UK Pension Schemes had something to be thankful for in November as the PPF 7800 Index rose 1.7% to finish the month at 96.1%. Funding levels were boosted once again by increasing gilt yields, causing liabilities to fall around 1.5%, as well as equity market growth. Equity markets were up 2-3% over November, buoyed by President Trump announcing that the US and China were in the “final throes” of a Phase One deal, and continued positive PMI data. With funding levels still 1.9% lower than where they started the year schemes will have turned their attention to 2020 and what they can do to close their funding deficits in the next decade.
As we look forward to next year, one thing seems certain: change is on the agenda. We have a new head of the ECB in place in Christine Lagarde, the UK election this week and the US Presidential election in November next year. Alongside a multitude of other general elections worldwide, there looks set to be a lot of change or expected change. One thing investors don’t like is uncertainty and there’s plenty of that to come. Many market participants are concerned about stock price falls in 2020; we remain optimistic about continued growth but it’s important to be nimble particularly in times of volatility.
So how could trustees look to navigate this uncertainty and mitigate its impact on their schemes? Fiduciary management is one option – instead of relying on a quarterly meeting cycle to make changes, delegate to an investment manager who can adjust the portfolio to reflect current market environments. Those schemes using fiduciary management have been able to capture more upside opportunities and better protect on the downside. Interestingly we are starting to see fiduciary management used by all sizes of schemes, demonstrating its effectiveness and appeal across the board.
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