Asset Management in COVID-19 Times

With violent market whipsaws and opinions diverging by the day, it’s important for an asset manager to keep a level head and rethink their strategy in turbulent times. We have compiled a list, divided into four major parts, of what asset managers should take into account while navigating this complex scenario:

Part 1: Market Outlook

Whether your asset management strategy involves reducing de-leveraging and reducing GMV, shorting credit securities, seeking securities in safety commodities like gold, shorting airline and travel stocks, and/or other combinations, the first step is to make up your mind on what your strategy will be. If you are a contrarian investor cultivating variant perception, other analyst views might be useless, but understanding the current and predicted numbers is always important.

Lazard Asset Management’s Thoughts on the COVID-19 Outbreak;
Schroders Insights’s Coronavirus to Spark “Severe” Global Recession;
Financial Times’s Fund Groups Suffer Heavy Outflows as Coronavirus Spreads;
CNBC’s Market sell-off is a ‘gross overreaction’ to a ‘severe but manageable flu, Morningstar says;
Business Insider’s JPMorgan has developed an AI tool to measure how the coronavirus is damaging markets — and its findings suggest the plunge is nowhere near finished
Financial Reviews’ Monster Rotation Weighs on Bond Market;
Argus’s Analysis: Coronavirus Fears Weigh on Steel Markets;
Bisnow’s Investment Managers Launch Coronavirus Fund To Buy Low On Hospitality Stocks;

Part 2: Fund/Portfolio Re-Construction

This crisis brings a change in markets. Many asset managers may find themselves exploring the possibility of new ideas and strategies, in some cases ones that would not fit their previous portfolio/fund at all. The next step is to review your current fund/portfolio construction and to make a new plan based on what the current situation is. This is also the time to execute on measures that affect your investment process.

Portfolio Reconstruction in Times of Crisis;
(Re)-Defining Trading Goals;
Articulating Investment Process/Talent Changes to Allocators;
InvestmentU’s How to Make Money During a Crisis;
Investopedia’s Investing in a Crisis and Strategies for a Bear Market;
Interactive Investor’s Coronavirus Poll: How Are You Investing During the Corona Crisis;

Part 3: Execution

These are times of fear, greed, and in many cases paralysis by analysis. Once you’ve re-defined the fund/portfolio construction for all allocated assets, it’s now time to unblock your traders/PMs so they can execute in these tense times. Many of them might be feeling hurt, vulnerable, caught off-guard. It’s imperative to make them gain closure and stay open to new possible opportunities without the shadow of failure hovering over them.

The Trading Psychology of Reversing a Bad Streak;
TheBalance’s Bouncing Back After a Big Trading Loss;
Warrior Trading’s How the Pros Recover from Five-Figure Losses;
MarketWatch’s 7 Ways to Survive a Painful Stock-Trading Loss;
Active and Reactive Emotions in Trading Psychology;

This is also the time to calm down nervous allocators. And if not possible, to decide on whether to let them run for the exits and risk fund liquidation, or to gate them if you think you know better:

Assuaging Allocator Fears 101;
To Gate or Not to Gate? Preventing Fund Liquidation During Allocator Runs for The Exits;

Part 4: Talent Management

In times like these, any differences in values or culture between you and traders/PMs will be exacerbated. This is when you can expect desertions or people jumping off the boat. Whether you’ve done the previous work of establishing the right culture and have loyal people or not, there are things you can do now to keep people close to you and drive compliance in tense times: