AVIVA INVESTORS MULTI-ASSET PLUS FUNDS - December 2020 - OUR RESEARCH. YOUR SUCCESS - Rayner ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
UND RANGE
AVIVA INVESTORS
MULTI-ASSET PLUS FUNDS
December 2020
OUR RESEARCH. YOUR SUCCESSCONTENTS
FUND RANGE PROFILE – AVIVA INVESTORS MULTI-ASSET PLUS FUNDS ____________4
EXECUTIVE SUMMARY__________________________________________________5
MULTI ASSET INVESTING________________________________________________6
AVIVA INVESTORS_____________________________________________________7
Aviva Investors Multi-Asset and Macro Team
PORTFOLIOS CONCEPT & OVERVIEW_______________________________________8
The Funds
Charges
FUND MANAGERS______________________________________________________11
Additional Support
Selected Key Individuals
THE INVESTMENT PROCESS______________________________________________13
Strategic Asset Allocation
Componentry Selection
Tactical Asset Allocation
Portfolio Construction and Implementation
Risk Management
PERFORMANCE AND HISTORICAL ASSET ALLOCATIONS_________________________16
Performance
CURRENT ASSET ALLOCATION/ECONOMIC AND ASSET CLASS VIEWS______________20
Current Asset Allocation
Economic / Market Views and Current Positioning
CONCLUSION _________________________________________________________22
ABOUT US____________________________________________________________23
Working with advisers
Working with providers
Ratings
Page 3FUND RANGE PROFILE – AVIVA INVESTORS MULTI-ASSET PLUS FUNDS
OUR FUND RANGE PROFILES provide an in-depth review of our leading rated fund ranges and are designed to give
advisers, paraplanners and analysts an ‘under the bonnet’ view of the funds.
In providing more detailed commentary than a standard fund range factsheet we believe our fund range profiles set
the standard for the next generation of research notes, aiding in fund selection and in meeting the ongoing suitability
requirements expected by the FCA, and helping ensure firms deliver good client outcomes.
All of our rated fund ranges are subject to rigorous and ongoing scrutiny on both a qualitative and quantitative basis. Our
fund range research methodology is available for download from the RSMR Hub – rsmr.co.uk.
The Aviva Investors Multi-asset Plus Funds have been an RSMR Rated Fund Range since February 2018. The fund range
provides five fund options for investors across different risk levels each with longer-term volatility targets linked to global
equities. The investment process is very structured and draws upon the significant resources within Aviva Investors
where there is a particular focus on providing ideas for multi-asset portfolios. Within this, the fund managers have a lot of
flexibility to express their views and have full responsibility for their portfolio positioning, performance and risk.
We believe that the Aviva Investors Multi-asset Plus Funds range is a strong proposition for UK retail investors and will
provide competitive risk-adjusted returns over the longer-term.
Ken Rayner, Director, RSMR
A founding director of RSMR, Ken began his career in the investment industry in 1989, shortly
after graduating from Leeds University with a Degree in Economics and Economic History.
Ken sits on the Investment Committee of a number of advisory firms to help them deliver their
investment strategies. As a well-known figure on the UK investment circuit, Ken spends much
of his time in face to face meetings with fund managers, which is vital in understanding how
funds are managed.
Page 4EXECUTIVE SUMMARY
z Aviva Investors has built up a well-resourced and experienced multi-asset
team that sits within the Multi-Asset and Macro team and is headed by Peter
Fitzgerald.
z The Multi-asset Plus fund range comprises five funds covering five different
risk profiles, each with longer-term volatility and performance targets and
parameters based on a percentage of global equity volatility. Aviva Investors
believe this is a better way of managing volatility-targeted funds and will
lead to significantly fewer changes to asset allocations during periods of very
subdued or heightened equity market volatility such as we have seen in 2020.
