Stock markets around the world have reacted negatively to the eurozone debt crisis, to the slowdown in the US and to the downgrading of the US credit rating by Standard & Poor’s.
The resulting volatility has led to the worst market falls since 2008. People are understandably concerned therefore about the effect that this could have on their investments and whether they can do anything to protect themselves.
There are many useful sources of information for ordinary investors about what is happening and its cause and effects. The BBC for example provides regular updates on its business pages: http://www.bbc.co.uk/news/business/
The aim of this page is to put these issues into context for Skandia International customers.
Please note that we do not provide specific advice about investments. We believe that your financial adviser is best placed to make sure that your investment decisions are based on your individual circumstances, aims and attitude to risk. We would therefore recommend that you discuss any response to the market uncertainty with your financial adviser.
How does all this turmoil affect Skandia customers?
Many of the assets your Skandia policy will hold are in the form of units in collective investment funds. Their value is worked out daily, based on the changing market value of their underlying mix of investments (eg stocks and shares, property and bank deposits).
The value of your units will typically go up and down over time, whatever the prevailing market conditions. But remember that any loss or gain is only ‘crystallised’ when you sell your units.
Skandia offer access to a wide range of funds and assets that you can switch between without surrendering your investment product. The funds available for you to choose from offer different levels of exposure to all the various asset classes (stocks and shares, bonds and government gilts and cash) and different geographical opportunities across the world’s economies. Depending on market conditions and your attitude to risk, your adviser will be able to recommend the right mix of investments for you and switch between funds as your attitude changes.
What should I do if I am worried about the current situation?
Investments are usually for the long term, so short-term volatility is not necessarily a reason to make drastic changes. If you are concerned about the impact of market conditions on the performance of your portfolio, you should contact your financial adviser in the first instance. They can assess the current risk profile of your fund holdings and if necessary adjust it to ensure that it matches your own attitude to risk. Please speak to your advisor about the tools and services available to help support this process.
What if I need my money now?
There are a number of options that you can consider in the current climate. Whatever your immediate aims, you should speak to your financial adviser to determine the best approach for your circumstances.
Is the picture really as bleak as the headlines suggest?
Looking forward, considerable uncertainty remains. It is unclear how much of a pick-up we will see in the global economy in the second half of the year, and the debt problems in the eurozone remain far from resolved.
On the other hand, corporate earnings reports continue to show strong growth despite the weak overall backdrop. In addition, recent market falls make stocks and shares even cheaper relative to bonds and cash. European stocks in particular look very cheap on a historic basis.
How is Skandia itself affected?
Skandia’s business model is almost exclusively built around providing investors with access to a wide range of funds from third party fund managers. As a result we do not rely heavily on borrowing or the use of derivatives like some more traditional insurance companies.
Skandia’s minimal exposure to with-profit and guaranteed products means we are very well placed to withstand the current market turmoil.
Skandia International remains profitable and its robust business model and tight control on costs is evidenced by its operating profit of £42 million for the first half of 2011.
Skandia's customers also benefit from the different investor protection schemes in the regulated areas in which we operate. Please see the investor protection section for for more information.
How is the Old Mutual Group affected?
Old Mutual is an international financial savings and wealth management group with a wide range of businesses. Internationally its main operations cover asset management, banking, life assurance and general insurance. It is the parent company of the Skandia Group.
Despite the falls in stock markets, the Old Mutual Group remains well capitalised and has sufficient liquidity to support regulatory and operational needs for the foreseeable future. The capital surplus of the Old Mutual Group remains strong at £2.0 billion as at 30 June 2011.
Each of the companies in the group has investments to meet the fund or savings objectives of customers. These will be affected by volatility in the markets depending on the asset type, sector, and any protection offered. Each of the companies in the group has sufficient capital and liquidity to support their regulatory and operational needs.