in these elevated costs.



Finally, it is unfortunate, but this volatile situation is likely to be our reality for quite a while. Despite defensive actions taken by central banks and governments, there are other pressures in the system that will cause further disruption and volatility. Throughout all of this, remind yourself of your original objective and that by staying sharp and focused you are better equipped to achieve it.

Important notices


References to Mercer shall be construed to include Mercer LLC and/or its associated companies.


This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without Mercer’s prior written permission.


For the avoidance of doubt, this paper is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract.


The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.  Past performance does not guarantee future results. Mercer’s ratings do not constitute individualised investment advice.


This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates, products or strategies that Mercer may evaluate or recommend.


For Mercer’s conflict of interest disclosures, contact your Mercer representative or see www.mercer.com/conflictsofinterest.



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