z The investment process is similar to that used for a number of other
multi-asset funds in that it incorporates strategic and tactical asset allocations
with fund/investment selection. Aviva Investors has a strong economic/asset
allocation framework, and the investment process categorises asset classes
by risk characteristics (Growth, Defensive and Uncorrelated), which is the
basis of overall portfolio construction.
z The managers take a global investment approach with no bias towards the
UK or sterling-based investments, which is a differentiated approach to many
UK retail multi-asset funds.
z There is extensive use of passive investment strategies and Aviva Investors’
internal investment capabilities, which helps to keep the fund costs very
competitive.
z The pattern of fund performance across the range has been as expected
since launch given the prevailing market conditions and the fact that the
managers’ views are expressed in similar ways across the portfolios. Overall
performance has been good with the lower risk funds protecting well on the
downside and the higher risk funds showing strong growth in rising markets.
Page 5MULTI ASSET INVESTING
The recent environment for the provision of financial advice has delivered a Managed investment solutions are one way of helping to take away some of
number of changes that have altered the way many advisers operate. The the stress of selecting assets in this environment, allowing the adviser to focus
implementation of the RDR back in 2012 has been at the heart of this change on the many other areas of financial planning whilst the assets are managed
but other subsequent reviews into the selection of investment solutions and on their behalf. It can be argued that these funds are simple solutions to
the requirement to understand different types of client risk have all contributed most investment selection and monitoring issues, and they are clearly a
to the current regime. Indeed, we have seen a move by many advisers to popular choice. The challenge is that, whilst it always seems advantageous
outsource investment solutions to multi-asset portfolios, relying on the fund to have more choice, selecting the right option from an ever-increasing list is
manager to maintain the portfolio rather than the adviser. The rise of targeted increasingly difficult and taking account of the increasing number of complex
investing, with either risk or return targets being used to manage investments, investment instruments that can be used to form portfolios, the apparently
has also been a feature of recent product offerings in the UK and has resulted simple solutions become all the more complex.
in a number of new solutions that have strict investment parameters. Overall
The changing regulatory environment is also adding to the difficulty in building
the market for this type of solution has widened and with the pension freedom
an appropriate solution that takes a client from risk assessment through to
regulations adding flexibility to an investor’s retirement choices the need for
investment solution. The advisory market has an equally expanding range of
such solutions can only grow further.
choices to take an investor through this process and guidance is needed to
Looking at the investment background for multi-asset investing, the last bring all the elements together to form an acceptable solution.
fifteen years have been mixed. Although figures will show that equities have
To try and simplify the choices but provide enough options to cover most
outperformed government bond markets over this period, it has certainly not
investors’ requirements is a difficult task. This review looks in detail at the
been straight-forward or predictable with short-term periods such as Q3 2007
Aviva Multi-asset Plus Funds, which we believe can go a long way to helping
to Q1 2009, Q3 2011, Q2 2015 to Q1 2016 and of course Q1, Q2 and Q3 of
overcome many of these issues and difficulties.
2020 being prime examples of this. This background has made it very difficult
for most investors, professional or otherwise, and requires a significant
amount of patience and skill to seek out those areas that can offer some
return in an ever-rotating economic environment.
Page 6AVIVA INVESTORS
Aviva Investors is a global asset management business that provides
solutions for clients including local government, pension funds, wholesale
and retail banks, insurance companies, charities and private wealth
managers. They are 100% owned by Aviva plc, which was created from
the merger of CGU plc and Norwich Union plc in May 2000, one of the UK’s
largest insurance companies and a company listed on the UK stock exchange
Following the merger of CGU and Norwich Union in May 2000 their asset
management businesses, Morley Fund Management Ltd and Norwich Union
Investment Management, were merged two months later but it was not until
September 2008 that the trading name was changed to Aviva Investors.
Aviva Investors currently has approximately £357 billion of assets under
management across a range of real estate, equity, fixed income, money
market, mixed and alternative funds and employs over 1,500 people within
various global locations (*Source: Aviva Investors, as at 30th Nov 2020).
