FOR ADVISERS ONLY
Investment Governance Meeting Summary – 1 December 2020
For more in-depth material you can access the following information:
Strategic Asset Allocation:
No SAA changes were recommended for the Governed Portfolios or GRIPs.
Tactical Asset Allocation:
Last change made on 10th September 2020.
Global equities delivered strong returns in August, although UK-based investors were impacted by sterling strength. While Covid-19 cases are rising in Europe and the UK, leading to travel restrictions and local lockdowns, the global economy continues to recover, albeit at a slower rate. Low interest rates and fiscal stimulus will support this. Following the strong bounce in equity markets, we have slightly reduced our overweight given ongoing economic and political risks. We have increased our overweight in commodities, given the inflation protection they provide, and trimmed the overweight in fixed income. We remain underweight in UK commercial property and cash.
Governed Portfolios
| Number of Governed Portfolios outperforming benchmark | 1 year | 1/9 |
|---|---|---|
| 3 years | 9/9 | |
| Since launch | 8/9 | |
| Number of Governed Portfolios within target volatility ranges | 9/9 | |
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All the Governed Portfolios were within their target volatility ranges.
Governed Retirement Income Portfolios
| Number of GRIPs outperforming benchmark | 1 year | 0/5 |
|---|---|---|
| 3 years | 5/5 | |
| Since launch | 5/5 | |
| Number of GRIPs within target range – Income Risk Metric | 5/5 | |
| Number of GRIPs within target range – Fund Risk Metric | 5/5 | |
All portfolios remain within their target ranges for the income risk metric. Sustainability scores have marginally declined from last quarter as annuity rates remain at historically low levels, yet the expected future returns across most asset classes have increased, which should improve future performance.
The fund risk metrics for GRIPs 3,4 and 5 are all within tolerance, however GRIP 1 is now flagging amber and GRIP 2 is flagging red. Although 1 year volatility for UK equity has decreased from 19.6% to 18.8%, volatility for conventional and index-linked gilts has increased. This combined with an increase in correlation between fixed interest asset classes has lead to increases in the fund risk metric for all GRIPs, in particular the lower risk portfolios with higher exposure to fixed interest. Please see the IAC minutes for the committee’s comments on the GRIPs risk metrics.
Tactical Strategy:
| Overweight | Neutral | Underweight | |
|---|---|---|---|
| Equities |  |
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| Property | |
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| Commodities |  |
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| High Yield |  |
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| Gilts | |
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| Index Linked | |
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| Corporate Bonds | |
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| Absolute Return Strategies (including cash) | |
Global equities delivered strong returns in August, although UK-based investors were impacted by sterling strength. While Covid-19 cases are rising in Europe and the UK, leading to travel restrictions and local lockdowns, the global economy continues to recover, albeit at a slower rate. Low interest rates and fiscal stimulus will support this. Following the strong bounce in equity markets, we have slightly reduced our overweight given ongoing economic and political risks. We have increased our overweight in commodities, given the inflation protection they provide, and trimmed the overweight in fixed income. We remain underweight in UK commercial property and cash.