The average discretionary private client portfolio has achieved a nominal annualised return of 5.6% over the past two decades, according to Asset Risk Consultants’ (Arc) private client indices, which celebrate their 20th anniversary this month.
Economic disrupters such as Covid-19 and the global financial crisis have caused the largest drawdowns for calendar years, with 2008 hitting a maximum drawdown of over -25% and an annual nominal return of -17.9%, while 2020 dipped to a maximum drawdown of -21.6% despite maintaining an annual nominal return of 4.6%.
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Arc found that 50-60% of portfolios were made of steady growth portfolios, often with equity in the range of 60-80%. If one had invested £1m into an average steady growth investment mandate in December 2003, 20 years later by the end of 2023 it would be worth £2.95m. In this time span, the difference between the worst-performing top quartile portfolio and the best-performing bottom quartile portfolio was 1% per annum, creating a difference of at least £600,000.
The Sterling Steady Growth PCI has held an annualised nominal return of 5.6% over this time, while the annualised real return sat at 2.7%.
Graham Harrison, founder and group chair, said: “Looking back over twenty years of performance data, the data reveals some important information for private client and charity investors alike. Despite the bumpy path over the last two decades, real returns for investors have been positive and investors have been rewarded for taking risk.
“However, the maximum drawdown figures clearly show the extent of pain that needs to be borne during difficult market conditions.”
The Arc indices consider near 350,000 underlying portfolios with a combined value near £1.5trn, with no restrictions on asset classes or concentrations.”
