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Strategic Asset Allocation Update for the Risk Managed Funds

5 min read 4 Oct 22

This content has been prepared by M&G Treasury and Investment Office (T&IO) and is prepared for information purposes only and does not contain or constitute investment advice. Information provided herein has been obtained from sources that T&IO believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. Neither T&IO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this document. The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.

‘M&G Treasury & Investment Office (T&IO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG). Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.

This year’s annual review of the long-term positioning of the Risk Managed and Risk Passive fund range was carried out against a background of inflation at the highest level for decades and rising central bank rates.

Much of the increase in inflation has been the result of Russia’s invasion of Ukraine, which has exacerbated supply chain problems already under strain from the pandemic. As central banks have tightened policy, fears of recession have mounted.

We started to reduce risk and add some inflation protection to the portfolio last year amid concerns that supply chains would come under pressure. Our approach was to ensure that we not only held assets that provide a hedge against inflation, but that also provide an additional investment premium. One area we have built exposure has been real assets, which historically during periods of high inflation has been one of the best performing areas of the market.

Cognisant of the current inflationary environment, we are keen to build on this real assets allocation within the funds and at the same time increase the diversification. We continue to tilt fixed income exposure towards Asian and emerging markets, which we believe offer better potential investment opportunities. Within the equity allocation we are trimming some of the exposure to the UK market, which has outperformed over the past 12-months. Some of these profits are being recycled into the US and Asian equity markets.