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PruFund Strategic Asset Allocation Update: Investing at the end of the cycle

7 min read 23 Aug 22

  • Build on the earlier risk reduction and continue the pivots made over the past twelve months
  • Add to the fund’s allocation to emerging market equities including an allocation to Indian equities.
  • Continue to transition the fixed income allocation away from developed market yields to emerging market debt.
  • Incremental additions to real asset allocations focusing on quality, building infrastructure in particular food infrastructure.

This year’s annual review of the long-term positioning of PruFund builds on the risk reduction exercise we carried out in the spring following Russia’s invasion of Ukraine.

The war continues to exacerbate supply chain problems adding to inflation pressures. Developed market inflation is now at multi decade highs and as central banks seek to tighten monetary policy in response, fears of recession are mounting.

The 12 months to end of June have been a challenging period for financial markets. Unusually, both bond and equity markets have delivered negative returns as investors have positioned for rising interest rates.

Against this backdrop, PruFund has benefitted from the positive performance contribution from its diversifying holdings in Property and Alternatives. Within these broad sectors the stand-out performers were UK property and private equity. 

The higher allocation to fixed income and lower exposure to property and alternatives in PruFund Cautious meant that it received less of the diversification benefits than PruFund Growth. Nonetheless, it is worth noting that both fund’s outperformed their respective benchmarks.

The value of an investment can go down as well as up and your clients may get back less than they have paid in. Past performance is not a reliable indicator of future performance.

The views and opinions expressed in this should not be taken as a recommendation, advice, or forecast.