The SEC last month gave U.S. public companies affected by the novel coronavirus additional time to file disclosures due March 1 to July 1, including quarterly reports. We suggest — even when they are filed — institutional investors ignore them.
To use the phrase that has changed all of our lives, investors should adopt social distancing from the filings, which will tell them what they already know — the first quarter offered historic levels of volatility and most equity investments dropped dramatically.
The U.K.'s Financial Conduct Authority also gave public companies there an extra two months to complete annual corporate reporting amid the coronavirus outbreak, but asked investors not to "draw undue adverse inferences when companies make use of the extra time," because the world is living through "unprecedented times."
Because of the times we are in, we are urging institutional investors to remember their long-term focus. Pay attention to portfolios structured for long-term performance or to meet long-term liabilities. The short-term performance of the first quarter should not be material. The same likely will be true of Q2.
For the executives who run institutional portfolios, objectives have been set with long-term goals in mind. Keep the faith in those asset allocations and investment policies.
Put an asterisk and a footnote in the books for the quarterly performance and rebalance back to established allocations.
For defined contribution plan participants, the same advice may be best for anyone other than those who need to retire in the midst of 2020's historic volatility. Putting an asterisk in place for this year's returns might be best to avoid locking in losses.
In an era when the focus on sustainability and stewardship has never been greater and leaders advocate for long-termism, why shouldn't the largest investors disregard short-term results?
It could give corporate executives breathing room to focus on doing what is right for the long-term health of their businesses, employees and stakeholders.
And it would only underscore what institutional investors have said all along: They're in it for the long haul.
