Simeon Willis believes Trump's victory could be a greater concern to UK pension scheme investors than Brexit.
Commenting on the outcome of the US Presidential election, Simeon Willis, Head of Investment Strategy, KPMG UK said:
“Trump’s victory in the US Presidential election has the potential to cause far greater concern to UK pension scheme investors than the UK’s decision to leave the European Union.
“KPMG previously identified that a Trump victory could lead to a 10 percent funding decline for a typical scheme; early market reactions seem to support this direction of travel. Sinking global asset values will hit schemes’ assets. This is different to what we saw after Brexit. In the aftermath of the leave vote, liabilities spiked due to falling bond yields but many schemes had protected themselves by using interest rate and inflation hedging. This hedging does not reduce expected returns. On the asset side it is very difficult to protect against falling asset values without forgoing expected returns. You can’t have the prospect of asset outperformance, whilst simultaneously protecting against underperformance. This means all schemes will be affected by turbulent asset values.
“As we enter a new era of political and economic ambiguity, our general view is that schemes will find it challenging to diversify the new levels of political risk and should cautiously pursue their long term objectives whilst seeking advice on their specific scheme requirements.”
For further information please contact:
Christina Bridge, KPMG Corporate Communications
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.