ClockWise: GMAP strategic asset allocation update

Royal London’s Global Multi Asset Portfolios (GMAPs) launched in 2016 as a range of multi asset funds available on range of platforms, consistent in their approach to the insured pension Governed Portfolios. The range has expanded over time to give broad coverage of the risk/return spectrum (chart 1).

Chart 1: Global Multi Asset Portfolios (GMAPs) and Governed Portfolios (GPs)

Source: RLAM as at 31 May 2026. Capital at risk. Performance shown net of fees, on a mid to mid basis as at 31 March 2026. *AUM as at 31 March 2026.

At Royal London Asset Management, we say there is no such thing as passive in multi asset. The GMAP funds are active on three levels:

1. A broadly diversified strategic asset mix seeks to maximise returns after inflation for a given level of risk.
2. Positions are adjusted tactically with a view to adding value as the global business cycle evolves.
3. Each asset class is implemented actively at the security level to maximise returns.

Our approach does not restrict the assets included, as is often the case, to company shares and investment grade bonds. We include commercial property as an alternative growth-driver to shares, offering inflation resilience and a degree of diversification, particularly during equity bear markets. We also include commodities as a real-time inflation hedge, often doing well when government bonds do badly – more important than ever in a world increasingly prone to price level shocks.

For some, strategic asset allocation is part of the product design stage, never to be repeated. For us, it is part of active management. We review this continually, making changes to incorporate new asset classes or to take shifts in relative valuation and emerging risk scenarios into account.

In our most recent review, we have made the following changes:

1. Increasing exposure to emerging market equities: to reflect improving fundamentals relative to developed markets at a valuations discount to global equities
2. Diversifying credit exposures: to reduce the aggregation of risk given tight high yield spreads
3. Adding to government bonds: to take advantage of high real yields, continuing a series of similar moves since the 2022 re-pricing of interest rates

Adding to emerging market equities

Macroeconomic management in emerging markets has improved over the years and relative equity market volatility has come down compared to previous decades (chart 2). Meanwhile, emerging markets offer good exposure to fast growing technology sectors at a valuation discount to global equities.

Taken together, we believe an increased allocation will result in better long-term risk-adjusted returns. We have funded the change from our relatively large strategic exposure to UK equities, though we continue to see the UK as an important diversifier given its valuation advantage and proven resilience to inflationary shocks.

We continue to see the UK as an important diversifier

Chart 2: Rolling 10-year volatility of developed market equities vs emerging market equities

Source: RLAM, Bloomberg as at 31 May 2026. Monthly returns of MSCI World index and MSCI Emerging Markets index.

Diversifying credit exposure

Credit spreads, particularly for US high yield bonds, remain tight by historical standards (chart 3). In this environment, we focus on diversification in order to preserve carry while improving resilience in a late-cycle environment where default risks could become more prevalent.

In our view, broadening the sources of credit return helps to reduce vulnerability to issuer‑specific and macro shocks. We favour areas with resilient income streams and low correlation to US high yield. This includes European asset backed securities and corporate debt in the emerging markets, where spreads are more attractive on a risk-adjusted basis.

We favour areas with resilient income streams and low correlation to US high yield.

Chart 3: US high yield credit spread over treasuries

Source: LSEG Datastream as at 31 May 2026.

Adding to government bond duration

The repricing in government bond markets in 2022 has lifted yields to more attractive levels from a long-term perspective (chart 4). While inflation uncertainty remains elevated, given geopolitical tensions in the Middle East, we believe that higher bond yields provide improved compensation for interest rate risk. A higher starting yield also increases the potential for government bonds to deliver positive returns in the event of an economic slowdown or disinflationary shock that prompts central banks to cut rates.

Chart 4: UK 10-year yield

Source: LSEG Datastream as at 31 May 2026.

Tactical positioning: A barbell approach

Starting with a broadly diversified strategic mix, we adjust exposures tactically on a daily basis to express shorter term views based on evolving macro fundamentals. Our base case is a muddle-through scenario in the middle east, where energy prices remain elevated or trade modestly higher, while pockets of the global equity market exposed to technology-related earnings upgrades continue to advance.

In our view, a barbell approach, overweight both commodities and technology stocks, has risk management attractions. Commodity gains would help to offset equity losses in a prolonged energy supply disruption. Similarly, tech exposure should do well in a peace scenario, offsetting some losses on commodities.

Chart 5: Current positioning: Overweight technology plays and commodities

Source: RLAM. Tactical positions as at 31 May 2026.

For professional investors only.  This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. Reference to any security is for information purposes only and should not be considered a recommendation to buy or sell.

The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice. Forward looking statements are subject to certain risks and uncertainties. Actual outcomes may be materially different from those expressed or implied.

Investment risks: RL GMAP fund range

Investment risk: The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested.

Credit risk: Should the issuer of a fixed income security become unable to make income or capital payments, or their rating is downgraded, the value of that investment will fall. Fixed income securities that have a lower credit rating can pay a higher level of income and have an increased risk of default.

Derivative risk: Derivatives are highly sensitive to changes in the value of the underlying asset which can increase both fund losses and gains. The impact to the fund can be greater where they are used in an extensive or complex manner, where the fund could lose significantly more than the amount invested in derivatives.

EPM Techniques: The fund may engage in EPM techniques including holdings of derivative instruments. Whilst intended to reduce risk, the use of these instruments may expose the fund to increased price volatility.

Exchange Rate risk: Changes in currency exchange rates may affect the value of your investment.

Interest Rate risk: Fixed interest securities are particularly affected by trends in interest rates and inflation. If interest rates go up, the value of capital may fall, and vice versa. Inflation will also decrease the real value of capital.

Emerging Markets risk: Investing in emerging markets may provide the potential for greater rewards but carries greater risk due to the possibility of high volatility, low liquidity, currency fluctuations, the adverse effect of social, political and economic instability, weak supervisory structures and accounting standards.

Counterparty risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the fund to financial loss.

Fund investing in Funds risk: The fund is valued using the latest available price for each underlying investment, however it may not fully reflect changing stock market conditions and the fund may apply a ‘fair value price’ to all or part of its portfolio to mitigate this risk. In extreme liquidity conditions, redemptions in the underlying investments, and/or the fund itself, may be deferred or suspended.

Liquidity and Dealing risk: The fund invests indirectly in assets that may at times be difficult to value, harder to sell, or sell at a fair price. This means that there may be occasions when you experience a delay in being able to deal in the fund, or receive less than may otherwise be expected when selling your investment.