Liquid strategies include public equity, fixed income and absolute return strategies.
Our public equity exposure is designed to generate returns, provide diversification and act as a potential source of liquidity, should it be required. Public equity was the top performing asset class in 2017, benefiting from economic growth momentum and an abundance of liquidity.
Overall, the public equity portfolio generated a net return of 22.9% in 2017.
Fixed income serves as the main source of liquidity and the primary liability-hedging asset. In addition, fixed income provides diversification benefits, especially in a deflationary environment.
Overall, the fixed income portfolio generated a net return of 4.6% in 2017.
Absolute return strategies
Absolute return strategies allow us to access a wide variety of risk premia in a diversified manner, consistent with our goals of building a more resilient portfolio. These strategies aim to produce consistent returns across market regimes, whether they are rising, flat or falling. These strategies are less constrained than those used by traditional managers who generally employ a “buy and hold” strategy.
Our absolute return strategies portfolio is transitioning to better align with our MDI objectives. In 2017, we funded key strategic partners, while consolidating the current portfolio of managers.
Overall, the absolute return strategies portfolio generated a net return of 5.0% in 2017.