EU Referendum: Capita Comment
Following the result of yesterday’s referendum, Bobby Riddaway, head of investment consulting, provides some immediate thoughts in relation to DB pension schemes.
Managing market volatility
- We have seen volatility overnight and today across financial markets with stock, currency, gilt and commodity prices all affected.
- The overall impact of these price movements for schemes will depend heavily on their asset allocation.
- A portfolio that is well-diversified may help to dampen volatility
- A portfolio with exposure to assets that closely match the scheme’s liabilities will also lessen the impact of market volatility
Keeping a close watch
- Pension schemes are of course longer-term investors and so short-term volatility can be seen as “noise”.
- So it’s important to avoid knee jerk reactions.
- However market volatility will impact on scheme funding levels (both positively and negatively)
- So it is important to maintain a close eye on the relative movements of both scheme assets and liabilities.
- Trustees may wish to consider whether BREXIT has an impact on the sponsoring employer, especially for those that have large export exposure to the EU.
In times of uncertainty, it is always prudent to take professional advice before making any significant investment decisions. Please be aware that this note is a general overview of current circumstances and does not constitute advice.
Please do not hesitate to contact your consultant, should you have any questions or if you would like to discuss this issue in more details.