Over April the PPF 7800 Index rose 0.6% as both assets and liabilities increased. Assets were boosted by recovering equity markets following the sharp ‘risk-off’ moves experienced in March. The main catalyst for this was the sizeable and speedy actions taken by central banks and governments to support businesses and individuals through the crisis, which took shape towards the end of March. Investors are now beginning to look through the short-term noise, as they shrug off grim economic data releases. Uncertainty remains high, but is focused now not on how deep the contraction is, but how long it will last.
Despite the ‘risk-on’ sentiment in equity and credit markets, gilt yields fell another 0.2% over April, driven by the combination of near zero central bank base rates at shorter maturities and by aggressive central bank buying of government debt at longer maturities. Longer dated inflation expectations remained relatively flat. This led to pension scheme liabilities rising by 3-4% over the month.
Whilst April offered some respite for Schemes after their torrid start to the year, the outlook for pension schemes is uncertain and many questions will now be asked. How has the scheme’s sponsor fared? Will there be contribution holidays? How does the volatility impact full funding objectives and timeframes?
From an investment standpoint, how do trustees and their sponsors get their pension schemes back on track? Would more diversification benefit the scheme? Would a better governance model help make and implement decisions more quickly? The Pensions Regulator has advised trustees to review their “governance structures and delegations” – fiduciary management is one option which schemes large and small have benefitted from. We expect this trend to continue and increase as all the stakeholders in a pension scheme review their arrangements.
|