Aviva Investors Multi-Asset and Macro Team
Aviva Investors formed the Multi Asset and Macro team under the leadership
of Peter Fitzgerald (CIO, Multi-Asset and Macro), who was previously head of
the Multi-Asset team. He oversees the multi-asset (including AIMS) portfolio
management, implementation, investment strategy, Global Rates and Emerging
Market Debt capabilities, each of which has its own team head. Aviva Investors
manages and advises on over £70bn of multi-asset investments.
Page 7PORTFOLIOS CONCEPT & OVERVIEW
The Multi-asset Plus Fund range (MAF Plus) seeks to generate returns through
a combination of capital growth and income. The funds are aligned to client risk
profiles by targeting specific levels of volatility, with accompanying parameters,
which are based on a percentage of global equity volatility. They use target
equity volatility, as they believe that this relative volatility target is a more
robust measure of risk than absolute volatility. The funds sit in the IA Volatility
Managed sector, but they follow a global, unconstrained investment strategy
with no formal benchmarks. As can be seen from the table below, MAF Plus II,
IV and V were the first to be launched in November 2010 followed by MAF Plus
I and III in February 2012.
FUND SIZE
NAME SECTOR LAUNCH DATE
(as at 29th January 2021)
Aviva Investors Multi-asset Plus Fund I Volatility Managed 6th February 2012 £397.2m
Aviva Investors Multi-asset Plus Fund II Volatility Managed 1st November 2010 £888m
Aviva Investors Multi-asset Plus Fund III Volatility Managed 6th February 2012 £1,118m
Aviva Investors Multi-asset Plus Fund IV Volatility Managed 1st November 2010 £731.9m
Aviva Investors Multi-asset Plus Fund V Volatility Managed 1st November 2010 £197m
Page 8The Funds
The fund objectives and relative volatility targets are detailed below:
Target Equity
Fund Name Description
Volatility*
The Fund aims to grow your investment over the long term (5 years or more) through a
Multi-asset Plus combination of income and capital returns. It is managed to a “defensive” risk profile, 20% of the volatility of the MSCI
Fund I which Aviva defines as aiming for an average volatility of 20% of the volatility of “Global World Index
Equities” (where the volatility of Global Equities equals 100%).
The Fund aims to grow your investment over the long term (5 years or more) through a
Multi-asset Plus combination of income and capital returns. It is managed to a “cautious” risk profile, which 45% of the volatility of the MSCI
Fund II Aviva defines as aiming for an average volatility of 45% of the volatility of “Global Equities” World Index
(where the volatility of Global Equities equals 100%).
The Fund aims to grow your investment over the long term (5 years or more) through
Multi-asset Plus a combination of income and capital returns. It is managed to a “moderately cautious” 60% of the volatility of the MSCI
Fund III risk profile, which we define as aiming for an average volatility of 60% of the volatility of World Index
“Global Equities” (where the volatility of Global Equities equals 100%).
The Fund aims to grow your investment over the long term (5 years or more). It is
Multi-asset Plus managed to a “balanced” risk profile, which we define as aiming for an average volatility 75% of the volatility of the MSCI
Fund IV of 75% of the volatility of “Global Equities” (where the volatility of Global Equities equals World Index
100%).
The Fund aims to grow your investment over the long term (5 years or more). It is
Multi-asset Plus managed to a “adventurous” risk profile, which we define as aiming for an average 100% of the volatility of the MSCI
Fund V volatility of 100% of the volatility of “Global Equities” (where the volatility of Global Equities World Index
equals 100%).
For the volatility measures the team use a combination of various
time periods, with a particular focus on longer-term (5 years) and
shorter-term (2 years) time periods and look at ex-ante figures using
the BlackRock Aladdin management tool. The volatility parameters are
+/- 8% of the target figures for each portfolio.
The funds also have a recently introduced performance target which
is set to produce an average return of at least 1.3% (gross) above the
performance benchmark (shown below) per year measured over three
year rolling periods.
