Investment Viewpoint: March 2018

Welcome to our March Investment Viewpoint.


Khalid Khan, Investment Proposition Manager, Royal London, discusses how a multi asset approach can reduce risk.

Multi Asset webinar

Watch a recording of our Multi Asset webinar with Trevor Greetham from 20 March 2018.


Market update

In the UK, the Bank of England (BoE) voted to keep interest rates at 0.5%, with only two members voting to raise rates. This was a change in stance from the previous month when all members of the MPC had voted to hold rates. The previous week the Office for National Statistics had confirmed that consumer price inflation had fallen to 2.7% in February, down from 3% the previous month. Markets interpreted this to imply that two rate hikes are likely this year; prompting a rise in Sterling on foreign exchanges.

US economic data continued to be broadly positive, although robust figures for pay growth and consumer prices triggered concern about a potential pickup in inflation. Markets continued to anticipate a rate hike by the Federal Reserve in March. The dollar strengthened, rebounding from three consecutive monthly declines.

In the Eurozone, the European Commission raised forecasts for economic growth this year. In Germany, Chancellor Angela Merkel’s centre-right Christian Democratic alliance reached agreement with the centre-left Social Democrats to form a new coalition government after months of political deadlock. The euro weakened against the dollar and strengthened against sterling.

Amongst the major equity markets, Japanese shares delivered the only positive return, even as the benchmark Nikkei 225 stock average declined, as the yen recorded its biggest monthly gain in almost two years against the Australian dollar. The UK market was the worst performer, with the FTSE 100 Index’s slumping. Sector returns were mostly negative; energy was the biggest drag on performance as oil and gas prices retreated, followed by consumer staples. Information technology delivered the strongest positive return, while the real estate sector also generated small gains.

The US bond market bucked the global trend, where on the whole, yields fell and curves rose. Higher yields and marginally steeper curves in the US reflected the markets reappraisal of how many hikes the Federal Reserve may make in 2018, and the continued strength of global economic data. Following the market selloff in January, UK and European bond markets paused for breath. This was despite a more upbeat tone to the Bank of England Inflation Report, and may in part reflect the relative lack of supply expected in March as the Bank of England seeks to re-invest nearly £18bn of cash across the curve.

While Brexit talks have moved on, we believe that business investment will be constrained by uncertainty. Against this background, we expect interest rates to remain at low levels, although we are now forecasting two 0.25% increases in the BoE’s base rate in 2018.


Performance update - as at 28 February 2018

Governed Portfolios (GPs)

Over 12 months to end February 2018 the Governed Portfolios have delivered between 0.88% and 5%. All portfolios have outperformed their benchmarks over one and five years. Over three years, all of the portfolios are outperforming benchmark except for Governed Portfolio 7, our most adventurous portfolio, which has returned 0.08% below benchmark on an annualised return basis. This slight underperformance was caused by weaker performance from the property holdings.

Governed Retirement Income Portfolios (GRIPs)

Over 12 months to end February 2018 the GRIPs have delivered between 1% and 6%. All five GRIPs have outperformed their benchmark over one, three and five years and since launch. GRIP4 and GRIP5 have returned 10% above benchmark since launch. You can view our monthly GP and GRIP performance and factsheets by visiting our Fund information page.

All figures are as at 28 February 2018. Source: Lipper as at 28.02.18, Royal London, as at 28.02.18. All performance figures, including the figures shown for the growth in the benchmarks, have been calculated net of the 1% annual management charge.

Remember, past performance is not a guide to the future. Prices can fall as well as rise meaning you may not get back the full amount of capital originally invested. Investment returns may fluctuate and are not guaranteed.

Latest tactical change

Trevor Greetham, Head of Multi Asset at Royal London Asset Management, has made a tactical change to the asset allocation of the Governed Portfolios (GPs) and Governed Retirement Income Portfolios.

Tactical change- 8 March 2018

Investment Advisory Committee

Read the minutes from our latest IAC meeting held on 1 March 2018.

Fund changes

View the recent fund changes we've made as part of our ongoing governance reviews.

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Last updated: 31 Jan 2018

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