“Over the course of July, funding levels fell for the first time in six months, decreasing at a rate of 1.9%. This is reflective of a sustained change in markets, with bond yields falling and developed equity markets rallying, as markets concluded that central banks’ pace of rate hikes will begin to slow and draw to a close. Despite the recent rally in equity markets, the economic outlook remains uncertain and we are continuing to see an increasing number of corporate insolvencies – which demonstrates the need for contingency planning. Furthermore, not every scheme will see funding level losses over this period, as it is largely dependent on the asset allocation and risk positioning of the scheme.”
“More broadly, with central banks facing increased pressure, as global economies continue to deal with the effects of geopolitical developments, we are positioning for a new regime of increased volatility. We also see policymakers ultimately living with a higher rate of inflation in the short and medium-terms, and we are positioned accordingly across all asset classes. In the long-term, however, we remain optimistic about economic growth and funding levels.”
“Overall, 2022 continues to highlight that risk management and thoughtful asset allocation remain the key considerations when meeting liabilities and funding goals. The diverse views held by fund managers on where central banks will get to, in terms of base interest rates, show why scheme managers must take a long-term view. They also demonstrate the importance of diversification across asset classes, including illiquids.”
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