The global spread of the Corona virus and the factual shutdown of large parts of the economy have led to major upheavals in the global financial markets.

The investor is currently receiving a large number of market assessments from banks and asset managers, with extensive analyses and scenarios for further developments. In addition, we want to show you some basic points, which should help to focus on the essentials in times of high uncertainty.

Don’t lose sight of your goal
Investment strategies always refer to the individual investment horizon. The higher the risk within the strategy, the longer your investment horizon should be. The daily changing news situation, panic headlines in the media and massive fluctuations on the stock exchanges mean that the investor's focus is strongly on the short-term area. Nobody can seriously answer the question of how likely it is that prices will be higher or lower next week. With an investment horizon of several years, it is likely that the economy and the capital markets will recover. Try not to lose the longterm perspective.

Take a bird’s eye view
In phases of significant market turmoil, it is important to keep an overview. Consolidated reports provide information on how price movements affect the development and allocation of total assets and provide an accurate basis for decisions.

Risk transparency
Only if the investor knows his risks, he can deal with them. In our analyses, we repeatedly find that products or instruments used, at first glance might lead to an incorrect risk assessment. Examples include structured products with complex risk and payout profiles, funds that do not
allow an insight into their reference values or bonds that represent mezzanine-like risk, to name just a few.

Debtor quality
In the search for yield, the quality of the debtor for bonds was sometimes considerably reduced. It is all the more important to monitor the rating structure and display it in the reports. A clean database is a prerequisite for achieving accurate results. The individual financial instruments must be correctly
categorized. This applies in particular to funds that are often used in the low rating classes. In times of major market turmoil, it became apparent that risks in bonds can lead to a significant increase in the overall risk. The poorer the credit quality, the more such bonds are proportionally classified as “equity risk”.

Counterparty risk
Investors should consider where and to what extent counterparty risks exist. In the case of liquidity in current accounts with the bank, these can include even ETFs. With ETFs there are differences in the type of implementation (replication method). In the case of synthetic replication, the implementation takes place with derivatives (SWAPs), which results in a counterparty risk. Counterparty risks must be identified, limited and continuously monitored.

Tradeability of the investments
A restricted liquidity (tradeability) of investments leads to reduced options for action. Such investments can often only be sold at high discounts, if at all TOPIC possible. With private equity investments, the illiquidity is in the nature of things. However, we keep seeing that apparently liquid investments become illiquid in volatile market phases. This can happen, for example, with funds, structured products or bonds. We therefore recommend limiting the size of the illiquid investments.