Page 9Name Performance Benchmark
Aviva Investors Multi-asset Plus Fund I 20% global equities 80% global bonds
Aviva Investors Multi-asset Plus Fund II 45% Global equities 55% global bonds
Aviva Investors Multi-asset Plus Fund III 60% global equities 40% global bonds
Aviva Investors Multi-asset Plus Fund IV 75% global equities 25% global bonds
Aviva Investors Multi-asset Plus Fund V 100% global equities 0% global bonds
Charges
Multi-asset funds can be subject to higher charges than single asset class
funds, as the fees of any underlying fund managers must be included in
addition to the fees of the multi-asset fund itself. When considering charges,
it is important to look not just at the headline figure but at how the fund has
performed after these charges have been taken into account in order to
identify whether the structure results in improved performance and justifies
any additional charges. To help with this fund performance is always quoted
net of the OCF.
The Fund Management Fee (FMF) and Ongoing Charges Figure (OCF) for the
‘Class 2’ clean share class are in the table below and the OCF is capped at
0.6% for all the funds.
Name AMC OCF
Aviva Investors Multi-asset Plus Fund I 0.49% 0.55%
Aviva Investors Multi-asset Plus Fund II 0.50% 0.58%
Aviva Investors Multi-asset Plus Fund III 0.50% 0.58%
Aviva Investors Multi-asset Plus Fund IV 0.51% 0.60%
Aviva Investors Multi-asset Plus Fund V 0.53% 0.60%
Source – Aviva Investors, 30th November 2020
Page 10FUND MANAGERS
Paul Parascandalo, Fund Manager (Multi-asset) Additional Support
Paul is a lead Multi-asset fund manager at Aviva Investors. He co-manages
Jerome Nunan, Investment Director (Multi-asset)
the Aviva Investors the Aviva Investors Multi-asset Fund (MAF) and Multi-
manager ranges. He is also lead manager of the Aviva Investors With Profits Jerome is an investment specialist focusing on Aviva’s multi-asset capabilities.
Funds. He joined Aviva Investors in 2010 as an Implementation Manager in He works closely with portfolio managers to articulate their investment
the Multi-Asset Funds team, before moving into the fund management role. process, portfolio positioning and investment performance to clients and
Prior to Aviva Investors he held a number of roles at HSBC in their private consultants around the world. Prior to joining Aviva Investors, he worked
banking arm. Paul holds an MSc (Hons) in Theoretical Physics from University at Deutsche Bank in Global Prime Finance. He began his career in the
College London and a BSc (Hons) Financial Services from the Institute of investment industry in relationship management. Before this he spent 10
Financial Services and is also a CFA charterholder. years in the British Army serving with the Royal Tank Regiment. He holds a BA
(Hons) in Modern Languages from the University of East Anglia and an MBA
Sunil Krishnan, Head of Multi-asset funds from Cranfield University School of Management.
Sunil heads the team that manages long-only Multi-asset funds and
Thomas Stokes, Investment Director (Multi-asset)
mandates. He is also a member of the Multi-asset leadership group and a
contributor to the AIMS investment process. Prior to joining Aviva Investors, he Thomas is a multi-asset investment specialist at Aviva Investors. He is focused
was a Senior Portfolio Manager in Global Multi-Asset Solutions at Santander on supporting the Aviva Investors Multi-asset Fund (MAF) fund managers
Asset Management having been Head of Global Asset Allocation at Hermes articulating their investment process, portfolio positioning and investment
Investment Management. He also spent 10 years at BlackRock Investment performance to clients and consultants. Prior to joining Aviva Investors, he
Management in a number of roles including portfolio management, research worked for Aviva Life and was responsible for relationship management in
and strategy. He holds an MSc in Economics from Birkbeck College, University the intermediary market. He began his career working for Walker Crips, a
of London and an MA in Philosophy, Politics and Economics from Balliol wealth management firm, where he was responsible for advising private and
College, University of Oxford and is a CFA charterholder. corporate clients. He holds a Diploma in financial planning and the Investment
Management Certificate. He is also a CFA Charterholder.
