Investment Governance Meeting Summary – 7 June 2021

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

There has been a strategic asset allocation change for the Governed Portfolios: an increase in our allocation to high yield bonds and a reduction in property.  Furthermore within equities exposure to global developed and emerging market equities has increased out of UK equities.

There has been a strategic asset allocation change for Governed Retirement Income Portfolios 1 and 2: an increase in equities and high yield bonds and a reduction in gilts, index linked gilts and corporate bonds.

Furthermore within equities exposure to global developed and emerging market equities has increased out of UK equities. 

Tactical Asset Allocation

Last change made on 11 March 2021.

The success of vaccination programmes and declining Covid-19 case numbers in the US and Europe fuelled expectations of a strong economic recovery this year, driving positive global equity returns.

Meanwhile, anticipation of significant US fiscal stimulus raised concerns about inflation causing global bond yields to rise. Due to short-term market volatility we have reduced our overweight exposures to equities, commodities, corporate bonds and global high yield bonds.

We also moved further underweight in gilts. This benefited our cash allocation, which has moved less underweight. The underweight exposure to commercial property remains unchanged.

Governed Portfolios

Number of Governed Portfolios outperforming benchmark 1 year 1/9
3 years 9/9
Since launch  9/9
Number of Governed Portfolios within target volatility ranges 9/9
  • All the Governed Portfolios were within their target volatility ranges.

Governed Retirement Income Portfolios

Number of GRIPs outperforming benchmark 1 year 5/5
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, with GRIP 2 being amber as it nears it’s upper limit.  Sustainability scores have increased from last quarter as annuity rates increased slightly and the expected future returns across most asset classes have increased.

The fund risk metrics for all GRIPs are within tolerance, with GRIP 2 flagging amber. This is a significant improvement from last quarter.

Moody’s Analytics updated the inflation metric embedded within the real return metric for the GRIPs from RPI to CPI this quarter. Generally this has improved expected real outcomes although this has been offset by the significant increase in inflation expectations and the slightly higher risk profile for GRIP1 and GRIP 2 following the SAA changes.

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

The success of vaccination programmes and declining Covid-19 case numbers in the US and Europe fuelled expectations of a strong economic recovery this year, driving positive global equity returns. Meanwhile, anticipation of significant US fiscal stimulus raised concerns about inflation causing global bond yields to rise.

Due to short-term market volatility we have reduced our overweight exposures to equities, commodities, corporate bonds and global high yield bonds. We also moved further underweight in gilts. This benefited our cash allocation, which has moved less underweight. The underweight exposure to commercial property remains unchanged.

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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.