| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| UK | 10.84% | 5.62% |
| Europe ex UK | 4.96% | 2.57% |
| North America | 6.16% | 3.19% |
| Japan | 2.76% | 1.43% |
| Asia ex Japan | 5.51% | 2.86% |
| China | 1.75% | 0.90% |
| India | 1.29% | 0.67% |
| Global Emerging | 1.65% | 0.86% |
| Middle East and Africa | 1.84% | 0.95% |
| Total Equities | 36.76% (+0.81%) | 19.05% (+0.73%) |
Market Outlook
2025 PruFund Strategic Asset Allocation
Last Updated: 21 May 25 10 min read
An update from the M&G Treasury and Investment Office (T&IO) detailing the recent Strategic Asset Allocation (SAA) changes that have been implemented across the PruFund range of funds.
A forward-looking, evolving approach to strategic asset allocation:
We periodically review our strategic asset allocation against our long-term capital market assumptions, taking into account a range of possible future scenarios. We consider a range of qualitative scenarios and also benefit from our in-house, stochastic asset model, GeneSIS, to map out a broad range of future scenarios across capital markets and asset classes, interest rates, inflation etc.
This allows us to create robust portfolios for clients which are highly diversified by geography and asset type, across a wide range of economic environments. Rather than relying on one single area to generate significant returns, PruFunds use the sum of their parts to create outcomes with the right mix of assets that are well positioned for future growth, while staying true to the funds' risk profile.
The Long-Term Investment Strategy team within T&IO are responsible for the SAA review. Key to this is their own capital market assumptions for the expected returns, volatilities and correlations of the various asset classes that sit within PruFunds. A look under the bonnet at the SAA process can be found here.
PruFund Growth Strategic Asset Allocation as at 1 May 2025.
Source, Long-Term Investment Strategy Team, M&G Treasury and Investment Office
Overview
- Our outlook for the rest of the year assumes muted growth. There are some tailwinds from easing inflation but there are longer-term challenges, particularly regarding a US-centred trade war
- Modest growth is expected in the UK, Europe, China and parts of Asia, while US growth is likely to slow
- The funds remain well diversified and in a good position given previous strategic asset allocation changes, and as such we are making relatively modest changes
- Markets are continuously evolving and we continue to react to this, reviewing our portfolio positions regularly to ensure holdings are best placed to capture valuation opportunities while managing risk levels
Key changes
Fixed Income
- Global High Yield positions have been materially reduced given the limited opportunity for outperformance (extremely low spreads) and risks to the downside
- A slight reduction in US Treasuries considering the current financial challenges and knock-on impact of tariffs and trade war on the US economy
Equities
- Our equity positions are designed to capture future global growth potential rather than current market capitalisation. We prefer to maintain geographical diversification in the face of rising uncertainty over US exceptionalism
- We have a marginal preference towards UK (more resilient to trade and inflation shocks) and Europe (material positive shifts in both monetary and financial support) as well as India (more insulated from the wider trade war in goods)
- We are also taking some profits on Africa on the back of good performance
Real Estate, Alternatives, Other Strategies
- Given the prospect of an intensifying trade war initiated by the US, with tit-for-tat retaliation and rising input costs, there is a risk of heightened inflation. As a result we have moderately increased our allocation to commodities, an asset class that was introduced in 2024
- We are committed to a broader mix of asset classes with access to real cash flows that can provide diversification in inflationary environments
- We are building positions in strategies that are relatively uncorrelated to the economic cycle (volatility, cross asset momentum and royalties)
Asset Allocations
Expand the headings below to see the new allocations by asset class for PruFund Growth and PruFund Cautious from 1 May 2025.
| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| UK | 7.95% | 6.27% |
| Europe ex UK | 1.66% | 1.31% |
| North America | 1.52% | 1.20% |
| Asia | 2.12% | 1.67% |
| Total Real Estate | 13.25% (-0.31%) | 10.45% (+0.57%) |
| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| Private Equity | 5.70% | 4.55% |
| Infrastructure | 3.56% | 4.20% |
| Private High Yield | 3.92% | 4.20% |
| Commodities | 1.07% | 1.05% |
| Total Alternatives | 14.25% (+0.58%) | 14.00% (+0.18%) |
| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| TAA Mandate | 3.15% | 2.80% |
| Other Factors | 1.35% | 1.20% |
| Total Other Strategies | 4.50% (+0.04%) | 4.00% (+0.01%) |
| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| UK Government Bonds | 2.34% | 4.04% |
| US Government Bonds | 1.76% | 3.03% |
| Europe including UK | 8.17% | 13.84% |
| US | 5.99% | 10.35% |
| Asia | 5.81% | 10.02% |
| China | 0.22% | 0.38% |
| Global High Yield | 0.11% | 0.20% |
| Private Credit | 0.53% | 1.79% |
| Convertible bonds - global | 0.88% | 1.52% |
| Africa | 1.02% | 1.16% |
| Emerging Market Debt | 2.41% | 4.17% |
| Total Fixed Income | 29.24% (-1.10%) | 50.50% (-1.48%) |
| Asset | PruFund Growth | PruFund Cautious |
|---|---|---|
| Cash | 2.00% (-0.01%) | 2.00% (+0.00%) |
Outlook
We have moved into a new, more uncertain economic regime. In this environment, we expect that economic cycles will be shorter and more volatile, emphasising the need for high diversification across asset classes and regions.
While it has been unclear up to now whether Trump would make good on his campaign pledges in full, we have been wary of the shifting world order for some time. We have been carefully monitoring the rising strategic rivalry between different economic blocs that has been building for a number of years. In our view, tariff uncertainties will ultimately result in a reduction of trade flow between the US and the rest of the world, and accelerate increased trade within and across Asia and emerging markets.
We expect that while fixed income and equities can be diversifying to each other, the prospect of ongoing inflation and financial risks makes real assets attractive. We remain committed to a broad mix of asset classes that generate real cash flows, as they provide genuine diversification in inflationary environments and are relatively uncorrelated to the economic cycle.