Guillaume Paillat, Fund Manager (Multi-asset)
Guillaume is a portfolio manager within the long-only Multi-asset team. He
Selected Key Individuals
joined Aviva Investors from First State Investments where he was managing Peter Fitzgerald, CIO, Multi-Asset and Macro
multi-asset portfolios. Prior to that he oversaw Global Fixed Income portfolios
Peter manages the company’s suite of multi-strategy funds targeting specific
with Colonial First State in Sydney. He began his career with AXA Investment
client outcomes such as achieving reliable capital growth and securing a
Managers and holds a Master’s degree in Investment Management from Paris
steady stream of income. He also the CIO of the Multi-Asset and Macro
Dauphine University.
team and is responsible for the strategic direction of the global multi-asset
and multi-strategy offering. Peter began his career at Old Mutual in 1995
before joining BNP Wealth Management’s multi-asset team. He has extensive
international experience having worked in Asia, Latin America and Europe.
He joined Aviva Investors in 2011. Peter holds a postgraduate diploma in
Page 11Education from Trinity College Dublin and a degree in European studies from Ian Pfizer, Head of Investment Strategy
the University of Cork. He is also a CFA charterholder. Ian is Head of Investment Strategy and is responsible for formulating the
‘House View’ and the risks to that view. He joined Aviva Investors in 2014 as a
Dhannjay Hirani, ACMA, Head of Implementation, Multi-Asset
senior fund manager within the Multi-asset team, focusing on the AIMS range.
& Macro
Prior to joining Aviva, he spent over 10 years at Standard Life Investments,
Dhannjay is responsible for the implementation and day to day management where he was Investment Director, Multi-Asset Investing and managed the
of all portfolios run within Multi-asset. Global Absolute Return Strategies (GARS) fund and the Absolute Return Bond
Strategy fund. Ian has a PhD in Mathematical Logic from Bristol University and
Before joining Aviva Investors, Dhannjay was head of structured fund
is also a CFA charterholder.
management at Lehman Brothers Asset Management, with responsibility for
the management of Multi-asset, commodity and credit structured funds. Prior
to Lehman Brothers, Dhannjay spent five years with the fund linked derivatives
group at Credit Suisse, with responsibility for the management of capital
guaranteed structures linked to a broad range of traditional and alternative
assets. Dhannjay graduated with a degree in Accounting and Finance from
Kingston University and is an associate member of the Chartered Institute of
Management Accountants.
Michael Grady, Head of Investment Strategy and Chief
Economist
Michael is Head of Investment Strategy and Chief Economist and is
responsible for formulating our macro ‘House View’ and the risks to that
view, as well as overseeing investment strategy for the AIMS funds. Since
joining Aviva Investors as Senior Economist and Strategist, Michael has been
responsible for monitoring and analysing global macroeconomic, market and
policy developments.
Prior to joining Aviva Investors, Michael was senior economist at COMAC
Capital Llp, a global macro hedge fund, where he was responsible for the
economic and market analysis used to inform the investment process. Prior
to this, he spent a decade at the Bank of England in a variety of senior roles,
latterly as a Senior Manager in the Markets Directorate. He began his career
at the Australian Treasury. Michael holds a BEc (Hons) from Macquarie
University, Australia.
Page 12THE INVESTMENT PROCESS
Aviva Investors describe their investment philosophy as having four beliefs Uncorrelated assets with the composition of the three ‘buckets’ remaining the
that underpin their investment process. These are: same across the portfolios but with the overall percentage allocations being
different. For example, if MAF plus I had 20% allocated to equities within
z A focus on long-term investing – investment ideas with attractive risk
which 5% was allocated to US equities (i.e. ¼), then if MAF Plus V had 100%
adjusted returns over a three-year investment period
allocation to equities, its US equity allocation would be 25% (i.e. ¼ of the total
z Economics, sentiment, and valuation analysis enables understanding of equity allocation).
