January provided a good test for investor confidence. Equities started the year strongly but these gains were short-lived as fears around the outbreak of the coronavirus and tensions between the US and Iran resulted in a sell-off later in the month. In the UK, while economic data improved from the disappointments late last year, this wasn’t sufficient for the Bank of England to raise base rates. This surprised both equity and bond investors, resulting in stocks and yields falling – the perfect storm for UK pension trustees as growth assets fell while liabilities rose. The PPF updated their assumptions during January and on the revised basis the PPF 7800 Index fell 3.5% to end the month at 95.9%.
By contrast our fiduciary clients have seen their funding levels protected over January. High liability hedge ratios helped to cushion the blow of falling yields, while tailored, nimble, growth portfolios mean we can respond to market events. This means our clients’ assets continue to be well-positioned for an increasingly uncertain environment. Over the course of 2019, we saw funding level improvements for all our fiduciary clients as asset increases outpaced liability rises. Again this contrasts with the PPF Index which stayed flat over the year. It therefore comes as little surprise that we are increasingly seeing larger schemes considering fiduciary management.
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