With Profits Fund – Performance Update
6 January 2021
Our expert internal investment team alongside our portfolio manager at our external investment managers, AXA IM, have continued to monitor market levels, activity and sentiment and at the end of 2020 the Society’s with-profits Order Insurance Fund was re-risked. Essentially, this means that the fund now includes equities in its holdings, following the sale of equities at the start of 2020.
The Society’s fund managers have also bought a new investment into USD high yield bonds, with approval to invest back into convertible bonds when the timing is deemed appropriate.
6 November 2020
- Since de-risking the Society’s with-profits Order Insurance Fund at the start of 2020, we have continued to monitor market levels, activity and sentiment and our expert internal investment team have maintained weekly calls with our portfolio manager at our external investment managers, AXA IM.
- US markets have reacted positively to the global stimulus packages from Governments and central banks, although this is largely concentrated on gains in the large technology companies, such as Amazon, Apple and Netflix, that have seen increased revenue streams throughout the pandemic. Other regions, especially Europe, have been much slower to recover, with markets still typically 20-25% lower than at the end of 2019. Bond markets have performed well during the past 6 months with prices rising and yields falling as central banks reduced interest rates.
- The current asset mix within the Order Insurance Fund remains largely unchanged to the update provided in April 2020. It should again be noted that this asset allocation is a temporary position and as mentioned, we are monitoring the markets, in collaboration with our investment managers, to determine the appropriate time to re-risk the portfolio, with an expectation that this will be before the end of 2020. A new asset allocation will be initiated at this time.
- When markets fall like this, people may be tempted to withdraw their money to protect it. However, this can lead to the investment being sold at a loss that might have been avoided if the investment were held for the long-term. Our with profits plans are designed to be held for the long-term. If you cash-in when the market is down, you will likely suffer a loss in the value of your investments and might miss out on any increases in value in the future if/when markets recover. If you make regular contributions to an investment, you might wish to consider continuing to make those contributions. You will be able to invest at lower prices than before the market downturn.
- If you need money in the short to medium term and have cash savings that could be used instead, such as cash ISAs or bank accounts, you might want to consider taking some money from those alternative sources, if that still leaves money in rainy day funds, rather than to realise losses from any investments you hold. The Government has announced a range of measures to offer support to people during the pandemic. You may wish to investigate whether you are eligible for this support before withdrawing money from your investments.
- We’ve compared our with-profits Order Insurance fund’s performance against that of the FTSE100 over the past 5 years and are pleased to be able to demonstrate that with-profits provides a much less volatile return which is shown by the graph below. Again, this provides investors with more confidence through a much less risky type of investment.
20 May 2020
As with most funds, the Society’s with profits Order Insurance Fund has suffered a fall in value due to the impact of COVID-19 on Global markets. The fund started the year underweight in risk assets, particularly equities, which helped to protect it when compared to other higher risk funds. The Society’s Investment Committee took the decision in March 2020 to de-risk the fund further, protecting it from future potential falls, by selling all equities and convertible bonds. The proceeds from those sales were invested into short term UK conventional Gilts. This reduced the fund’s volatility and protected the solvency position, but crystalised losses in the funds that had been sold. Markets have reacted positively to the global stimulus packages from Governments and central banks, however sentiment is that the recovery will be slow with most equity markets moving sideways for the past 5-6 weeks.
When markets fall like this, people may be tempted to withdraw their money to protect it. However, this can lead to the investment being sold at a loss that might have been avoided if the investment were held for the long-term. Our with profits plans are designed to be held for the long-term. If you cash-in when the market is down, you will likely suffer a loss in the value of your investments and might miss out on any increases in value in the future if/when markets recover. If you make regular contributions to an investment, you might wish to consider continuing to make those contributions. You will be able to invest at lower prices than before the market downturn.
If you need money in the short to medium term and have cash savings that could be used instead, such as cash ISAs or bank accounts, you might want to consider taking some money from those alternative sources, if that still leaves money in rainy day funds, rather than to realise losses from any investments you hold. The Government has announced a range of measures to offer support to people during the pandemic. You may wish to investigate whether you are eligible for this support before withdrawing money from your investments.
The current asset mix is:
As at April 2020
It should be noted that this asset allocation is a temporary position as we are monitoring the markets, in collaboration with our investment managers, to determine the appropriate time to re-risk the portfolio.
18 March 2020
Global Equity markets have continued to fall sharply, with short-lived occasional respite as markets rebound for a day on positive news. UK and other European markets are down over 30% year-to-date. US markets have also fallen, but to a lesser degree, with the DOW and S&P down 20-25%.
The OIF has been underweight in equities for several months, but the speed and severity of these falls have still impacted the fund. With consideration to current market volatility and uncertainty about the impact of the pandemic on the global economy, we have made the decision to de-risk the fund by selling all equity and convertible bond positions.
The fund still benefits from a diverse asset mix including Gilts, UK Treasury Bills and Corporate Bonds as well as Property and SME loan funds. These other assets have performed well during this difficult period and we believe will give protection to asset values at a time of global uncertainty.
The position will be monitored on an ongoing basis by our expert internal Investment Management team and by AXA Investment Managers with a decision to re-risk and invest back into equities at a time of more stability.
12 March 2020
In light of the recent turmoil in global markets, we felt it important to provide an update on the performance of our With Profits Fund – the Order Insurance Fund (OIF) since the start of the year.
Global Equity markets have fallen steeply, especially over the past 3 weeks, with UK and other European markets down 20% year-to-date. US markets have also fallen, but to a lesser degree, with the DOW and S&P down 13-15%. The OIF has a relatively low weighting of equities – currently 16%. The fund benefits from a diverse asset mix outside of Equities, including Gilts, Corporate Bonds and Convertible Bonds, as well as Property and SME loan funds. These other assets have performed well during this difficult period, with the fund value actually increasing by 1%.
As of 12 March 2020
Together with our investment managers, AXA IM, we continue to monitor the exposure to each asset class on an ongoing basis and will provide further updates in due course.
We hope this provides reassurance to you during this uncertain period.