March 2025 Investment Summary

A negative month for the Passive range with returns ranging from -1.58% for Passive 5 to -1.12% for Passive 1.
*P Acc share class with data sourced from FE analytics as at 31 March 2025.

March 2025 was a tougher month for the portfolios in absolute terms.

Most major equity markets fell, with Emerging Markets outperforming and supported by a positive return from the Hang Seng, as Chinese advances in AI continued to be viewed optimistically by investors. The FTSE 100 dropped 2.0%, after pessimistic data releases for GDP growth and retail sales. The Stoxx 600 reduced 3.7% influenced by new US trade tariffs, but healthcare and consumer staple stocks held up better. The S&P 500 decreased 5.6% and Nasdaq fell 8.1%. Sector performance saw only utilities rise with the largest falls seen in healthcare and technology. Market uncertainty around AI-heavy technology names and tariff-driven inflation impacts saw investors continue to rotate out of US equities into cheaper valued European and Chinese equities.

Tariff fears maintained the risk off US sentiment, with 25% tariffs on Mexican/ Canadian imports taking effect at the start of March. 25% tariffs were also imposed on all steel and aluminium imports while an additional 10% tariff on Chinese goods has fuelled investor concerns of a worldwide economic slowdown and global trade war. The US market’s heavy tech concentration remained under pressure, with question marks over the sustainability of large cap technology company earnings and rich valuations. 10 year US Government bond yields were range-bound through the month, ending broadly unchanged at 4.21%, with lows of 4.15% and highs of 4.36%. The Fed held interest rates in March, as officials repeated they did “not need to be in a hurry” to change rates given market uncertainty, but signalled 2 rate cuts for the rest of the year in their expectations.

March’s US labour market data showed payrolls increased by 228,000, surpassing forecasts, in a sign of resilience despite the Trump administration’s sweeping cuts to the governments workforce. Unemployment did increase to 4.2% from 4.1%; its highest level since November, but remains at benign levels. US consumer confidence reached its lowest level since January 2021. Households are increasingly uncomfortable about a growing list of negative economic data and trade tariff implications.

Middle East tensions remain. The Israeli military striking Beirut in Lebanon for the first time since the November ceasefire agreement, in retaliation for rockets launched at Israel and remain at five ‘strategic’ positions. The conflicts impact remains limited on the global economy, Brent Crude remained range-bound in the mid $70/barrel.

The economic environment has been resilient so far but the expectation is that tariff imposition and retaliatory measures will generate global inflationary pressures and dampen global growth. We expect markets to remain volatile with further announcements to come as countries respond or seek to negotiate. The multi-asset portfolios are globally diversified across equities, fixed income and other assets. Within equities regional differentiation may continue, and investing across different regions will help manage risks.

WS Prudential Risk Managed Passive - Tactical asset allocation activity

We maintain an equity overweight of +2.0%, made up of a diversified basket of US, UK Asia and GEM, due to a continued preference for equities and a positive view on the broad Asia region. We increased our allocation to US government bonds this week and reduced our allocation to US corporate bonds. We also hold small overweight positions in US Treasuries, UK Gilts and Real Estate (REITs).

Emerging Markets

The fund invests in emerging markets. Generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could either increase or decrease. These investments therefore carry more risk.

High Yield Bonds

The fund invests in high yield bonds. High yield bonds carry a greater risk of default than investment grade bonds, and economic conditions and interest rate movements will have a greater effect on their price. Income levels may not be achieved and the income provided may vary.

Value of Investments

The value of investments, and any income can fall, as well as rise, so you could get back less than you invested. Neither capital nor income is guaranteed.

Investments Long Term

Investments should be regarded as long term and are not suitable for money which may be needed in the short term, you should always have a sufficient cash reserve.

Property

The fund invests in Property funds, property shares or direct property. In particular the following risks will apply:- The property market is illiquid and this can, in exceptional circumstances, lead to times in which clients are unable to dispose of part or all of their holding. Property valuations are made by independent agents but are ultimately subjective and a matter of judgement. Property transaction costs are high (typically around 7% due to legal costs, valuations and stamp duty)

Performance Charges

This fund makes charges that depend on the fund's performance. For full details please refer to the fund prospectus.

Derivative Exposure

The fund invests in derivatives as part of its investment strategy, over and above their use for Efficient Portfolio Management (EPM). Investors should be aware that the use of these instruments can, under certain circumstances, increase the volatility and risk profile of the Fund beyond that expected of a fund that only invests in equities. The fund may also be exposed to the risk that the company issuing the derivative may not honour their obligations which in turn could lead to losses arising.

Umbrella Liabilities

If the liabilities of one fund were to exceed its assets, the other funds within the scheme might have to transfer across money to cover the liabilities.

New Fund

The charges and expenses may make up a higher proportion of a newly launched fund than initially estimated.

Solvency of Bond Issuers

If the fund you choose invests in bonds there is a risk that the issuer may default, resulting in a loss to the portfolio.

Returns Are Not Guaranteed

What you receive when you sell your investment is not guaranteed; it depends on how your investments perform.

Inflation

Inflation will reduce the real value of your investments in future.

Taxation and Tax Relief

Levels of taxation and tax relief are subject to change.