MAY 2012 Ready for the big switch
Aviva Investors is positioned to take advantage of the retail distribution review changes, and says it has a broad range of options for investors prepared to explore the multi-asset route.
JEREMY LEADSOM Sales director, Aviva Investors UK Retail
The retail distribution review (RDR) is likely to bring about a shift in the prior- ities of investors and their advisers. It may also push more investors to risk-tar- geted rather than return-targeted solu- tions. Aviva Investors believes that subtle shifts in its fund range leave it with a broad range of options ahead of the regulatory changes.
Multi-asset investing is increasingly seen as offering a solution both to the troubled economic climate and the new regulatory changes. Multi-asset man- agers call upon a broad range of asset classes allowing them to shift their port- folios to adapt to changes in the market environment, important at a time when asset correlations are changing. Designed with RDR in mind, Aviva Investors Multi-asset Funds are risk tar- geted rather than return targeted, which means they can be more easily matched to the risk profile of a client.
Aviva Investors has a proven multi- asset capability running over £70 billion (as at 31 December 2011) in multi-asset strategies and has one of the biggest teams in the market.
Jeremy Leadsom, sales director for Aviva Investors UK Retail says: “We have been running multi-asset funds for a very long time. In November 2010, we launched three into the market to test the response. We found that there were an increasing number of FSA fines for those companies that had not matched their client’s risk profile to product risk and there was a real demand for risk- targeted products.”
Aviva Investors designed its multi- asset range with this in mind, ensuring that its funds matched portfolio risk to a client’s risk tolerance as uncovered by the adviser’s fact find. The group launched two additional funds, in Feb- ruary 2012, completing the multi-asset I to V range. Leadsom says: “They are globally unconstrained, with a flexible investment mandate. Each fund aims to remain within an upper and lower band of volatility on a rolling three-year basis, with each fund taking off where the last has left off. Typically, the lower-risk funds will have a high proportion
invested in bonds, the higher-risk funds in equity.”
In order to ensure the funds have a globally unconstrained mandate they are in the IMA Specialist sector rather than the IMA Mixed Investment sectors. However, Leadsom says, the funds are not designed to target peer group perfor- mance but to help advisers assess risk and match it to the risk profile of each of their clients. Equally, many of the group’s peers are now taking a similar approach so fund categorisation has less impor- tance. The funds are actively managed by Justin Onuekwusi, a fund manager on the dedicated Multi-asset Fund Team at Aviva Investors. He is also able to draw on macro economic input and asset allocation research from Aviva Investors’ broader team of specialists. The funds focus on long-term asset allo- cation and adjust these positions only if they do not make sense in the short term. Asset allocation in the funds is dynamically managed and is imple- mented using a blend of active and pas- sive investments. Leadsom says: “In our allocation to US equities we combine active and passive investments. One of the themes we currently like in the US is equity income so we hold both an actively managed dividend paying strat- egy and a passively managed large cap strategy. We may use an in-house man- ager, but we are not forced to do so. We have an in-house team that does that research for us.”
The multi-asset range has found res- onance at all levels – a number of restric - ted panels are looking to use the service and it has found similar popularity in the wealth management and institutional space. Leadsom believes it also offers a natural solution for advisers with clients that do not have significant wealth, but with whom they may want to continue a relationship. This may be clients who are likely to inherit wealth or where family members are important clients. Elsewhere, Aviva Investors’ pre-RDR focus has been on income-generating products, recognising that this is an area of vital importance for investors as inter- est rates remain low. The UK Equity Income fund, managed by Chris Mur- phy, has just hit his three-year anniver- sary on the fund and is first quartile over that period. It is a competitive sector, but Leadsom says that the fund is generating some traction among advisers. The equity income theme is also being explored by the group in other
markets. The US equity Income fund, managed by River Road, a Louisville- based fund manager, launched last July and has been growing in popularity in the UK market. Leadsom says: “Income is in constant demand and many believe that the US economy is improving. The fund has moved up from £50m to £160m in less than six months.”
‘ ‘
We think we’ve been disciplined in the way we have looked at our product range. The difficult tasks are behind us
The group has also had some success with its fixed income products. Its global high yield bond fund is run from North America and is structured as a SICAV. The fund is now OBSR-rated and pre- sents another solution for diversifica- tion of income. Leadsom believes there remains value in the high yield sector as markets continue to discount a higher default rate than is likely, even in the current difficult economic environment. He thinks the fund range is now well- adapted for the post-RDR environment. He adds: “We think we’ve been disci- plined in the way we have looked at our product range. The difficult tasks are behind us. For example, when we announce the new share classes for the funds in next few months, we believe that we will be in line with the market.” Leadsom suggests the biggest change for active managers will be that those not generating alpha will no longer be able to justify active management fees in the new era. However, he believes the fund management industry has respon - ded to the change in climate with flexi- bility. He says: “Most groups know their pricing strategy, they are not using the new environment to try and drive up prices and have adapted their suite of products to suit the new conditions. “Those still charging active fees for quasi-passive management will find it more difficult in the new environment, but in general, the industry has react ed intelligently to changing needs.” Jeremy Leadsom, sales director, Aviva Investors UK Retail, was interviewed by Invest editor Cherry Reynard.
Except where stated as otherwise the source of all information is Aviva Investors as at 16 May 2012. Any opinions expressed are based on the views of Aviva Investors and they should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors. No part of this document is intended to constitute as advice or recommendation of any nature. Past performance is not a guide to future performance. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested. Aviva Investors is the business name of Aviva Investors UK Fund Services Limited. Registered in England No. 1973412. Authorised and regulated in the UK by the Financial Services Authority. FSA registered no. 119310. Registered address: No 1 Poultry, London EC2R 8EJ. An Aviva company.
www.avivainvestors.co.uk
FUND PROFILE
27
*Telephone calls may be recorded for training and monitoring purposes.
fund&
salessupport@aviva.co.uk WEBSITE
0800 015 4773* EMAIL
www.avivainvestors.co.uk
PHONE
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48