asset price dynamics
The Growth assets are deemed to have the greatest capital growth potential.
z Dynamic asset allocation is the primary driver of reliable long-term returns
They include high-yield bonds and emerging market bonds alongside global
z Portfolio construction is key to robust, risk adjusted returns; bringing equities. The Defensive assets can help manage volatility and potentially
together top-down dynamic asset allocation and bottom-up stock selection protect the value of the portfolio during times of market stress. They include
alpha to generate robust and diverse sources of excess returns sovereign bonds, investment-grade corporate bonds, cash/near cash, and
Aviva Investors employs a five-step investment process including strategic active currencies. The Uncorrelated assets have the potential to perform no
and tactical asset allocation, fund selection and implementation. They aim to matter what the markets are doing, such as absolute return investments and
avoid any home bias (i.e. a deliberate stance towards UK assets) within their property. As you move up the fund’s risk spectrum from MAF Plus I through to
portfolio construction. MAF Plus V the allocation to Growth assets increases with the allocations to
the Defensive and Uncorrelated assets decreasing.
1 Strategic Asset Allocation The starting points for the global equity and global fixed income weightings
There are seven principles behind the strategic asset allocation: are the market capitalisation weights with adjustments for risk factors.
Longer-term volatility and correlation figures are used for each asset class
z Invest on a globally unconstrained basis (lack of home bias)
and in the Defensive allocation there is a bias towards credit to reduce the
z Focus investment universe on liquid asset classes portfolio impact of the very low volatility of cash.
z Group asset classes by risk drivers (Growth, Defensive, Uncorrelated) rather
than traditional asset classes The strategic allocation process has been enhanced in the last twelve months
initially by increasing the resource through head count but also by the greater
z Use market cap weights as an initial starting point for the allocation process
integration with the Solutions team under Cyril Martin. This team has been
z Currency hedge ‘Defensive’ assets to eliminate foreign currency volatility part of the delivery of portfolio solutions in the life company and with external
z Deliver returns that are commensurate with risk clients, and its expertise has been made more available to the Multi-asset
z Review periodically for risk alignment team. It has allowed for greater depth and breadth of analysis widening the
qualitative perspective for the team and allowing the optimisation of portfolios
The process focuses on liquid asset classes, so they have excluded certain for each risk profile.
less liquid asset classes such as private equity and infrastructure. The asset
allocations are based on a seven-to ten-year time horizon and are formally 2 Componentry Selection
reviewed on an annual basis to remain in line with the target volatility levels.
This element of the process is driven by the requirement to select the correct
The allocations will consist of varying proportions of Growth, Defensive and underlying investment strategy for the portfolio. The main set of options are
Page 13either passive or active. In the case of the MAF Plus strategies these are and investment ideas using internal and external information. The research
combined to try and maximise the best characteristics of both. A passive is reviewed on a quarterly basis and weekly meetings take place to discuss
approach is generally taken in those sectors that have better liquidity and are developments intra-quarter.
more efficient, which tends to be more focused on the equity markets and
The main output from their research is the Aviva Investors ‘House View’,
more specifically developed markets. This can also be demonstrated more
which determines their central case for global markets and asset classes
acutely when looking for solutions which focus on ESG.
together with the key risks to this view and a number of alternative scenarios
The team also prefer to select internal investment options rather than external to the central view. The research looks to identify the key drivers of various
ones as they believe that they have significant expertise in-house as a global economies and the expected returns. The economic analysis looks at
asset manager and they can also benefit from cost reductions that are not factors such as where economies are in the business cycle and longer-term
available from external managers. If they do not have the internal expertise, investment themes. Valuation analysis looks at a variety of metrics, depending
then they can select from an external manager utilising the skills of their on the asset class, on both an absolute and relative basis. They also look at
multi-manager team who are already reviewing and researching a range market sentiment, which is often a driver of shorter-term performance and
of managers for other Aviva solutions. They also must ensure that these can lead to periods of extreme optimism or extreme pessimism.
