2024 – Looking Backwards and Forwards

Over the longer term, investors expect a positive, after inflation return from investing in company shares and lending money to governments and companies by owning bonds.  Unfortunately – and inescapably – in the shorter-term market returns are anything but predictable. They contain a lot of noise, as the market absorbs new information into prices.  High inflation in 2022 led to a rapid rise in interest rates around the world, contributing, in part, to the fall in global bond and equity prices. It was a painful backward step and a reminder that the road to long-term returns can be bumpy and painful at times. With these now higher yields, some investors may have been tempted to hold more cash but roll forward a year and that would have been a poor decision in the short term.  It is nearly always a bad decision in the long term for those with long investment horizons.  Fortunately, 2023 has delivered a much more positive story.

Looking Backwards

Last year all core assets delivered positive returns. The US market – and in particular the ‘Magnificent Seven’ as the press have dubbed the big tech firms – regained the losses they suffered in 2022.  In fact, they contributed around three quarters of the return of the US market over the year.  As a consequence, global developed market returns were very strong, given that the US weight in global markets is around 63%. Value companies underperformed in the US (largely because of the overwhelming impact of the ‘Magnificent Seven’) but made a strong contribution outside the US.  Both value and smaller companies outperformed strongly in emerging markets. Global commercial property (REITs) also managed a positive return.

On the defensive side of portfolios, high quality, short-dated bonds have recouped over half of the falls suffered in 2022 – largely on account of the higher bond yields, which caused the pain in 2022 – delivering returns similar to cash.

Figure 1: Global investment returns – 2022 and 2023 compared

Data: Funds used to represent asset classes, in GBP. See endnote for details.

Sensible, systematic portfolios comprising a diversified ‘growth’ basket of equities – with tilts to value and smaller companies – paired with ‘defensive’ short dated high-quality bonds will have delivered robust returns in 2023, somewhere in the region of 9% for a 60/40 split respectively in GBP terms[1]. Investors with portfolios denominated in GBP suffered a small currency drag over the year as Sterling appreciated against the US Dollar by around 4%, as well as most other major currencies.  Year-on-year inflation in the UK fell to 3.9% in November, down from 10.5% at the start of the year.

Looking at three-year cumulative returns helps to illustrate the benefit of remaining invested through tough years such as 2022. Bond returns have been poor due to starting yields around 0% at the start of the period followed by subsequent yield rises (and thus bond price falls), but these were more than compensated for by strong growth asset returns.

[1] Refer to table in the endnote for underlying funds and allocations.  This is provided for informational insight only and does not represent any form of advice or recommendation.

Figure 2: Cumulative global investment returns – three years to the end of 2023.

Data: Funds used to represent asset classes, in GBP. See endnote for details.

Looking Forwards

The outlook for the global economy looks a little bleak as major economies teeter on the brink of recession, including the UK.  China has deep and wide economic problems that are restraining its growth prospects.  Inflation has come down in the EU (2.4%), US (3.1%) and UK (3.9%) from recent double digit highs.  Risks remain – including conflict in the Middle East impacting energy and supply chains –and the final yards to reach central bank target levels of inflation (2% in the UK) will be harder to achieve and vulnerable to geopolitical risks.  Interest rates may well remain elevated relative to the low rates that investors experienced up until early 2022, which is good for bond holders.

It is useful to remember that forward-looking views are already reflected in today’s prices.  What comes next, no-one truly knows. The key is to remain highly diversified, resolute in the face of any market set-backs and focused on long-term goals.

And finally…

More broadly, Putin continues to wage his illegal and brutal war in Ukraine and the terrible humanitarian tragedy unfolding in Gaza seems to have no resolution in sight. Our thoughts are with all the innocent people caught up in these conflicts.

This year we face the prospect of elections in democracies such as the UK, US, Taiwan, India, Pakistan, Indonesia, and within the European Union.  US politics is as deeply partisan as it has ever been, raising the level of uncertainty about the future.  The democratic process is always combative, often messy and sometimes ugly.  Let us hope that these elections result in governments that fulfil Lincoln’s wish set out in his Gettysburg Address after the Battle of Gettysburg in 1863:

‘that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.’  

