As you would expect volatility has been particularly high recently as we try to transition back to normal with our economies, with Central Banks and Governments policy changes, particularly in the UK and the US. This volatility has been increased further by the Russia/Ukraine conflict as you will have heard in the news. Thankfully most portfolios don’t have much of an exposure to Russia.
Over the last few days we have started to receive notifications of 10% or more drops in portfolio values for clients in the higher risk ‘unsmoothed’ funds and portfolios. This is to be expected.
PruFund Growth is a very well diversified multi asset fund with ‘smoothing’ and it lags both a falling and a rising market but it is not immune to volatility. Prudential updated us on PruFund late on Friday 25/02/2022. You would expect some impact on your PruFund Growth investments now – however the great news is as follows:
- No Unit Price Adjustment downwards on PruFund Growth
- The Expected Growth Rate (EGR) increases from 5.7% to 5.9% gross per annum
- A technical fund surplus has been declared following an actuarial assessment and an increase in value of 1.25% will be applied to PruFund Growth today (Monday 28/02/2022)
The above increase in PruFund Growth EGR rates is applicable to Pru pension products and ISAs. Other products differ.
This EGR increase is really good news given the current challenges and backdrop of markets. Other ‘smoothed’ Pru funds did not fare as well and in particular the new PruFund Planet ESG range of funds had some downwards Unit Price Adjustments applied. As we have discussed, in my view this range of funds are too new to invest in for the majority of our clients.
However, the global impact of the conflict in Ukraine with the Russian invasion should not be under estimated. The whole world will feel the impact of this invasion and the necessary sanctions economically.
Markets are disconcertingly dispassionate about geopolitical events such as this invasion of Ukraine, and their focus is more likely to return to the actions of Central Banks and Governments.
My thoughts are with the Ukrainians, brave people fighting a courageous battle. I’m sure the majority of Russians, even their armed forces, don’t want to be in a conflict either. Hopefully there will be a resolution soon.
Steve Speed
28/02/2022