managers have an appropriate ESG policy that reaches certain required
Using this as a framework, the Asset Allocation Committee (AAC), which
standards. Over time this may see a shift to a greater active weighting in MAF
comprises representatives from the Investment Strategy team and multi-asset
Plus portfolios.
and single asset class portfolio managers from across Aviva Investors, then
More recently this area of research has been improved in the governance analyse the information and apply this to a variety of asset classes, including
of their internal managers. Whilst this might be seen as a given, the team the overall multi-asset view, on a quarterly basis. The focus on improvement to
have sought to improve the validation of these selections. They believe it all aspects of the process has led to some changes in the last twelve months.
is important to provide as much transparency as possible on the internal The aim has been to improve the framework, allowing better information flow
selections. To do this they have set up a Solutions Oversight Committee which and to place more emphasis on what the markets are currently expressing,
includes representatives from the solutions team, portfolio managers and the whilst seeking to balance the qualitative and quantitative inputs. They have
multi asset team. This group can review the internal building blocks of the sought to incorporate more views from the expert groups within the team,
portfolios and challenge the sections and performance of the funds with a allowing the portfolio managers to task these groups to research potential
referral path to higher management if it is felt appropriate. It provides greater strategies or sources of alpha enhancement. Previously this has been difficult
accountability and structure to the selection process. to coordinate, but they now have a system called Confluence which allows
each team to contribute their specific information and analysis for other teams
3 Tactical Asset Allocation to view and utilise from one central source. The not only acts a source of
Although each fund has a longer-term volatility target, they also operate within new ideas but helps to contain the rational for decisions made previously and
specified volatility parameters, which allow the managers to take tactical asset can act as an audit trail if necessary. It can also act as a stimulus for debate
allocation positions. ahead of the asset allocation meeting.
The Investment Strategy team consists of economists and asset allocation The MAF portfolio managers hold monthly and weekly meetings at which the
specialists and they produce market research and provide asset allocation House View and the AAC output is interpreted for application at an individual
Page 14fund level. They also use specialist, external research providers, investment will be unleveraged positions. MAF Plus V is permitted to be leveraged, using
banks and third-party providers as supplementary information. The fund index futures, to a maximum of 10% of NAV. Any exposure to areas such as
managers have the final say on the positioning of the portfolios. property and commodities will be through collectives and/or ETFs. The fund
managers consult with the Aviva Multi-Manager Research team on third party
4 & 5 Portfolio Construction and Implementation investments.
Portfolio construction begins with grouping the asset classes by common Within the Growth ‘bucket’ the managers do not seek to hedge out currency
risk factors. The allocations within global equities start with the market risk systematically. Broadly speaking they believe that currencies can have
capitalisation weightings, which are then adjusted for risk and for the current attractive diversification benefits, however as part of their assessment of the
asset allocation views. macroeconomic environment, they will consider the likely outlook for different
Investment vehicle selection and the decision of whether to go active or currencies. This will inform the decision on whether or not to hedge certain
passive, internal or external, and physical or synthetic sits with the fund currency risk.
managers. Additionally, the fund managers monitor the risk in their portfolios The Defensive ‘bucket’ seeks to be fully currency hedged, otherwise the
regularly to ensure that the funds are performing as expected. This includes foreign exchange (FX) volatility may dominate the return profile. Cash/near
(but is not limited to) observing ex-post and ex-ante volatility, currency cash is limited to 10% of NAV.
exposures, beta, duration and yield. Aviva Investors’ independent performance
team and investment risk team provide the multi-asset fund managers with Currency exposure in the Uncorrelated ‘bucket’ can vary depending on
regular performance and risk attribution reports. The funds are therefore the strategies being used. For example, currency risk is managed within
continually monitored, and changes are implemented when necessary. They the Target Return Fund and any residual exposure is an intentional source
have made significant strides in recent years in their testing of portfolios of expected return but specific long and short currency positions will be
using tools such as Aladdin, and also adding proprietary innovations to fit their taken within the Aviva Multi Strategy Target Fixed Income fund as part of its
particular strategies and methodology. These pre trade risk tools allow them to investment strategy.
test the portfolios in a number of ways before actioning any trades.
