What’s going on in the markets?

Piers Hillier, Chief Investment Officer at Royal London, explains how market movements affected Royal London Asset Management's performance in 2017, and why it was a good year for members' investments

PIERS HILLIER: Hello, I’m Piers Hillier. I’m the Chief Investment Officer at Royal London Asset Management. I’m here to talk to you about how we’ve performed for you over the last 12 months in terms of your investment.

CAPTION: Royal London Asset management (RLAM) plays an important role in investing your money.

PIERS: The work of RLAM is really important because we run the majority and invest the majority of the assets for you as members. We also have the ability to encourage third parties to invest with you, and the benefit of that is that the revenue we generate from those can come back to you as part of a member dividend.

CAPTION: It’s been a really great year for the business.

PIERS: 2017 has been a great year of progress for RLAM. We’ve launched a number of new funds in global equities, emerging markets, property and multi-asset credit. But we’ve also seen our assets grow substantially as well.

CAPTION: We’ve seen economic expansion across the world.

PIERS: Somewhat surprisingly, after Brexit in 2016, 2017 probably hasn’t been as volatile. I think we’ve been pleasantly surprised by economic expansion broadly across the world, and that was good news for corporate earnings and the outlook for returns from equities. It provided more of a challenge in the fixed income space, particularly for government bonds where central banks started to debate whether they needed to raise interest rates, and that’s really one of the themes and challenges we’ll see in 2018.

CAPTION: This growth has been good for your investments.

PIERS: Market movements over 2017 in terms of the outcome for members actually have been pretty positive. Equity investments showed good returns last year across the world, and by adding in merge market capabilities this year we’ve improved returns for investors. Somewhat surprisingly, property was a good returning asset class for the UK last year, despite the batch job of Brexit, because of strong demand from overseas. Fixed income struggled a little bit more because of that potential interest rates rise environment, but actually our credit, which is our core strength, has done really well in 2017. So overall the outcome for members has been very good.

CAPTION: We’ve been diversifying the range of opportunities we provide for you.

PIERS: One of the things we’ve been doing over the last 3 years has been investing to diversify the range of opportunities that we provide, and so by thinking about your needs as members and how we diversify the proposition hopefully we meet the needs of third parties, and if we can encourage them to invest, our ability to provide better outcomes for you is clear.

CAPTION: We’ve continued our commitment to social responsibility.

PIERS: Socially responsible investment has been an important part of what we do at RLAM for a long time. So when we look at corporate investments, do they actually provide better outcomes, and the real driver of that has been in what we call ESG – Environmental Social and Governance engagement with businesses. We have a very strong and stable investment team which came to us as part of the acquisition of the Co-op investment business, and we’ve taken some of that real insight and understanding from our sustainable team and we’re starting to share that more broadly across RLAM, and we’d expect to see more about that for you across the coming year.

CAPTION: And good corporate governance remains at the heart of what we do.

PIERS: We think corporate governance is really important in terms of how we provide better outcomes for you as members. So the same way you as members challenge us in terms of how we manage Royal London, well that’s what we do on your behalf to the companies that we invest in, to make sure they’re doing the right things with the investment that we give them to generate economic returns, and that’s partly in terms of the governance of the business on a day to day basis, but also how does that business interact with a broader environment, both socially as well as environmentally. I think for us, it’s the whole package that’s important and not just the governance piece.

CAPTION: This year might be more challenging, but your investments are in good hands.

PIERS: So the forecast for 2018 is probably more challenging than it’s been for a while, and that’s partly because while we do have better economic growth than anticipated, we also have a backdrop of potentially rising in interest rates and so that provides more of a challenge for us as managers. We need to think carefully about how we allocate your money and which asset classes we choose to invest.

CAPTION: If you’re unsure about your pension or investments, an impartial financial adviser can provide guidance based on your requirements.

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