We're changing our approach to rebalancing

What is rebalancing?

Target Lifestyle Strategies, Governed Portfolios (GPs) and Governed Retirement Income Portfolios (GRIPs) come with monthly rebalancing as standard. It means that your clients’ investment split is realigned to the portfolio that originally matched their attitude to risk and time to retirement. If a portfolio is not rebalanced regularly, the asset split can drift significantly over time, changing the portfolio’s risk profile.

What is changing?

Rebalancing is currently applied to each policy automatically on the anniversary date for the GPs and GRIPs, and on your clients’ day of birth each month for Target Lifestyle Strategies. As well as this, rebalancing occurs whenever the tactical asset allocation changes. With effect from Monday 16 March we have turned off automatic rebalancing. This means we will use the tactical asset allocation process to rebalance clients’ portfolios.

Why are we making this change?

In the current environment markets are showing extremely high levels of day to day volatility due to concerns over the impact of the COVID-19 worldwide pandemic.  As a result, customers could experience significantly different asset allocation changes as a result of portfolio drift depending on the day of the month that their auto-rebalance is due. This could result in movements which are extreme enough to move individual allocations outside of the risk budget. In order to avoid this and treat our customers as fairly and consistently as possible we will manage rebalancing through our tactical asset allocation process.

What does this mean for clients?

This allows us to have greater control over the rebalancing experience for customers and means we can continue to honour our rebalancing commitments and ensure allocations remain within risk budgets. We will publish regular updates of any changes made including rationale for those changes.

When will auto-rebalancing be turned back on?

We are following our enhanced monitoring process throughout this period and are holding regular calls with senior leaders across the Royal London group and the investment management teams at Royal London Asset Management. This allows us to monitor market reaction, the impact on our investment strategies, customer behaviour and cashflows and provides governance and oversight of this process to monitor the position.

We’ll look to turn auto-rebalancing back on when market volatility returns to historic norms and senior leaders across Royal London Group agree that it is the right course of action for our customers.

Find out more

To find out more, please get in touch with your usual Royal London contact.