As we mark the decade anniversary of the collapse of Lehman Brothers, asset allocators and fund selectors remember 'the emotional impact' of the event that saw close to $10trn (£7.68trn) losses in global equity markets, fuelling the worst financial crisis in recent history, and explain how it affected them as investors.
Chris Bowie, partner and portfolio manager at TwentyFour Asset Management
Things have changed a lot since Lehmans. The big ones are bank regulation and bank balance sheets.
Pre-Lehmans, senior banking loans were ranked the same as for a depositor. This has changed and senior banking loans are no longer the same rank and so are higher risk nowadays.
Banks also hold a much higher amount of Tier 1 capital. It used to be 4%-5% and now it is 14%, with some even holding 35%. As the quantum of capital is going up, banks are more conservative, which makes them more investable.
But as banks are more careful, they do not have as much capital to trade bonds so the liquidity of the bond market has gone down and is lower than pre-crisis, which means you have to stay in more liquid bonds.
A crisis gives you perspective; you never want to hold onto something you cannot sell and you always think about the worst that could happen.
Tim Cockerill, investment director at Rowan Dartington
It is hard to imagine today what it was like ten years ago. Every day brought more bad news, no investment or institution seemed safe and contagion was rife.
The collapse of Lehmans was not actually a surprise given the environment. I did not see it coming, but when the market is very fearful and on the edge of complete panic, nothing should be a surprise.
What has been learnt with hindsight? Investment institutions need to be tightly regulated and unbridled capital markets are bad news. Central banks were able to save the day - just - but we may not be so lucky next time.
From a portfolio construction point of view, nothing is safe in these markets; normal rules of engagement break down, but quality real assets eventually win through. And if you feel brave, buying as others panic can pay off handsomely.
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