In the UK, it is certainly possible that the Conservatives will struggle to remain in government.  As Churchill once said:

‘Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…’

Winston S Churchill, 11 November 1947 

On a brighter note, it is worth remembering that despite the conflicts in the world, seeming discourse in democratic nations and the rise of autocratic and despotic leaders, the world we live in is better in many respects than ever before.  While 659 million of the world’s population live in poverty, this is down from 1.9 billion in 1990 and 902 million in 2012[1].  Global under-5 mortality has dropped by 60%, 2.1 billion people have gained access to safe drinking water since 2000 and today 40% of board seats in FTSE 350 companies are held by women (10 years ago 150 or so of these companies had no women on their boards)[2].  These lesser known facts are a strongly positive counterbalance to the immediate troubles that the world faces.

From an investing perspective, we remain hopeful for the best in 2024 but remain prepared for the worst, as is always prudent.

Happy New Year!


[2] Sunday Times magazine, December 31, 2023. ‘Really, actually, properly excellent things that happened in 2023’

Risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Data series used:

Asset class Fund ISIN Weight in P60/40
Gbl market Fidelity Index World P Acc GB00BJS8SJ34 27.5%
Gbl value Dimensional Global Value GBP Acc IE00B3NVPH21 9.2%
Gbl small cap Vanguard Glb Small-Cp Idx £ Acc IE00B3X1NT05 9.2%
EM iShares Emerging Mkts Eq Idx (UK) D Acc GB00B84DY642 4.9%
EM value Dimensional Emerging Mkts Val GBP Acc IE00B0HCGX34 1.6%
EM small cap iShares MSCI EM Small Cap ETF USD Dist IE00B3F81G20 1.6%
Gbl property L&G Global Real Estate Div Index I Acc GB00BYW7CN38 6.0%
Short, high qual bonds Dimensional Global Short Dated Bd Acc GB0033772848 36.0%
UK 1-5 gilts iShares UK Gilts 0-5yr ETF GBP Dist IE00B4WXJK79 0.0%
UK IL gilts Dimensional £InflLnkdIntermDurFI GBP Acc IE00B3PVQJ91 4.0%

More information is available on request.

A Tribute to the Wisdom of Charlie Munger

Charlie Munger, the lifetime business partner of Warren Buffett at Berkshire Hathaway, passed away in late November at the ripe old age of 99.  He was a deep thinker about business, who focused on the fundamental strengths of companies exhibiting a simplicity that he could understand.  Although he was less high profile than Warren Buffett, he is credited with changing Buffet’s approach of buying ‘fair companies at wonderful prices’ to buying ‘wonderful companies at fair prices’.

He and Buffett delivered investors with stellar returns of +10% above the S&P500 index (1964-2022) [1], although the past two decades have been far more challenging, delivering the return of the market.  He amassed great personal wealth through the investment returns of Berkshire Hathaway [2] – compounded over a long period of time – but gave the majority of it away to philanthropic works.   In tribute, we look at a number of his well-known quotes.

Make yourself into the person you want to be.

A key driver of his personal philosophy was deciding on the person you want to be and then making sure that you become that person.  He summed this up nicely as follows.

Early on, write your desired obituary — and then behave accordingly.

He was also focused on lifelong learning. He and Buffet both read voraciously every day and set aside time for thinking as opposed to doing.  His advice was to go to bed smarter than when you woke up.

His thoughts on investing

His take on investing was that it was a long-term game where you make your choices, have the courage of your convictions, stick with it through thick and thin, and reap the rewards of time and compounding, avoiding emotional and financial costs along the way. Sounds familiar!

A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.

(Charles T. Munger, Value Investing: A Value Investor’s Journey Through the Unknown.)

Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.

(Poor Charlie’s Almanack)

His reference to ‘getting it’ includes financial and emotional cost leakage, not least chasing returns and trying to time markets, instead of sticking to a well-thought-out strategy.

When he and Buffet began their relationship at Berkshire in the 1960s the investing world was very different, with many more retail investors and fewer sophisticated institutional investors.

