U.K. corporate defined benefit funds saw a £35 billion ($44.1 billion) improvement in deficits in the week after the U.S. presidential election, which is helping unwind damage done by the U.K.'s vote to leave the European Union, Hymans Robertson said.
The consultant added that the data from its 3DAnalytics platform show how volatile deficits can be. U.K. DB plan deficits now stand at £825 billion, said the consultant, down more than £200 billion from the all-time high of £1.03 trillion in August. The deficit reduction was attributed to rising bond yields, in part due to revived inflation expectations in response to policy pledges made by President-elect Donald J. Trump.
“Following a significant rally earlier this year, we've been seeing positions in fixed-income assets unwind due to emerging signals from the Federal Reserve of high economic growth and interest rate rises which have been amplified significantly by what the market has been calling the "Trumpflation' trade,” said Calum Cooper, partner at Hymans Robertson, in a statement accompanying the data. “This has seen increasing allocations to growth-focused assets that are likely to benefit from the expected policies of the president-elect, such as spending on infrastructure, tax cuts and trade protectionist policies.”
Mr. Cooper said pension funds should not be knocked off course by the volatility of deficits and should retain a long-term focus “through short-term political fog and uncertainty.”