Fiduciary managers are adopting a more cautious, defensive stance, cutting equity allocations and holding more cash, amid trade tensions, according to Isio.
Around 66 per cent of fiduciary managers feel these tariffs have made it harder to earn good returns from global stocks since they were introduced on Liberation Day. Due to this, around 33 per cent see investment grade credit as a better option for short-term gains.
Additionally, half of managers have adjusted their equity exposure following Liberation Day, and one-third have downgraded their equity outlook in response to the tariffs.
But 75 per cent of managers are sticking to their long-term investment plans and are not making quick changes. Instead, most prefer just adjusting their portfolios slightly to keep things balanced and let their investments handle the ups and downs of the market.
Isio’s research shows fiduciary managers were well-prepared before the tariffs came into force, with nearly all, around 91 per cent, being underweight in the big seven US tech stocks, reducing risk for schemes heavily invested in growth assets. According to Isio, liability hedging remains steady, with most managers hedging close to 100 per cent where affordable but they’re holding more cash as collateral to quickly take advantage of market opportunities.
Isio partner & head of fiduciary management oversight Paula Champion says: “Fiduciary managers have responded well to a shifting investment landscape, where global uncertainty and evolving market dynamics are prompting a more defensive stance. The reduction in equity exposure and growing interest in credit demonstrates a pragmatic response to near-term risks and opportunities.
“What stands out is the clear distinction between short-term tactical moves and long-term strategic discipline. While there may be opportunities to utilise market dislocation, lower equity pricing and widening credit spreads, investor confidence has been damaged, and we can expect volatility to continue. Fiduciary managers have proven they are adept at responding to volatility without losing sight of the long-term plan but, against the current backdrop, schemes will be seeking confidence that the plan is still the right one to meet their objectives.”