There is so much money now in the hands of so many smart people all trying to outsmart one another. It’s a radically different world from the world we started in.

(2023 Berkshire Hathaway Annual Meeting)

The implication is that markets are probably more efficient, meaning that bargains are far rarer for active managers.  Berkshire’s size, and the greater efficiency of markets, has probably underpinned their more lackluster performance in the past two decades.

Even back in 1994, he saw that the investment management industry had become a factory churning out glistening products that appealed to the investment magpies, particularly faddish products designed to chase yesterday’s returns.

I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, ‘My God, they’re purple and green. Do fish really take these lures?’ And he said, ‘Mister, I don’t sell fish.’

(A Lesson on Elementary, Worldly Wisdom as It Relates To Investment Management & Business, 1994 speech at USC Business School)

Today, there are over three million (yes, that is correct!) indices available to investors and more equity mutual funds available than there are listed companies in the world.  This is the ‘idiocy’ to which he refers.  In reality, a sensible, systematic approach to investing requires only a handful of funds to capture market exposures and make evidence-based, long-term risk factor tilts.

One fundamental difference between Charlie Munger’s approach to investment and that of a systematic investor relates to diversification.

The worshipping at the altar of diversification, I think that is really crazy…I find it much easier to find four or five investments where I have a pretty reasonable chance of being right that they’re way above average. I think it’s much easier to find five than it is to find 100. I think the people who argue for all this diversification — by the way, I call it ‘diworsification’ — which I copied from somebody — and I’m way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.

(2021 Daily Journal Annual Meeting [3])

At one level he is right.  Long-term market returns are driven by just a handful of stocks.  Research suggest that around 4% of US companies have driven all of the returns of the US market since 1926 [4].  At another level, for most investors he is probably not right, even if it was right for him.  The challenge for investors is picking these stocks.  Perhaps in a time when markets were less efficient and with two deep, investment obsessed investors working on the problem, then finding at least a few of these companies may have been possible.  But for the vast majority of investors, the only way they can guarantee to pick these winning firms is to own the entire market.  The cost of getting it wrong is too big to contemplate and few have the time, insight and fortitude to risk doing so.  As his partner Warren Buffett once said:

By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.

(Berkshire Hathaway shareholder letter 1993.)

Charlie Munger will be remembered as one of the great ‘active’ investors and a man of humility and integrity. People like him are few and far between.

Charlie Munger (1924-2023)


[2] At the time of his death his shares in Berkshire Hathaway were worth US$2.6 billion but the records show that at one point he owned shares worth in excess of US$10 billion, sales of which have funded his philanthropic endeavours.

[3]      The newspaper publishing company he chaired from 1977 through 2022

[4]      Bessembinder, H. (2018) Do stocks outperform Treasury bills? Journal of Financial. Economics, vol. 129, no. 3, 440–457.

If you have any questions or queries about anything in relation to the nature of this blogpost, you can contact

Investment impact of the unfolding tragedy in the Middle East

Everyone has been touched by the horrific events and unfolding human tragedy in Israel and the Gaza Strip, and many are concerned by how this might escalate into a wider conflict at a time of great uncertainty in the world. People’s immediate focus is, rightly, on the plight of those caught up – either directly or indirectly – in the maelstrom of the conflict. We can only hope that some form of peaceful solution can be arrived at quickly, however hard or unlikely this may seem.

At such a time, it may feel a little inappropriate to be worried about the impact of ongoing events on investors and their portfolios.  Yet, with many people feeling a great degree of uncertainty about the geopolitical events around the world, the cost of living crisis, the state of politics in many countries, not least the UK and the US, providing some reassurance may be welcome.

In the days since the weekend’s tragic events, the Israeli stock market has fallen by around 7%, in part due to the fall in the Israeli currency (the shekel).  From a portfolio allocation perspective, the Israeli equity market (classified as a developed market) is only around 0.15%[1] of the world equity markets (developed and emerging markets combined).  As such, any direct impact from the Israeli stock market will be negligible in a well-diversified portfolio.  So far, other asset classes have not been materially affected. That is the easy part.

