Investment Governance Meeting Summary – 11 June 2019

The Investment Advisory Committee (IAC) meet every quarter to review our Governed Range and funds.
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Strategic asset allocation

  • No SAA changes were recommended for the Governed Portfolios or GRIPs.

Tactical asset allocation

 

  • Last change made on 7th March 2019.
  • Having bought in the market weakness at the end of 2018, we reduced equity exposure during rallies towards the end of Q1, taking profits whilst also reducing commodity and government bond allocations.
  • The proceeds of this were moved into short duration global high yield debt and cash, ready to reinvest if equity markets fall. We would like to see evidence that Chinese stimulus measures are boosting growth before becoming more positive on equities again.

 

Fund review

  • 13 RLAM funds on watch
  • 7 Funds under review
  • 15 Matrix funds on watch

 

Governed Portfolios

Number of Governed Portfolios outperforming benchmark 1 year 8/9
3 years 4/9
5 years 5/9
Number of Governed Portfolios within target volatility ranges 9/9
  • All 9 portfolios show positive asset allocation over a 3-year time frame. This has increased from 8/9 in Q4 2018.
  • Long term returns remain positive with 7/9 portfolios outperforming since launch by an average of 1.83%.
  • Contrarian purchases of equities across the fourth quarter were sold as equity markets rallied through the beginning of 2019.

Governed Retirement Income Portfolios

Number of GRIPs outperforming benchmark 1 year 5/5
3 years 5/5
5 years 5/5
Number of GRIPs within short-term risk measure 5/5
Number of GRIPS within long-term risk measure 5/5

All GRIPs were within the tolerances for their income and fund value risk metrics.

*For more information on the risk metrics please see leaflet Managing Risk in GRIPs.

Tactical strategy

 OverweightNeutralUnderweight
Equities down arrow    
Property   no change  
Commodities     down arrow
High Yield up arrow    
Gilts     down arrow
Index Linked   no change   
Corporate Bonds no change    
Absolute Return Strategies (including cash)     up arrow

Source: Tactical change – 7 March 2019, Royal London

  • In March, investor sentiment seemed very optimistic. We continued to monitor Chinese stimulus measures and its effect on growth. As such, we continued to take profits from equity purchases made during market weakness early in the year and moved the proceeds into high yield bonds and cash. The overall position as at end March, was overweight Equities, High Yield and Corporate Bonds; underweight Absolute Return Strategies (inc. cash), Gilts and Commodities. Neutral positions were maintained across Property and Index Linked Bonds.

The following funds were subject to action at the latest IAC meeting (27th February):

Rathbones Global Alpha

  • The fund finished ahead of benchmark over Q1 2019, however was still behind benchmark over 1, 3 and 5 years to the end of March 2019. Positive contributors over the year include the funds positioning in US equity markets with the Brown Advisory US Equity Growth and Edgewood Select US Select Growth funds performing particularly strongly. Contribution from the UK was also positive over the year with the Lindsell Train UK Equity fund being a particular highlight. However, both Japan and Emerging Markets positioning detracted from performance over the year. Over the longer term, the Rathbone Investment Committee is already aware of the drag on performance from the fallout from the UK referendum, and the difficulties in reducing our small and midcap exposures in the UK within a fund of funds structure. This continues to affect both the 3 and 5 year numbers.

 

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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.