The latest Towers Watson review of the economic assumptions underlying the optimised portfolios available through our platform has resulted in a revision to asset allocations this quarter.
Over the quarter there was a modest increase in the expected returns on UK cash, UK fixed interest, UK Equity and Property, a small decrease in the expected return on International Fixed Interest and no change for International Equities. Long term volatility was broadly unchanged across all the asset classes.
Long term expected returns for UK fixed interest reduced to 1.57% p.a. from 1.49% p.a. The expected returns for these asset classes are influenced by current UK long bond yields, which increased during the quarter.
The projected cash return forecasts have a tendency to influence projected returns on other assets such as equities and property. Over the quarter the expected long-term returns for UK cash increased to 1.54% p.a. from 1.42% p.a.
The projected expected return for UK equity increased to 6.62% p.a. from 6.49% p.a. The projected expected returns for UK commercial property also increased to 4.38% p.a. , reflecting the increase in forecast UK cash returns. Projected returns from International Equity were unchanged at 8.17% p.a. reflecting decreases in expected US cash returns, being offset by increase in those from the Eurozone.
Over the quarter most of the optimised portfolios showed little change although generally although , for some , we saw small moves from International Equity to UK Equity and from International Fixed Interest to UK Fixed Interest.
View the standard asset allocations as at September 2017