Figure 1:  Asset class returns from 06-10-2023 to 11-10-2023

Morningstar Direct © All rights reserved. See footnote for data uses[2]. In GBP terms.

The hard part is trying to evaluate what the possible geopolitical, economic and investment market scenarios are that lie ahead and the likelihood that they might occur.  At this point, the human mind (not least those of market commentators) tends to work overtime, trying to make sense of the vast interconnected nature of possible outcomes, by making up plausible stories.  These tend to be in the form of conditional probability narratives starting with ‘If A happens, then the impact on B could be material, which could lead to C falling’.  (In one possible scenario A = oil price rise, B = higher inflation, C = bond prices).  Worrying news headlines can ensue.  The question is, what can one do with such information? The truthful answer is not very much.

Fortunately, systematic investors with relatively long horizons can largely ignore these narratives and rely on the fact that they are all, in aggregate, already reflected in today’s market prices.  Unless an investor has better information (or uses information better than others) they should probably not try to outguess markets at a time like this and remain sensibly invested in their long-term strategy.

Things could end up worse than expected and equity markets might fall.  No-one knows.  There could be a flight to safe haven assets such as US Treasuries which would force yields down and bond prices up.  Again, no-one knows.  What investors with highly diversified portfolios do know, however, is that the countries, sectors and individual companies they own are many and varied and the bonds they hold are generally pretty defensive.  This broad diversification should see them through any investment storms that they might encounter, today or in the future, as it has done successfully over the decades. As the chart below shows, investors who remain invested should be rewarded over time.

Figure 2: Global equities and world events Aug 1998 to 11 Oct 2023

Data: Morningstar Direct © All rights reserved – Global equities – Vanguard Global Stock index $ Acc. In GBP

The key is not to make any emotionally driven decisions – perhaps influenced by media headlines or your own narratives – and to remain invested.  If necessary, get in touch with your adviser who will be happy to talk things through with you.

We hope for better times ahead for everyone.

Risk warnings

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

If you have any questions or queries about anything in relation to the nature of this blogpost, you can contact

[1]     Based on its allocation in the iShares MSCI ACWI ETF USD Acc

[2]      Using product data as proxies: iShares MSCI Israel ETF, Vanguard FTSE Emerging Markets ETF, Vanguard FTSE Developed Markets ETF, iShares UK Gilts 0-5yr ETF GBP.  Other: Brent Crude – NYMEX: BZW00, US/GBP Yahoo! Finance.

Pacem Supports ‘Brewing Ideas & Crafting a Business’

Pacem is delighted to continue it’s efforts in supporting early-stage businesses and entrepreneurs by partnering with Belfast City Council & Innovation Factory on the upcoming ‘Brewing Ideas & Crafting a Business’ event which will be held at Innovation Factory on Friday 15th September 2023.

This is an ideal event for any pre or early-stage entrepreneurs from within the Belfast area, offering the opportunity to hear from fellow Belfast-born entrepreneur, Alan Mahon. Alan is the Founder and Executive Chair of Brewgooder, a purpose-driven brewery which has now been recognised as the UK’s fastest growing beer brand. Having started the business in 2015 at the age of 26, the company is now worth over £3m and has so far, helped over 100,000 people worldwide across 140 different projects, providing clean water and food to those in need.

The session is designed to provide inspiration and encouragement to attendees, offering them the opportunity to learn practical advice and invaluable lessons from Alan’s journey, whilst also networking with like-minded individuals. Attendees will be afforded the opportunity to ask questions, learn from an expert and gain the support needed to start or grow their business and network.

Daniel Glover, Managing Director at Pacem, spoke of his enthusiasm in supporting the event:

“Pacem is thrilled to, once again, be involved with an initiative that really celebrates and stimulates the entrepreneurial spirit within Belfast and offers aspiring entrepreneurs expert advice, allowing them to push the boundaries and challenge themselves no matter what stage of their journey they’re at. We are looking forward to meeting old faces and new for an enjoyable morning of inspiration, impetus and networking and are delighted to be involved in such an exciting event which aligns so closely to our core values”.

