Governed Portfolio 5 Annual Review - Royal London Group



[pic]

GOVERNED PORTFOLIO 5

ANNUAL REVIEW

Introduction

This document provides a rolling annual review of Governed Portfolio 5 and is designed to assist you in preparing your client reports. The information is provided on a sample basis only and you should ensure that your own final version satisfies your compliance requirements. For more information about the Governed Portfolios please visit adviser.investment.

Investment objective

This portfolio aims to deliver above inflation growth in the value of the fund at retirement, whilst taking a level of risk consistent with a moderately cautious, balanced or moderately adventurous risk attitude over a medium time period.

Ongoing governance

Governed Portfolio 5 is reviewed quarterly by Royal London’s Investment Advisory Committee (IAC) to make sure it’s performing in line with its objective. The portfolio is invested in a mix of assets shown under current asset allocation. Performance of the portfolio is measured against a benchmark asset allocation, also shown below, which reflects the risk profile and investment timeframe of the portfolio. If the IAC decide that the mix of assets need adjusted it happens automatically on your clients behalf.

Current tactical allocation Benchmark asset allocation

|ν |56.25% |Equities |

|ν |15.00% |Property |

|ν |5.00% |Commodities |

|ν |2.05% |Global High Yield |

|ν |1.70% |Short Duration Global HY |

|ν |4.38% |Gilts (10yr) |

|ν |5.00% |Index Linked Bonds (10yr) |

|ν |6.00% |Corporate Bonds (10yr) |

|ν |1.00% |Absolute Return Gov Bond |

|ν |1.87% |Cash Plus |

|ν |1.75% |Deposit |

Tactical position as at 16/08/2018.

Performance to 30/06/18

Past performance is not a guide to the future. Prices can fall as well as rise meaning you may not get back the value of your original investment. Investment returns may fluctuate and are not guaranteed.

|  |Percentage Change |  |  |

|  |30/06/2017 |30/06/2016 |30/06/2015 |

|  |31/07/2017 |

| |Estimated (%) |Target (%) |Upper bound (%) |Lower bound (%) |

|Governed Portfolio 5 |10.0 |10.5 |11.6 |9.5 |

Source: Investment Advisory Committee Report, data as at 30.06.2018. The volatility shown is the forward looking stochastic projection of the annualised volatility of the strategic asset allocation over a 10 year time period.

Governed Portfolios have a fixed risk target with a 10% tolerance either side, i.e. we will always aim to keep the volatility of the strategic asset allocation for Governed Portfolio 5 between 9.5% and 11.6% p.a. A higher portfolio volatility figure indicates we would expect the portfolio to produce a wider range of returns than the target volatility figure while a lower portfolio volatility figure indicates we would expect returns to be more stable than the target volatility figure.

Annual review log

|Date |Details |

|IAC Meeting – 29/08/2018|Governed Portfolio 5 outperformed benchmark over 1 and 5 years to end of June 2018. The existing tactical position applied 16/08/2018 |

| |continues. No change required to benchmark asset allocation. |

|16/08/2018 |A currency crisis in Turkey has rattled global stock markets. Before the selloff, our multi asset funds were already positioned |

| |relatively defensively, with the smallest overweight in equities since 2012 and favouring the US over emerging markets. We continued |

| |to reduce exposures to stocks and commodities, bringing the latter allocation into line with the benchmark. The proceeds were moved |

| |into government bonds and short dated high yield debt. We will look to add back to stocks in coming months. We are modestly overweight|

| |global equities and short dated global high yield bonds. |

|12/07/2018 |Our Investment Clock may enter its ‘Stagflation’ phase during summer, as inflation tracks slightly higher while global growth cools, |

| |especially outside the US. Stocks are flat year-to-date after a burst of volatility that marked a global growth peak; a deteriorating |

| |economic backdrop and talk of trade wars signal further volatility. We continued to take profits on our equities position, where the |

| |overweight is the lowest since 2012, and reduced our overweight commodities allocation; the proceeds were moved into government bonds |

| |and cash, reducing underweights. We are modestly overweight global equities, global high yield bonds and commodities. |

|07/06/2018 |Our Investment Clock remains in its ‘Overheat’ phase, with greater risk of inflation, although there are indications of economic |

| |weakness outside the US. We expect stocks to trade in a range over summer; investor sentiment, having been very fearful in February, |

| |is now neutral. After capitalising on weak markets in the first quarter to increase equity exposures, we have been taking profits on |

| |our overweight position as prices recovered, moving the proceeds into cash. Longer term, we remain positive on stocks but more |

| |cautious on government bonds. We are moderately overweight global equities, global high yield bonds and commodities. |

|IAC Meeting – 05/06/2018|Governed Portfolio 5 outperformed benchmark over 1 and 5 years to end of March 2018. The existing tactical position applied 10/05/2018|

| |continues. No change required to benchmark asset allocation. |

|10/05/2018 |Our Investment Clock remains in its ‘Overheat’ phase, with increased risk of inflation, although the global economy is showing some |

| |signs of slowing. With investor sentiment staying neutral, we have taken further profits on the extra equities purchases made during |

