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To our Prudential customers, as you may be aware, on Tuesday (17/03) Prudential announced and applied a downward Unit Price Adjustment (UPA) on some of their PruFund range of funds. We have just been listening to Prudential’s Treasury and Investment Office’s (T&IO) technical feedback and outlook regarding this recent action and I have summarised below some of the key outputs from this update:

  • Prudential have stated that some areas of the investment market have been ‘indiscriminately affected’ and they see buying opportunities in the market
  • Unusually high volatility – Prudential stated that we are not far from ‘the darkest hour, before dawn’. Effectively, this means that they believe that the high levels of market volatility we are currently seeing, are likely to continue for perhaps another couple of months before returning to more normal markets
  • There is nothing else quite like PruFund – please see below past performance of PruFund Growth vs Multi-Asset benchmarks over the last 5 years:

Past Performance over last 5 Years

Source: FE Analytics

We have also seen this data tested against some of the PruFund peers too and it was evident that there was nothing else quite like PruFunds.

  • PruFund recap: One of PruFund’s key characteristics is the ‘smoothing’ mechanism to their investment returns and this is reflected in changes in the value of the fund’s underlying unit holdings
    • One point to remember is that the PruFund is designed to lag a rapidly rising market and the same is true in a decreasing market. Please also bear in mind that the PruFund range of funds cannot defy gravity and in turbulent times (like we are experiencing now) they will also reduce fund values

 Summary

Prudential’s T&IO views are that high levels of volatility are expected for the next few months before we see more normal levels of investment volatility returning. Now is a buying opportunity ahead of the future market recovery. It is important to keep calm and carry on (stay invested).

Should you have any queries please, please do not hesitate to contact us.

 

Carl Mitchell – IFA/Paraplanner

19/03/2020