Tickets to attend are fully subsidised thanks to the event partners and can be accessed via the link below.

Winners Crowned at Belfast Business Idea Award 2023

A busy mum of three has been crowned this year’s Belfast Business Idea winner for her innovative range of plastic-free hair and skincare products for children.

Sarah McKegney pitched her Percy and Pop concept to judges at the finalists’ night, held on Tuesday 20 June, and received a £2,500 cash injection and support package worth over £3,000 to enable her to take her idea forward.

The Belfast Business Idea competition, organised by Belfast City Council, and supported by Pacem, Danske Bank, the Open University and the Innovation Factory, helps unearth, recognise and fast track the best business ideas in Belfast.

Sarah was one of five budding entrepreneurs selected by an independent panel of judges to pitch their ideas to an audience at the event. Sarah explained how she came up with the concept for her own range of solid shampoo and conditioners, after she was unable to find natural, plastic-free alternatives for bath time with her three young children, all aged under five. Her pitch was selected as the overall winner, following an audience vote.

I am delighted to win this award. All of the finalists were outstanding, so it’s a real honour to have been chosen as the winner,” said Sarah.

“This package of support will be invaluable in developing the next stage of our journey and we are really excited to see where we can take Percy and Pop, with the help and advice from a trusted support network. This initiative is a lifeline to budding entrepreneurs and a fantastic opportunity to springboard our business and we can’t wait to take our bathroom revolution to the next level!”

Sarah was presented with the award by Daniel Glover, MD at Pacem who have supported this initiative for the past four years.

“A massive congratulations to Sarah on winning this year’s Belfast Business Idea Award –  ‘Percy and Pop’ is a great concept with exceptional potential and we are looking forward to working alongside Sarah in bringing her business to the next level,“ said Danie

“The calibre of entries from across the board this year was exceptional and is a real testament to the entrepreneurial spirit we have within our city – well done to all those who took part and to the other organisations who, alongside Pacem,  continue to support business start up and growth in the city”.

The four other business ideas chosen by the competition judges will also receive a support package worth over £3,000  which includes:

> Six months free accountancy services (including software) from Pacem Accounting and Tax Advisory

> 1 year Innovation Factory membership (including an open plan co-working desk, access to masterclasses and on-site bespoke business mentoring)

> A complimentary place on a Business and Management or Marketing Short Course via the Open University.

> A 2 hr group mentoring session with Alan Mahon, Founder of Brewgooder.

The other four finalists announced on the evening were:

  • Ankit Goel – PropAI
  • Ciara Doherty and Sinead Molloy – Shevron
  • Maebh Reynolds – GoPlugable
  • Ryan Forde – Medical AI Systems (MAIS)

All aspiring entrepreneurs in attendance also had the opportunity to hear from, and put questions to, Belfast-born businessman Alan Mahon, founder of Brewgooder, the UK’s fastest growing beer brand in 2022, who provided them with inspiration and advice on taking forward their own business journeys.

Speaking at the finalist’s night, Elizabeth Crossan, Director of Accounting & Tax, commended all applicants and expressed her enthusiasm towards working with the winners,

We are looking forward to working alongside the newly crowned winners of the 2023 Belfast Business Idea Award by providing six months free accountancy services. We love helping new businesses develop and grow and to play a part in their journey is a real privilege. We can’t wait to see what is in store for these blossoming businesses and predict great things ahead –  watch this space”.

Marketing, Communications and Events Executive

As one of Northern Ireland’s leading Financial Advisory Firms, Pacem is a boutique practice which offers a unique Financial Planning & Accountancy Business Advisory service. As a company we are people focused and we have a very close relationship with our clients. Our culture is that we want all team members to realise their potential and we provide this through mentoring and coaching. We promote employee well-being and a supportive team working ethos in line with company values and objectives.

We are now recruiting for a shared role of a marketing, communications and events executive with our sister company, Podiem.

