The latest Willis Towers Watson (WTW) 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 material increase in the expected returns on all asset classes considered in the review. Long-term volatility was broadly unchanged across all the asset classes.
The projected long-term returns for UK Fixed Interest increased to 1.76% p.a. from 1.08% p.a. The expected returns for this asset class are influenced by current long bond yields, which increased during the quarter.
Over the quarter, the expected long-term returns for UK cash increased to 1.62% p.a. from 1.23% p.a. reflecting expectations of a faster pace of UK interest rate increases. The projected UK Cash returns forecast has a tendency to influence projected returns on other assets such as equities and property.
The expected long-term returns for UK Equity increased to 6.70% p.a. from 6.29% p.a. and the projected long-term returns for International Equity increased to 8.12% p.a. from 7.62% p.a. reflecting an increase in expected US Cash returns.
The projected expected returns for UK Commercial Property increased to 4.45% p.a. from 4.06% p.a. reflecting the increase in forecast UK cash returns.
The effect has been only minor changes in the allocations between the asset classes, with the most notable shift being a small increase in the allocation to International Equity relative to UK Equity.
View the standard asset allocations as at 20 March 2017