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Last Thursday afternoon (21/05/2020) we had an update from Parit Jakhria of Prudential’s Treasury & Investment Office (TIO).  Parit is the Director for Long Term Investment Strategy at the TIO and his role is to lay out the long-term investment views and select assets for the multi asset fund at Prudential that includes PruFund Growth and With Profits funds.  The assets managed by Parit and the TIO value at circa £170 billion.

In an investment context, long term is 10 years plus.  I often hear about the TIO focusing on 15 years.  Short term is 0 to 5 years and medium term is 5 to 10 years.  One of the benefits of the scale of Prudential’s Multi Asset funds is that they can afford to invest with a long-term focus and not be concerned with liquidity issues.  Buying illiquid assets can help generate higher returns.

Parit commented that we have had 2 to 3 decades of globalisation and now this may decline slightly, and we could move more towards regional blocks, Europe (inc. UK), US, Asia etc.  This means that it’s more important to remain globally diversified.

Prudential’s TIO follow this process for investing:

  1. Capital markets assumptions
  2. Capital market modelling
  3. Portfolio construction
  4. Strategic asset allocation

This process is really useful in uncertain times.  The TIO look at a whole range of potential scenarios and on that basis, they are relatively positive.  The modelling is done on Prudential’s own unique inhouse system GeneSIS.

How are the TIO investing?

Their equity investment overall has increased with additional investment in the UK, Asia, Japan, Global Emerging Markets, China and a new investment in India.  Fixed Interest has seen a reduction overall.  They invested in African and Asian debt and now have a new Emerging Market debt allocation too.

Summary

I was awaiting written information from Prudential confirming their thoughts as outlined on Thursday afternoon, but they tend to be a little slower in issuing a written market briefing.

From my point of view the long-term asset allocation is positive and it’s good to see it when you have spent c 16 years looking at the strength and depth of their multi asset research that they are investing for growth over the long term.

Please note that this does not mean that the short-term volatility is over.  We may still experience further bouts of short-term volatility as we deal with the virus and try and get the economy working properly again.  Other news flow will impact on markets too, US/China, Brexit Trade Deals and US politics for example.

Please note that the above is based on my notes and interpretation of what Prudential said and can not be relied on.  Investments can (and obviously do) go up and down in value.

One of the key messages we hear repeatedly is to remain invested.  This is important.

Steve Speed

26/05/2020