Investment governance

Our governance promise ensures we take a proactive role in the governance of our investment proposition.
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We believe all investment options should be monitored on a regular basis and through strong governance we can help to ensure they deliver in line with their investment objectives.

That’s why all of our investment options have a formal review process, at no extra cost.

At the heart of this is our Investment Advisory Committee (IAC).

Find out more about our Governance Promise.

View a copy of the Investment Advisory Committee Terms of reference

About the IAC

 An image of the members in the Independent Advisory Committee

The IAC is made up of five pension and investment experts, three from the Royal London Group and two independent experts. They're committed to providing an ongoing formal review process for our investment proposition helping you deliver an ongoing, compliant service and peace of mind to your clients.

Meetings are held on a regular, usually quarterly basis to review our Governed Range and funds. The review process focuses on taking a long-term view to ensure investment decisions are made in our investor’s best interests and cover the following types of questions:

  • What is the best blend of assets to meet our customers’ objectives?
  • How should we change the asset mix to respond to changes in the economic outlook?
  • The long-term fundamentals for an asset class have changed, should the best asset mix change?
  • There has been a change of fund manager, would it be best to switch funds?
  • Should the amount invested in UK and overseas equities be changed?

We understand that real governance needs to be transparent so you can see what action we’ve taken and why.

To help the committee to make these decisions, they review reports and market commentary from –

  • Morningstar Investment Management Europe Limited – fund reports
  • Moody’s Analytics – comprehensive risk report
  • Royal London Asset Management – market commentary

To find out more about our members download The Investment Advisory Committee leaflet. 

 Latest meeting minutes

Highlights

There have been three tactical changes in the last quarter:

There were three tactical changes in Q1;

  •  Global equities continued to rise in December as the US and China trade tensions eased and the UK general election delivered a strong parliamentary majority, reducing political uncertainty. There were further signs that the global economic slowdown was bottoming out. While inflation remained low, it has picked up slightly with higher oil prices, which may have constrained central bank flexibility. We added to commodities out of government bonds, partly to hedge against increased geopolitical risk and partly against some inflationary pressures. We also added slightly to our overweight position in high yield bonds.
  • After a benign start to 2020, the coronavirus outbreak shook global financial markets in late January. World equities delivered negative returns for sterling investors in the short term. Economic growth forecasts for China had been cut sharply for the first quarter, but the authorities have introduced stimulus measures and the virus impact could have been short lived. We bought the dip in equity markets as they looked to be overly pessimistic on the economic impact of the outbreak. We added to global high yield bonds, while moving further underweight in gilts and trimming commodities to neutral.
  • Stock markets declined sharply in reaction to the coronavirus outbreak. We reduced equity exposure in view of further downside risk to the world economy, but we retained a small overweight as we see this shock as ultimately temporary - investor sentiment was extremely depressed and valuations were more attractive. We also moved underweight commodities. We added to government bonds and commercial property, and increased corporate and global high yield bonds at wider spreads as we expected them to offer resilience.

During the quarter, we continued to take an active approach to tactical asset allocation with a view to generating returns irrespective of market direction. As the virus spread rapidly outside China, we took exposure down to a broadly neutral position to reflect a high level of uncertainty. We also increased our exposure to government bonds, while trimming global high yield exposure. We retain a position in short duration global high yield, a relatively defensive strategy. Lastly, we have minimal commodity exposure, having sold ahead of the crisis.

In depth

Highlights

There have been two tactical changes since the last meeting:

  • Global equities rose again in October in local currency terms as investors focused on the supportive monetary policies of central banks and US-China trade talks moved towards an agreement. Given inflation remains muted, we expect lower interest rates to trigger a mini cyclical upswing. Having been broadly constructive on the outlook for stocks all year, despite mixed economic data; we have increased our overweight position in equities. In addition, we have increased our allocations to commodities and global high yield bonds. Against this, with bond yields remaining close to historical lows, we have further reduced our holdings of government bonds.

  • Global equities rose again in November as investors focused on the accommodative monetary policies of central banks and early signs that global growth is stabilising. Given muted inflation, interest rate cuts in the US and other countries are positive for risk assets as the global economy picks up. However, stock markets are always vulnerable to political setbacks, such as US-China trade deal delays or Middle Eastern tensions. While remaining constructive on the outlook for equities, we have taken some profits and reduced our overweight position. We have also reduced our allocation to commodities, building up cash to buy equities on weakness.


We started the quarter overweight in equities, having taken advantage of seasonal weakness in the summer. While we tactically traded this allocation through the quarter to exploit valuation opportunities, stocks should continue to outperform bonds over the next year or two and we remain constructive on equities with an overweight allocation. While trade issues and geopolitical risk could cause short-term setbacks, we are primed to buy on any setback in global stock markets or on further evidence of economic recovery.

In depth

Highlights

We started the quarter firmly overweight in equities, having bought during weakness last quarter and benefitted from the sharp recovery. We slightly increased this position over the period, taking advantage of seasonal weakness in August.

Monetary policy is currently easing in the US, the euro area, China and a wide range of other developed and emerging economies. We think this economic cycle has further to run and stocks should continue to outperform bonds over the next year or two.

In depth

 

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.