How can RAW help you diversify your portfolio?
Economic and geopolitical upheavals have presented investors with unprecedented challenges in recent years, and significant market shocks have forced investors to take a more proactive approach to adjusting their strategies and portfolios.
Despite recent improvements, market volatility could still threaten portfolio performance, so investors must prepare for potential disruptions in the coming months.
In this blog, we will outline the key obstacles investors face, before exploring how RAW Capital Partners’ RAW Mortgage Fund can help them diversify their portfolios to overcome them.
Market volatility
Several factors have contributed to the shocks experienced by the markets in recent years: not least sky-high inflation, aggressive central bank actions, and the aftermath of the Covid-19 pandemic. Additionally, the stability of the international system has been shaken by a number of geopolitical conflicts, particularly in Eastern Europe and the Middle East. These political and economic headwinds have created an increasingly difficult investment landscape.
Recently, however, there have been signs of improvement. The S&P 500 is up 12% this year, and on May 15, the UK stock market hit a record high of 8445.80. However, investors should temper their optimism due to looming challenges that could impact investments in the latter half of the year.
Key challenges for investors
Forthcoming political events could create a significant amount of volatility. With major geopolitical players like India, the UK, and the USA undergoing important election cycles, we anticipate increased volatility as investors react to the outcomes of the different election results. As the world's largest economy, the election results in the USA are likely to have the most substantial impact on investor portfolios and will therefore be of particular interest.
Meanwhile, geopolitical conflict presents another major challenge. The crisis in Gaza is on the edge of expanding into a wider conflict, while Russia's invasion of Ukraine has entered its second year. As both regions are intrinsically linked to global oil markets, these conflicts are likely to influence the performance of many major asset classes as long as they continue. Consequently, any developments could bring fresh turbulence to the markets.
Finally, perhaps the most significant challenge facing the investment world is the outlook for interest rates, which vary among the major central banks as they strive to balance inflation and economic growth.
In the US, for instance, there appear to be too many inflationary pressures currently for the Federal Reserve to consider lowering the base rate just yet. However, with inflation edging closer to normal levels in the Eurozone, the European Central Bank (ECB) recently opted to cut rates, aiming to stimulate its financial and housing markets. The Bank of England (BoE) is poised to follow suit at some point this summer. As such, the currency and bond markets could experience a period of significant uncertainty as interest rates are adjusted disparately across the global economy.
Diversifying to mitigate volatility risks
While we may be in a period of relative calm currently, it's clear that these challenges have the potential to introduce considerable volatility in the near future. Therefore, investors must maintain a proactive and adaptable approach to managing their portfolios. Diversification could be a particularly valuable tool in this regard.
Indeed, if investors can construct a portfolio that contains a mixture of uncorrelated asset classes, territories and sectors, they’ll be better placed to mitigate the effects of volatility in certain markets and benefit from potential growth opportunities in others. Opting for a mixture of traditional and alternative investments that perform independently of each other could also reap some rewards.
How RAW Capital Partners can help
With this in mind, investors could consider the RAW Mortgage Fund, which identifies low-risk mortgage lending opportunities on quality residential property located in major towns and cities in the British Isles. There, properties are more easily let and more easily sold, even during economic downturns. For instance, we don’t lend against high value properties or developments as they often carry more risk.
This means that the fund can offer a consistent level of dividend income or capital growth without the volatility typically associated with stocks and shares, making it an attractive option during periods of market turbulence and economic uncertainty. What's more, risk is meticulously managed through conservative lending standards, rigorous credit assessment, and ongoing monitoring.
The aim of the Fund is to achieve a consistent gross return of around 4% per annum above the Bank of England Base Rate. Since most of our mortgages are variable rate, returns to investors typically rise when the Base Rate increases. However, given the uncertain outlook for interest rates, returns could be impacted in the coming months.
In the last 12 months, the fund has achieved net annualised floating returns of 8.46%*. For those interested in the fund, we offer a minimum investment starting from £10,000, providing accessibility to a non-traditional investment option with the potential for attractive returns.