We’ve updated the strategic asset allocation (SAA) for the Future Advantage range as part of our focus on outcomes for your clients.

These updates have been through our annual governance review process, with SAA set inhouse by our Policyholder Investment Office (PIO).

We’re responding to shifting medium and long-term prospects across key asset classes, managing our approach to risk through adjustments to SAA.

An overview of our changes:

These asset allocation decisions were made in Q3 2025, and since then we have dynamically shifted the portfolios towards their new target state. This long-term, gradual approach allows us to manage the impact of market volatility as we buy and sell assets, helping protect financial outcomes for your clients.

We have reduced exposure to North America equity and have taken an overweight position in Japan equity, overall maintaining the same equity allocation and approach to risk and volatility across the Future Advantage range.

During our SAA review in Q3 2025, we observed that US stock market valuations appeared high compared to historical levels. Therefore, we were aware there was a potential risk of increased volatility that may go unrewarded. As a result, we adjusted our asset allocations to place less emphasis on North America equity in favour of other regions with more attractive prospects. In contrast to North America, even after a strong start to the year, we believe UK, Europe and Japan remain undervalued relative to their fundamentals.

Other changes to the portfolios include:

  • Introduced new asset classes - UK government sovereign and sub-sovereign bonds to further diversify
  • Adjusted allocation to emerging market debt - a mix of increases and decreases to control different aspects of the risk profile for each fund
  • Slight increase in overall allocation to bonds - in Future Advantage 2 to 4
  • Decreased cash and money market allocation - in all but Future Advantage 1
  • Maintained the same approach to sustainability - which aims to deliver broad market returns through our equity and corporate bond exposures.

We believe amending our design will better position the Future Advantage portfolios to weather fluctuations and deliver for clients over the longer term.

About our strategic asset allocation (SAA) approach

  • The SAAs for the Future Advantage range are developed by the Investment Strategy team within our inhouse Policyholder Investment Office. The team uses 10-year forward-looking economic assumptions, portfolio optimisation tools, and internal governance processes to determine long-term asset class weights for each portfolio. To enhance the SAA process, PIO have partnered with a leading provider of applied mathematics and data optimisation, Ortec Finance, who have a history stretching back to 1981.
  • Our strategy team researches and analyses our chosen asset markets to consider the themes and drivers of returns and risk in those markets. The team then reviews our results, comparing them with other major Capital Market Assumption (CMA) providers such as BlackRock, JP Morgan, Schroders, GSAM, as well as those provided by the Ortec tool itself. This comparison highlights any outliers or areas requiring deeper investigation. Once this journey is complete, the proposed CMAs are taken to the Capital Market Assumptions Forum – a governance group designed to challenge, refine and ultimately endorse the final set of assumptions.
  • When CMAs have been agreed, they are loaded into Ortec’s GLASS optimisation platform, where they become the raw material for constructing long-term portfolios. The goal is to find the portfolio that is investable, resilient and aligned with customer needs.
  • Each year, the SAA models are refreshed. The team revisits the 10-year economic outlook, tests whether the world has shifted in ways that warrant change and rebuilds the ‘ideal’ SAA for each portfolio. This annual rhythm ensures the SAA remains forward-looking.
  • The Investment Strategy team retains the flexibility to adjust SAAs on an ad hoc basis, outside of the normal annual cycle, if it believes that it is in the best interests of clients. However, the portfolios are not subject to tactical asset allocation, as it is our belief that it does not add value. Our approach to asset allocation is genuinely long-term in nature.

Money invested is at risk.

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