U.K. OCIOs make overall gains in 2020 by sticking to strategies

Outsourced CIOs in the U.K. made no significant changes to their investment strategies following the onset of the COVID-19 pandemic, but those with more risk in portfolios took huge hits in the first quarter of 2020.

Analysis of 22 growth portfolios run by 18 OCIOs in 2020 showed that those managers with the highest returns in 2019 — due to high equity and market exposures — in general suffered some "hair-raising losses" in the first three months of last year, XPS Pensions Consulting said.

Its latest FM Watch report, outlining the findings of the analysis, said those managers with more risky portfolios lost up to 14.5% in the first quarter of 2020. However, that strategy then paid off as markets rebounded and recorded record high gains.

Only two of the 18 OCIOs made investment gains in the first quarter, of 1.8% and 0.3%. OCIOs were not identified in relation to their returns.

All of the OCIOs analysed made gains in 2020 overall, with growth portfolio returns of 2% to 16.8%.

XPS Pensions' previous report covering 2019 analyzed returns for 16 OCIOs, finding full-year performance of 8.3% to 20.5%.

"Fiduciary managers have weathered the storm of COVID-19, albeit with large variations in fortunes," Andre Kerr, head of fiduciary management oversight, said in a news release accompanying the report. "The fact that (they) stuck to their guns and trusted their strategies stood them in good stead to recover from the shock to market confidence we saw in Q1."

However, a more prolonged downturn may have resulted in a different outcome, Mr. Kerr said, "and some would have faced deep losses by sticking to their original strategy."