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14 May, 2020

 

What’s happening?

  • Poor economic data continues
  • UK Q1 GDP sends warning for Q2

Focus on managing funding level volatility

  • Build better portfolios
  • Capture funding gains
  • Secure the funding position

What’s next?

  • Some countries and US states are beginning to open economies back up

What’s happening?

In developed markets, poor economic data continues:

  • UK GDP growth announced as slumping 2% in Q1[1]
    • Quarter contained one week of total lockdown & economic shutdown
    • Drop around the same level as Q4 2008
       
  • We expect Q2 growth figure to be several times lower
    • April and some of May saw almost total economic shutdown

Focus on managing funding level volatility

With volatility back in public markets, it is a good time to assess how to take control of volatility in your funding level. But before we start: Ensure you have a clear plan

  • You cannot manage your funding volatility until
    • You know your ultimate destination
    • You know the risk you can and need to take to get there

Now we can set out a plan using three clear steps…

  • Build better portfolios
    • Lock in the funding level you already have
    • Don’t miss the opportunity to capture further growth
  • Improve, by capturing funding gains
    • Balance assets that offer growth and protection
    • Only run the return and risk you need, by reassessing progress made
    • Implement funding milestones and automatic de-risking triggers
  • Secure your funding position
    • Don’t lose all your hard work
    • Protect, rather than seek growth
    • If you still need to take risk, reassess your destination

To most efficiently achieve this process – and ultimate goal – trustees need to be alert to changes in funding levels, and not just reacting to lagging market, scheme and economic data at quarterly meetings.

Consider how best to implement your thoughtful planning with a governance upgrade.

 

What’s next?

Some countries and US states are beginning to open economies back up, but a significant economic recovery will only take place when the public wants to get back to normal life rather than just being allowed to do so.

 

[1] Bloomberg, May 12, 2020


 

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