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June 2015 Update - Review to March 2015

Asset allocation quarterly review

Following the latest Towers Watson review of the economic assumptions underlying our platform optimised portfolios there will be no asset allocation changes this quarter. This review ran to the end of Q1 2015.

Platform asset allocations

All major markets and asset classes enjoyed positive returns for the first quarter of 2015, with the exception of commodities which continued to suffer from a weakening oil price and soft metal pricing. There were a number of stimuluses’ across markets including Japan and European Quantitative Easing plans stimulating both equity and fixed interest markets. Low inflation figures, fuelled by falling energy costs, postponed expectations of rate rises and fed through into improving economic activity in areas such as the euro zone. Fixed interest markets have proved very volatile, rising in value on low inflation data and central bank action to stimulate economies by buying in debt, but falling back when investor focus turns to the low historic yields, or data suggesting inflation may pick up later in the year.

Given the above positive gains in all major markets in early 2015, the Towers Watson forecast expectations for future returns have in general decreased over the quarter, with risk measurement (volatility) either static or marginally declining.

The outcome from the model, has been at many risk levels, no change in asset allocation or very minor alterations, with the exception of cash and Fixed interest assets.  As stated last quarter over the last year there has been a steady reduction in fixed interest yields and to a lesser extent, a reduction in long-term projected cash yields. This has led to a gradual, but sustained movement away from UK fixed interest holdings in favour of increased cash holdings across the majority of the risk profiles.

With the continued fluctuations in fixed interest markets and considering the cost to clients of switching the most appropriate action is to maintain the current fixed interest allocations. Therefore the overall asset allocations this quarter remains unchanged.

View the current platform allocations (as at 18 June 2015).

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