Financial markets remained unpredictable, amid the ongoing measures to contain the spread of COVID-19.  The FTSE 100 had its first positive week in seven weeks, while European shares had a three-day rally, as investors responded favourably to actions from central banks and spending and relief packages at the government level. However, the outlook for the economy and investment markets is still uncertain in the short-term, with the timeline for lockdown being extended.

Alex Tedder, Head and CIO of Global and US Equities at Schroders (our strategic investment partner), said on Thursday:  “Elevated volatility is not unusual during geopolitical disruption and will undoubtedly continue. More relevant, however, are the underlying drivers of equity returns and the outlook for the likely trajectory of the recovery. For the time being, market moves reflect the fear of the unknown as well as the deterioration in the economic environment and growth expectations. Unprecedented monetary and fiscal stimulus is thus being brought to bear to support economic activity.” 

Multi-asset investing

Investing – in equities in particular – should always be considered a medium to longer-term investment. While the causes of current market stress are outside of the ‘norm’, equity markets have demonstrated over many decades their ability to recover from short-term troughs and deliver strong returns for investors over the medium to long-term.

An appropriate multi-asset fund, fitting the client’s attitude to risk and investment goals, can offer diversification benefits which aren’t solely reliant on the performance of equities. Many government bonds, for example, have seen historically low yields in recent weeks as investors flock to assets perceived to be lower risk than equities. (Prices move inversely to yields.)

 In terms of our own core multi-asset fund range, it’s important to note that we have not made any changes to the long-term positioning of our funds based on what might be (in investment terms) a short-term, hard to predict, phenomenon. Our asset allocation maintains a medium to long-term investment horizon. Market corrections are a natural part of investing, and we continue to believe that equities still offer attractive opportunities for growth over the long term.

Retirement Portfolios & Dynamic Volatility Management

The Scottish Widows Retirement Portfolio Funds (RPF) feature a de-risking process called Dynamic Volatility Management (DVM).

DVM is designed to kick in when equity market volatility increases significantly, and is determined by:

  • Taking as a starting point a market volatility threshold, initially set at the 60th percentile of average historic volatility.
  • Adjusting based on the equity performance over the previous rolling 52 weeks.

If there has been positive market performance, which there was for 2019, for example, the dynamic threshold is raised because we believe the RPF will be able to tolerate more volatility after a period of growth. Conversely, if the RPF have experienced losses, that will lead to a lower threshold, to allow de-risking to start earlier.

Given the volatility increase in recent weeks, combined with a sustained decline in equity markets, the DVM threshold is currently activated; as a result, a portion of the RPF equity content has de-risked.


27 March 2020


DVM data is subject to change daily, as market conditions can change rapidly and de-risking may switch off again quickly. We are working closely with Schroders, our strategic investment partner, to monitor market conditions and position the RPF accordingly.

Volatility: Retirement Portfolio Funds – latest update on our Dynamic Volatility Management (DVM) process.

Dynamic Volatility Management status (PDF)