Investment governance

Real governance needs to be transparent so you can see what action we've taken and why. This should give you and your clients peace of mind that we're looking after their investments.

The Investment Advisory Committee (IAC) meet every quarter to review our Governed Range and funds. Highlights from the most recent meetings can be found below.

Details of previous IAC meetings can be found on the governance meeting updates archive.

27 February 2019 - Governance meeting update

Highlights:

  • There have been three tactical changes since the last meeting.
    • In October, following market panic we began contrarian purchases of equities based on growth and risk outlooks. Further to this, we also increased commodity exposure but still remained under benchmark. These purchases were funded from government bonds and cash. Overweight positions across high yield bonds and corporate bonds were maintained.

    • In November, investor sentiment remained in panic territory and as such we added to equity exposure, funded out of cash and short duration high yield debt. We remained conscious that markets may retest recent lows however with a positive outlook for equities through 2019, albeit with increased volatility, we remained positive on equities. Neutral positions were maintained across property and index linked bonds.

    • In December, market volatility remained following US Federal Reserve signals of near neutral interest rate levels and US-China trade negotiations. With long term expectations of economic expansion across 2019, we continued to purchase equities, increasing our overweight position. As higher volatility is expected to remain, we expanded government bond allocation, funded from commodities, high yield corporate debt and cash.

  • In our view, stock markets were premature to price in a US recession, and the recovery in equity prices has further to run. Longer term, we remain positive on stocks. Within Equities, we have overweight’s in the US, Japan and emerging markets, with below benchmark allocations to the UK, continental Europe and Asia Pacific (excluding Japan). Within the overweight Fixed Income allocation, we continued to favour sterling investment grade corporate bonds and short duration global high yield debt versus Gilts. Commodity exposure has been moved further underweight, and UK commercial property exposure kept around neutral.
4 December 2018 - Governance meeting update

Highlights:

  • There have been 3 tactical changes since the last meeting.
    • In July, we continued to take profits on our equity positions reducing the overweight to its lowest level since 2012. We also reduced our overweight commodity allocation with the proceeds moved into government bonds and cash reducing these underweight positions. We were modestly overweight global equities, global high yield bonds and commodities.

    • In August, we continued to reduce exposures to equities and commodities, bringing the latter into line with the benchmark. The proceeds were moved into government bonds, short dated high yield debt and cash. We were modestly overweight global equities and short dated global high yield bonds.

    • In September, we continued to de-risk portfolios by reducing exposures to equities and commodities, moving the latter allocation to an underweight relative to the benchmark. The proceeds were moved into government bonds, short dated high yield debt and cash.

  • Given the de-risking of portfolios that took place during the summer, TAA effects were relatively muted over the quarter. There were small positive contributions from overweighting Equities and underweighting Cash whilst an overweight stance in Commodities marginally detracted. Fixed Income and Property allocation effects were broadly neutral. Regional positioning within Equities was positive over the quarter with performance benefiting from overweighting overseas markets at the expense of underperforming UK equities. Across the overseas regions, overweight allocations to the US and Japan at the expense of continental Europe and Emerging Markets, all contributed positively to relative performance. Within Fixed Income, the overweight exposure to investment grade corporate debt offset a small positive contribution from underweighting conventional and index-linked UK government bonds which underperformed as Gilt yields rose over the period.
29 August 2018 - Governance meeting update

Highlights:

  • There have been 3 tactical changes since the last meeting.
    • In April, we increased the allocation to index linked government bonds, bringing this almost in line with the benchmark; funded by reducing our overweight holding of equities and from cash. With economies continuing to expand and inflation remaining benign, we were overweight global equities, global high yield bonds and commodities.
    • In May, we took further profits on the extra equities purchases made during the market lows and reduced the overweight allocation to commodities. Proceeds of these sales were moved into government bonds and cash.
    • In June, after capitalising on weak markets in the first quarter to increase equity exposures, we took profits on our overweight position as prices recovered, moving the proceeds into cash. There were no changes to the strategic asset allocations.
  • At the end of Q2 we remained positive on stocks but more cautious on government bonds due to ongoing concerns regarding inflation and interest rate increases. Having taken profits from our overweight equity allocations over the quarter we remained moderately overweight global equities and commodities. At the regional equity level, we were overweight US and subsequently overweight Japanese equities which tend to benefit from a strong dollar. As emerging markets have difficulty in servicing dollar-denominated debt when the US currency strengthens, this allocation was moved from overweight to underweight. We maintained underweight positions in Asia Pacific (excluding Japan), UK and continental Europe.
5 June 2018 - Governance meeting update

Highlights:

  • There have been three tactical changes since last quarter.  In January, we added to commodities, funded out of bonds.  We slightly increased the position in high yield bonds. We looked to maintain our overweight position in stocks; a short-term set-back was not ruled out and we would use such an opportunity to increase our equity allocation.  In February, we added to our moderate overweight position in equities on market weakness, buying stocks in the emerging markets in particular, and deepening the underweight in government bonds. We also took this opportunity to move commodities further overweight.  In March, we added to equities again, capitalising on stock market weakness and given that supportive world growth conditions remain in place. We also increased the allocation to index linked bonds and conventional UK gilts. The changes were funded out of high yield debt, government bonds, property and cash.  There were no changes to the strategic asset allocation.
  • Overweight positioning in equities was maintained in Q1; market volatility gave our multi asset funds the opportunity to add significantly to equities at more attractive prices. Underweight positioning in government bonds was sustained through the quarter as the interest rate outlook grew slightly less benign.
  • We are modestly overweight equities, commodities and short duration high yield bonds in our multi asset funds, but underweight government bonds given more evidence to be concerned about inflation and interest rate increases than in the last few years.  We maintain an overweight position in Japan, a global growth beneficiary, a neutral position in European and US equities, and stay underweight UK equities while Brexit uncertainty remains.
Last updated: 18 Mar 2019

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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.