An index is a set of calculations that can be used to measure or reflect the performance of a group of companies connected by a specific theme or grouping. The skill in investment management is to design a suitable portfolio which will meet an individual investor’s needs. Used properly, indices can provide a useful perspective on the world of stocks and shares and on the performance of your portfolio.
The Personal Investment Management & Financial Advice Association PIMFA provides the methodology for two index series (The MSCI PIMFA Private Investor Index Series and The MSCI PIMFA Equity Risk Index Series), both of which are designed to represent their respective weightings, show returns of selected multi-asset-class strategies, and are used as benchmarks to compare the performance of portfolios.
The indices include weightings of equities, bonds, real estate, "cash" and “alternative” investments in proportions that reflect the longer-term objectives for each strategy.
The weightings are determined by the PIMFA Private Indices Committee, which is responsible for regularly surveying PIMFA members and reflecting in each index the industry’s collective view for each strategic objective.
The index weightings are updated when the Committee determines that strategy changes across the industry warrant a review.
The result is a suite of indices that can be used as benchmarks to compare the performance of portfolios that have investment objectives similar to the strategy represented in the respective index.
Each MSCI portfolio contains different proportions of UK equities, overseas equities, bonds, cash, and alternatives to represent the aims of UK wealth managers. The changes in their values are represented by the movements of the related indices.
Income – Represents the investment strategy of clients seeking an income flow from the investment.
Balanced – Represents the investment strategy of clients seeking a balanced approach between income and capital growth in their portfolio.
Growth – Represents the investment strategy of clients seeking capital growth from their portfolio.
Weightings of allocations are determined by the PIMFA Private Indices Committee, which is responsible for ensuring the current asset allocations reflect the industry’s collective view for each strategic objective in each index. It also discusses the appropriateness of current underlying indices, and new potential asset classes and examines reports from the working group.
Index weightings are updated when the Committee determines that strategy changes across the industry warrant a review. This can (but may not) occur up to four times a year.
The MSCI PIMFA benchmark is our starting point for asset allocation. The Core portfolio can only differ by a set range while the Tactical portfolio is free to change as much as we judge appropriate. We always take the opinions and decisions of the PIMFA Private Indices Committee into account.
We measure our performance against the benchmarks. We would expect to outperform them when markets are falling as investing predominantly pension money means we adopt a slightly more cautious approach. Conversely, we expect to underperform when the market is growing. There is no guarantee in either case that this will always happen.
The articles are for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.
No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.