Strategic Asset Allocation

Significant changes to the Strategic Asset Allocation of our Pension Portfolio Funds and Retirement Portfolio Funds

As part of our ongoing robust governance, we regularly review and adapt our multi-asset funds as the market environment changes and as we see new opportunities for customers and scheme members emerging. It’s clear the investment outlook is shifting, exacerbated by the Covid 19 impact, and we expect lower projected returns and potentially continued volatility.

So we’re introducing a number of significant changes to our Pension Portfolio Funds and Retirement Portfolio Funds to ensure customers and members benefit from the new environment. These changes are projected to deliver improved expected investment returns for unchanged downside risk and at no additional charge.

We will be implementing the following enhancements as a result of our 2020 Strategic Asset Allocation Review:

- A new Strategic Asset Allocation approach for equities to reduce the ‘home bias’ by allocating less to UK equities. We will also be aligning the split of investments in overseas equities closer to a market-capitalisation basis, from which we will adjust our positions based on our long-term return assumptions for each region

- Diversifying the sources of return in our portfolios by investing in a wider range of asset classes, while maintaining a significant level of equity exposure. The new passively-managed asset classes are property, via Real Estate Investment Trusts (REITS), and Emerging Market Government Debt. Both of these asset classes proved to be positive contributors to future returns in our extensive modelling, and show low correlation to other assets, providing diversification benefits

- Introducing currency hedging on a portion of our overseas equities to help optimise returns in flat or more volatile markets and enable us to achieve greater diversification

- Integrating Environmental, Social and Governance (ESG) considerations into our portfolios as we begin to implement our Responsible Investment Principles

Our Support for you

- PIA: 2020 Strategic Asset Allocation Review (PDF)

- Pension Portfolio Funds and Retirement Portfolio Funds 2020 Strategic Asset Allocation Review (Retirement Account) (PDF)

Helping you understand our funds