50% of this role will be devoted to leading on Marketing & Communications activity for Pacem – This is an exceptional opportunity to own and grow the marketing function at a growth-orientated business. As part of its impact and engagement activity, Pacem regularly co-designs initiatives such as ‘The Expedite Programme’, ’30 Under 30 Climate Change-makers’ and the ‘Belfast Business Idea Award’ alongside Podiem,  and so the remainder of the role will be in helping Podiem to deliver these joint events.

Pacem is a multi-award-winning provider of coordinated business accounting and financial advice to business owners and successful professionals. Founded in 2017 and now employing 23 people, Pacem is one of NI’s fastest growing financial advisory firms with a strong focus team development and wellbeing evidenced by multiple ‘employer’, ‘best company to work for’ and ‘growth’ awards.

This is a unique opportunity for the right person to carve out a long-term role, becoming an integral member of the team. For more information and to apply, please download the job specification below. For any queries please contact Frances on 028 9099 6948. Pacem and Podiem are equal opportunities employers.

Marketing Communications and Events Executive – May 2023

Just a few stocks drive market returns

It is sometimes easy to forget that when markets rise and fall, we are looking at this through an aggregated, market-capitalisation weighted lens.  In reality, the fortunes of individual companies and even sectors may be quite disparate over both the short and longer terms.  Take a look at the figure below that illustrates just how widely dispersed US stock outcomes have been year-to-date 2023 (to the end of April).  The S&P 500[1] is up by around 9% in USD terms (4% in GBP terms as Sterling has strengthened against the US dollar).

In the first quarter of 2023, the top ten contributors to performance accounted for 90% of the market rise, with Apple, Microsoft and Nvidia contributing to half of the rise.  Yet in 2022 the top ten companies by size collectively fell 37% compared to the market fall of around 18%[2].

Figure 1: Individual US stock returns differ widely (YTD to 30/4/23)

Note: (1) This represents the return of the Vanguard S&P500 ETF in USD. Holdings data from Morningstar Direct © All rights reserved.

A combination of recency and hindsight biases can tempt the unwary into thinking that it is easy to pick stocks (e.g. ‘It was obvious that Meta would rebound after last year’s plummet in share price!’). Nothing could be further from the truth.

Active investors – who aim to beat the market through their stock-picking skills – see charts like the one above and lick their lips at the opportunities they offer.  Yet they are not guaranteed to beat the market, or even deliver the market return.

Passive investors on the other hand – who believe that markets work well incorporating all public information into prices – see the dangers of picking the wrong stocks and missing out on the returns that market, in aggregate, delivers. They can, more-or-less, capture the market return with a high degree of certainty.

A research paper in 2018 titled ‘Do stocks outperform treasury bills?’[3] had the remarkable effect of being claimed by both the active and passive sides of the investing debate as evidence as to why their approach is valid. He identified that the US$32 trillion of wealth created between 1926 and 2015 in the US market, was entirely generated by the top 1,000 companies, or put another way, less than 4% of the total number of companies that had existed on the US stock exchanges. A follow-up paper[4] focusing on non-US markets found that over 60% of all stocks failed to deliver a return higher than US T-bills and less than 1% of companies delivered all of the wealth creation from 1990 to 2018. The author states (in his original paper):

‘Not only does diversification reduce the variance of portfolio returns, but non-diversified portfolios are subject to the risk that they will fail to include the relatively few stocks that, ex-post, generate large cumulative returns. Indeed the results help to understand why active strategies, which tend to be poorly diversified, most often lead to underperformance.’

The challenge of structuring a highly active, concentrated portfolio to attempt to identify and capture the returns of these few wealth generating firms is immense, and at risk of both hubris and a lack of humility around the power of the collective market view (‘it’s all in the price’). The active management industry’s track record of delivering on its promise to beat the market is well-documented and extremely poor, with over 95% failing to do so over a twenty year period[5].

For those who accept that markets work, they can simply capture the market return through a low-cost, highly diversified systematic fund (of which index funds are a subset).

As the late, great John C. Bogle, the founder of Vanguard liked to say:

‘Don’t look for the needle, buy the haystack!’

Risk warnings

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Reference to specific products is made only to help make educational points. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

[1]      This represents the return of the Vanguard S&P500 ETF in USD

[2]      Nasdaq, (2023) Top 10 Names in S&P 500 Responsible for 90% of Q1 Gains, April 05.