| |the market lows and March; we also reduced the overweight allocation to commodities. Proceeds of these sales were moved into |

| |government bonds and cash. Longer term, we remain positive on stocks and are overweight global equities, global high yield bonds and |

| |commodities. |

|19/04/2018 |Our Investment Clock remains in the early stages of its ‘Overheat’ phase, with a robust worldwide economic expansion and increased |

| |risk of inflation. Following considerable volatility in markets in recent weeks, portfolio activity focused on risk management. We |

| |have again increased the allocation to 10-year index linked government bonds, bringing this underweight almost in line with the |

| |benchmark; this was funded by reducing our overweight holding of equities and from cash. With economies continuing to expand and |

| |inflation remaining benign, we are overweight global equities, global high yield bonds and commodities. |

|08/03/2018 |Our Investment Clock is in the later cycle ‘Overheat’ stage, with strong global growth and more risk of inflation. We have added to |

| |equities again, capitalising on stock market weakness and given that supportive world growth conditions remain in place. We also have |

| |increased the allocation to 10-year index linked bonds. The changes were funded out of high yield debt and cash. With economies |

| |continuing to expand and inflation remaining benign, we are overweight global equities, global high yield bonds and commodities. |

|IAC Meeting – 01/03/2018|Governed Portfolio 5 outperformed benchmark over 1, 3 and 5 years to end of December 2017. The existing tactical position applied |

| |08/02/2018 continues. No change required to benchmark asset allocation. |

|08/02/2018 |As our Investment Clock moves further into ‘Overheat’ territory, we have added to equities at the margin and also added to commodities|

| |again, funded out of bonds. While the supply-demand balance is favourable for commodities, potential for weaker demand in China, the |

| |world’s biggest consumer of raw materials, is a concern. The sell-off in equities that began at the end of January seems exaggerated, |

| |and we are buying at lower levels, in expectation of a recovery in coming months as the world economy keeps expanding. We will look to|

| |maintain an overweight allocation to stocks. |

|18/01/2018 |A combination of our ‘Investment Clock’ moving further into ‘Overheat’ and positive price momentum mean that we have added to |

| |commodities at the margin, funded out of bonds. Nevertheless, we remain cautious on commodities as the Chinese economy is likely to |

| |slow, and recent US dollar weakness could reverse, in line with interest rate differentials. We slightly increased the position in |

| |high yield bonds. We will look to maintain our overweight position in stocks; with investor sentiment so positive, we do not rule out |

| |a short-term set-back and we would use such an opportunity to increase our equity allocation. |

|IAC Meeting – 01/12/2017|Governed Portfolio 5 outperformed benchmark over 1, 3 and 5 years to end of September 2017. The existing tactical position applied |

| |16/11/2017 continues. No change required to benchmark asset allocation. |

|16/11/2017 |There are signs that growth is picking up, against a backdrop of loose monetary policy and low inflation. Against such a backdrop, |

| |central banks are unlikely to tighten in a meaningful way; this is positive for stocks and high yield, where we remain overweight. |

| |With seasonality now positive, we are likely to buy dips in stock markets rather than sell rallies. We’ve marginally increased our |

| |underweight in bonds and taken some profits in high yield. We have added to commodities at the margin. |

|12/10/2017 |There are signs that growth is picking up but wage inflation remains muted, despite low unemployment rates. Against such a backdrop, |

| |central banks are unlikely to tighten in a meaningful way; this is positive for stocks and high yield, where we remain overweight. |

| |With seasonality turning positive, we are likely to buy dips in stock markets rather than sell rallies. We’ve marginally trimmed our |

| |underweight in bonds to take advantage of the recent rise in yields. There is a potential risk of a slowdown in China, which may |

| |result in a softening of commodity prices and we have trimmed at the margin. |

|14/09/2017 |We took advantage of bouts of risk aversion on heightened geopolitical risk surrounding North Korea and extreme weather events in the |

| |US to add to the portfolio’s overweight in equities. The portfolio’s commodities exposure was moved to a marginal underweight, |

| |reflecting ongoing potential for weaker economic activity in China next year. We slightly decreased the portfolio’s exposure to |

| |government bonds given current low bond yields. We maintained the exposure to global high yield bonds as a lower risk way of gaining |

| |corporate exposure with some income. Property exposure was kept in line with the benchmark. |

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. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration number 302391. Registered in England and Wales number 4414137. Registered office: 55 Gracechurch Street, London, EC3V 0RL. Royal London Corporate Pension Services Limited is authorised and regulated by the Financial Conduct Authority and provides pension services. The firm is on the Financial Services Register, registration number 460304. Registered in England and Wales number 5817049. Registered office: 55 Gracechurch Street, London, EC3V 0RL.

September 2018 5Z0266/37

-----------------------

ν |55.00% |Equity | |

|ν |15.00% |Property |

|ν |5.00% |Commodities |

|ν |2.50% |Global High Yield Bond |

|ν |5.00% |Gilts (10yr) |

|ν |5.00% |Index linked Bonds (10yr) |

|ν |5.00% |Corporate bonds (10yr) |

|ν |7.50% |Absolute Return Strategies (including cash) |

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download