Andrew Milligan: Avoiding stranded assets - don't let your portfolio go stale

Investors need to focus on environment

What are the risks attached to a portfolio? We might answer in terms of whether it meets the client’s objective, will it be too volatile, will it under-perform so the manager loses their mandate?

The concept of ‘stranded assets' is a valuable one in relation to risks for a long-term portfolio. The concept should be extended, from narrow to broad, from a sector to a market. First off, what is a stranded asset? A stranded asset loses its economic value well ahead of its anticipated useful life, whether as the result of changes in legislation, market forces, disruptive innovation, societal norms, or environmental shocks. For instance, in 1900, railway shares were a sizeable part of the UK and US stock markets, then a new technology appeared: motorised transport. Today, the ...