[3]      Bessembinder, H. (2018) Do stocks outperform Treasury bills? Journal of Financial Economics, vol. 129, no. 3, 440–457.

[4]      Bessembinder, H. (Hank), Chen, T.-F., Choi, G. and Wei, K.-C. (John). (2019), Do global stocks outperform US treasury bills? SSRN Electronic Journal.

[5]      SPIVA | S&P Dow Jones Indices. (2022)

Supporting Innovation: Pacem Backing the 2023 Belfast Business Idea Award

Pacem is delighted to, once again, support the Belfast Business Idea Award 2023. The Idea Award, supported by Belfast City Council, Danske Bank, Pacem, Open University and Innovation Factory, differs from other awards in that it is the strength of the idea that is assessed, rather than the achievements of the venture so far. The competition is designed to unearth, recognise and help to fast track the best business ideas in Belfast and means that people who have yet to set up a business have as much chance of winning as those who have already started to trade successfully.

This competition celebrates budding entrepreneurs, encouraging them to push the boundaries of creativity and contribute to the vibrant business ecosystem of Belfast.

Applications for the 2023 Belfast Business Idea Award will be open from Friday 12th May until 3pm on Thursday 8th June .

The prize pool is outstanding and will make a real difference to early-stage businesses and those thinking of taking the next step with their idea. The overall winner will receive £2,500 cash plus a support package (below) worth over £3,000. The other four finalists will also receive a support package worth over £3,000 which includes:

  • 1 year Innovation Factory membership (including an open plan co-working desk, access to masterclasses and on-site bespoke business mentoring)
  • A complimentary place on a Business and Management or Marketing Short Course via the Open University.
  • Six months free accountancy services (including software) from Pacem Accounting and Tax Advisory
  • A 2 hr group mentoring session with Alan Mahon, Founder of Brewgooder.
All Idea Award applicants will receive:
  • A place on the ‘Create Catchy Content’ online video marketing masterclass on Thursday 1st June at 12noon. Register at:
  • A VIP place at Finalist’s Night on Tuesday 20th June where they will hear from (and get to put their questions to) Belfast Born Entrepreneur, Alan Mahon, founder of the UK’s fastest growing beer brand in 2022, Brewgooder.

Pacem is delighted to be involved, once again, with the #BelfastBusinessIdeaAward which serves as a launchpad for aspiring entrepreneurs, providing them with the platform, resources, and network needed to transform their ideas into successful businesses. We believe that supporting this initiative is a testament to our commitment to fostering innovation and economic growth, ultimately benefiting the local community and the region as a whole and we cannot wait to see what this year brings!


Don’t just take our word for it!

We fundamentally believe that a systematic approach to investing provides the best chance of experiencing a successful investing journey. Sticking to some key guiding principles – which are grounded in evidence and logic – gives investors a solid foundation on which to build a sensible investment solution. This short note provides an insight into five of our favourite insights from experienced and accomplished academics and practitioners and explains how these words help us plant our investment philosophical flag in sensible space.

1.    A focus on risk management, rather than chasing performance

‘You don’t find out who’s been swimming naked until the tide goes out.’

Warren Buffet, Berkshire Hathaway 1994 Annual Meeting

The financial media enjoys reporting on top performing fund managers. Humans like exciting stories. Good investing, however, should – to most – seem relatively boring through taking a ‘risk-first’ approach. Ultimately, sensibly considered risks should be rewarded appropriately over time. The risk management process involves deciding which risks one wants to be exposed to in portfolios (such as broad global equity market risk) and which we do not (such as the use of leverage). Managing these risks tightly over time and monitoring them on a regular basis is key.

2.    Be diligent and act rationally, with due patience

‘Activity in investing is almost always in surplus.’

Charles D. Ellis, Winning the Losers Game, 1993

Ensuring any decision made is free from an emotional reaction is a must. Many are prone to making knee-jerk – and sometimes permanently damaging – investment decisions. Taking steps to avoid this is well-advised.

