Private client portfolios remain 12% below 2021 levels in real terms despite above average returns in 2024, according to Asset Risk Consultants’ Annual Review.
Adjusted for inflation, most private client portfolios are at a similar level to 2017, with real returns needing to average 6.6% over the next decade to revert to the historical norm of 4% per year.
Inflation spiralled in 2022, reaching a high of over 11% in the UK before inching back towards the Bank of England’s 2% target over the last 18 months. Meanwhile, returns were also down that year with the MSCI World falling 7.8%.
In 2024, private clients made average nominal returns of 8.4%, compared to the historical average of 6.1%.
ARC collects the actual performance of over 350,000 portfolios (net of fees) from 140 investment managers to establish the returns being seen by real clients.
See also: Calastone: Equity funds pull in record £27.2bn inflow in 2024
Shaun Le Messurier, director at ARC Research, said: “Investors may be relieved to see the value of their portfolios back at pre-2022 levels but it is important to consider portfolio returns after inflation has been taken into consideration.
“Our data shows the extent of the damage caused by the market events of 2022. Despite Steady Growth portfolios, which are the most popular among private client investors, generating above-average real returns for the second consecutive year, these portfolios remain 12% below 2021 levels in real terms – and significantly below the 4% a year real target return.”
The firm recently conducted a sentiment survey of CIOs, which found trade wars, inflation and equity concentration to be among the top concerns in the coming year despite a positive sentiment towards equities.
Following Donald Trump’s US election win in November, fears of potential trade wars and supply chain disruption have grown sharply.
According to the survey of 98 CIOs, there is also a lingering unease about persistent price pressures and monetary policy responses.