Defined contribution (DC) master trusts have cut exposures to US equities this year as the effects of trade tariffs have reverberated through stock markets.
Research by consultancy group Isio has found that the recent market volatility fuelled by the levying of tariffs on imports to the US has prompted several master trusts to review their allocations to US equities.
The S&P 500 index is up 10.8% in dollar terms so far this year, despite having plunged in early April after the US government introduced import levies on most countries.
For growth phase default portfolios, Isio said several providers had reduced their allocations to US equities in the second quarter of 2025. The consultancy said this reflected concerns about the effects of tariffs as well as the potential weakness of the US dollar and the dominance of a small number of US technology companies in global indices.
“This quarter has been a reminder of two key principles for DC investing: don’t panic in the growth phase and diversify appropriately in retirement.”
Sukhdeep Randhawa, Isio
“While the US continues to dominate global indices, its weighting is significantly higher than its share of world GDP, prompting a broader reassessment of strategic equity exposures,” Isio stated.
It added: “There is value in the discussions emerging this year around growing scrutiny of US exceptionalism and its implications for strategic equity allocations over longer timeframes.”
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Sukhdeep Randhawa, director at Isio, said: “This quarter has been a reminder of two key principles for DC investing: don’t panic in the growth phase and diversify appropriately in retirement.
“While tariff turmoil sparked short-term market shocks, the bigger picture is that providers are now reconsidering how much reliance they place on US equities over the long term. For members, it is clear that strategies built for discipline and diversification remain best placed to deliver resilience and long-term value.”
Despite the volatility, growth and retirement phase strategies delivered positive returns in the second quarter of 2025, Isio found.
“Despite material differences in asset allocation, performance was clustered within a narrow range, underlining the resilience of diversified portfolios in volatile conditions,” the consultancy said. “The most diversified at-retirement strategy recorded the strongest performance, demonstrating the value of spreading risk appropriately to protect members’ outcomes.”