3.    Take part and believe in capital markets

‘You’ve got to talk yourself out of the market portfolio.’

Eugene Fama, Nobel laureate, speaking with The Rational Reminder Podcast, May 2020

Owning a share of companies through investing in capital markets is an effective way for investors to grow their wealth over time. Owning a little bit of everything is not a bad place to start. Luckily for investors these days, one can do so with relative ease through investing in mutual funds. Doing so enables investors to participate in the growth of listed companies from around the world in a diversified manner, avoiding being overly concentrated in a single stock.

4.    Keep costs low

‘In Investing, You Get What You Don’t Pay For.’

John C. Bogle, Founder of The Vanguard Group, February 2005

Cost is by no means the only factor separating better and worse investment solutions, but it is a significant one. Costs can be implicit (e.g. frictional trading costs) or explicit (e.g. fund manager fees). Clearly, any saving made by an investor is retained in the portfolio, rather than being passed off to another party in the process.

5.    Stick to the plan

‘Real-world application of fundamental investment principles produces superior outcomes.’

David F. Swensen, author and former CIO of Yale University endowment, 2005

An investor who can recall their key investment principles stands in good stead to avoid making mistakes. Abiding by some simple guidelines – such as those outlined by the investment mavens in this note – enables investors to employ a robust and repeatable process for managing their wealth.

FAKE NEWS!! Active outperforms passive!!

Unfortunately we now live in a world of fake news and ‘alternative facts’[1] where parties shamelessly push their own agenda at the cost of salient facts.  In order to be heard in the noise of social media, research headlines need to be bigger and more eye-catching.

For those investing using an evidence-based approach that means it is important to make sure that any evidence being reviewed is based on true facts, reliable data and sound research methodologies.  There is much good research and empirical evidence available, but some of a lesser quality occasionally makes the headlines.

A recent piece of research by a fund management firm that manages over US $580 billion[2] is a case in point, making the statement:

‘Active funds beat passives in every market in the UK over a 20-year period’

That is quite a claim to make.  The firm looked at funds in seven Lipper categories[3] and – somewhat surprisingly for an investment house filled with bright and talented people – compared how the fund with the best performance over the past 20-years had done relative to passive alternatives (index funds) and the index.  The methodology is so evidently flawed as to hardly be worth reviewing. It is best summarised as requiring a fund-picking strategy of perfect 20-20 hindsight!  They concluded that it would have been worth identifying the best active fund instead of using a passive fund. The problem is that this is almost impossible to do without a crystal ball.

Alan Miller of SCM Direct – a firm which has campaigned to improve investor outcomes – summed it up most effectively:

‘It’s a bit like saying you’re better off buying a lottery ticket than putting your money in the bank because had you won the lottery each year, you’d have done much better.’

Unfortunately this type of naïve research risks misleading retail investors, and even some advisers, against a sensible evidence-based approach suggesting that a passive approach makes good sense.

In their own data, the fund management firm in question revealed that in the six Lipper categories where there was a passive fund with a 20-year track record, in five the average passive fund beat the average active fund.  In the sixth, there was nothing much in it.  The best passive fund – which you do have a fair chance of identifying, unlike an active fund – outperformed in all six categories.  Another methodological flaw arises; no account seems to have been taken of the high proportion of UK-based funds that would have failed to survive the period.  A reputable study[4] reveals that only around 50% of GBP-denominated funds survived the 10-year period to the end of 2022.  Over 20-years this figure is likely to have been even worse.  We also know from this study that, on average across the eight categories of funds denominated in GBP (so a similar fund set to the flawed research above), 80% of active funds failed to deliver on their promise of beating their market benchmark over 10-years.  For a 20-year period this is likely to be higher, as evidenced in the US version of this study.

‘Enough, already!’ as our American friends might say.

[1]      This was a term used by White House adviser Kellyanne Conway to defend an untrue statement about the number of people attending President Donald Trump’s inauguration.

[2]      As reported in–do-its-claims-stack-up/

[3]      Lipper is a data provider who break down the fund universe into categories such as global equities and emerging market equities.

[4]      SPIVA Europe Year-End 2022 Report