Our governance process

Good governance is essential in delivering good customer outcomes and helping your clients achieve their long-term investment goals.

Design of our Governed Range

The strategic asset allocation (SAA) represents our long-term view of an efficient asset mix for each portfolio. The Investment Advisory Committee (IAC) monitors how the portfolios are delivering against their risk objectives every quarter, as well as carrying out a more detailed review every 12 months and a formal review every three years.

The formal review ensures that portfolios remain appropriate for their long-term objectives, which are designed to optimise returns within their risk framework.

SAA objective and approach

Each portfolio has real return objectives designed around a risk target framework, and risk metrics are based on those objectives.

The objective of the reviews is to improve long-term outcomes for your clients. The IAC reviews expected risk, return and correlations for each asset class in order to identify the most efficient long-term mix.

SAA process

The long-term expected return, volatility and correlation assumptions we use are based on Moody’s Analytics capital market assumptions. These are then overlaid with a Royal London house view.

Each asset class has a set of assumptions that reflect our expectations of risk, return and how they move in relation to one another. These assumptions determine the risk/return trade-off for each asset class.

The next stage of the process is to review and test the current SAAs against hundreds of potential other combinations of portfolios, over thousands of different future scenarios, working with the assumptions Moody's Analytics has provided.

This helps us identify which asset allocation offers the best potential performance for the level of risk taken in each portfolio, and the best risk/return trade-off.