More DC Master Trust providers are cutting back on US equity exposure after tariff-driven market swings highlighted the risks of relying too heavily on the US, according to Isio’s latest quarterly review of 12 major schemes.
The “Liberation Day” tariff announcement at the start of Q2 triggered a sharp sell-off in global equities before a quick rebound once most tariffs were suspended. Portfolios ended up recovering well, but it reminded investors how exposed they are to tariff risks, a weaker dollar and the heavy focus on a small number of US tech giants.
US shares still take up far more space in global indices than their share of the world economy. According to Isio, that imbalance is making schemes look again at how much they rely on the US, though it stresses that long-term savers shouldn’t be pushed into reacting to short-term market swings.
Members with around 30 years until retirement usually have growth-focused funds, packed mostly with stocks. Most of these are from developed markets, though some providers are starting to add private equity, property, and infrastructure.
As retirement approaches, portfolios tend to shift, with stock exposure reduced and bonds, cash, and government securities playing a much larger role. Allocation strategies vary across providers, but the general approach moves toward broader diversification, spreading investments across bonds, credit, property, and alternative assets.
Isio found that every at-retirement strategy it reviewed delivered positive returns in Q2. The most diversified approach produced the strongest result, showing the value of spreading risk to secure outcomes for members.
Sukhdeep Randhawa, Director at Isio said: “This quarter has been a reminder of two key principles for DC investing: don’t panic in the growth phase and diversify appropriately in retirement. While tariff turmoil sparked short-term market shocks, the bigger picture is that providers are now reconsidering how much reliance they place on US equities over the long-term. For members, it is clear that strategies built for discipline and diversification remain best placed to deliver resilience and long-term value.”