In periods of extreme market movements (such as occurred in March
More recently the team have adapted the construction process to pair any 2020) they can move away from the re-balancing parameters with the
tactical trades which can then be maintained as they rise and fall in value. implementation team co-ordinating with the fund management team to agree
This helps to demonstrate and validate any tactical asset allocation decisions. an interim solution. This allows for a level of flexibility which then means they
If the team decide they want to overweight a particular area then this has to don’t create trades that can be dealt with on a more pragmatic basis.
be sourced from an alternative investment in the portfolio. The decisions are
paired so that they can demonstrate why they have added to one and taken Risk Management
away from another. This thesis can then be monitored and checked over time The funds target specific levels of volatility, with accompanying parameters,
to make sure it remains valid. which are based on a percentage of global equity volatility, as Aviva believes
that this relative volatility target is a more robust measure of risk than
The funds are long only and there will be no physical short selling of
absolute volatility. The volatility measures are a combination of various time
securities, but they can, and do, use derivatives (including commodity futures)
periods, with a particular focus on longer-term (5 years) and shorter-term (2
for efficient portfolio management and/or to enhance performance but these
Page 15years) time periods, and look at ex-ante figures using the BlackRock Aladdin
management tool. The volatility parameters are +/- 8% of the target figures
for each portfolio.
Fund managers are accountable for the risk taken within their portfolios, so risk is
an important part of the portfolio construction. They can use in-house and external
risk management tools to measure the impact of any proposed changes.
The independent Investment Risk team use external software, such as
BlackRock’s Aladdin and RiskMetrics, to look at risk at individual security, asset
class and fund level. They look at risk statistics, such as VAR, daily to check
that the risk is consistent with the funds’ objectives and investment process.
There is also a credit risk team, which monitors credit-related investments
with a particular focus on the more illiquid investments plus it looks at
counterparty credit risk.
Page 16PERFORMANCE AND HISTORICAL ASSET ALLOCATIONS
(Data source: Aviva Investors, all figures to the end of November
2020, unless stated otherwise)
Performance
31.12.19 – 31.12.18 – 31.12.17 – 31.12.16 – 31.12.15 –
31.12.20 31.12.19 31.12.18 31.12.17 31.12.16
Aviva Investors Multi-Asset Plus Fund I SC2 3.39 8.77 -3.49 2.53 6.05
Aviva Investors Multi-Asset Plus Fund II SC2 4.40 14.18 -5.51 5.94 9.98
Aviva Investors Multi-Asset Plus Fund III SC2 4.57 16.35 -6.25 7.83 14.64
Aviva Investors Multi-Asset Plus Fund IV SC2 4.49 18.18 -6.87 9.36 17.16
Aviva Investors Multi-Asset Plus Fund V SC2 4.13 21.29 -8.27 12.19 21.15
Source: Aviva
The following charts show the funds against their peer group. All data
was provided by Aviva who sourced it from Morningstar Direct. The data
is Gross, Monthly Return in Pound Sterling. Sector shown is each fund’s
Morningstar Category.
Aviva Multi Asset Plus Fund I
Aviva Multi Asset Plus Fund I
120.0
115.0
110.0
105.0
100.0
95.0
90.0
85.0
31/12/2017
31/01/2018
28/02/2018
31/03/2018
30/04/2018
31/05/2018
30/06/2018
31/07/2018
31/08/2018
30/09/2018
31/10/2018
30/11/2018
31/12/2018
31/01/2019
28/02/2019
31/03/2019
30/04/2019
31/05/2019
30/06/2019
31/07/2019
31/08/2019
30/09/2019
31/10/2019
30/11/2019
31/12/2019
31/01/2020
29/02/2020
31/03/2020
30/04/2020
31/05/2020
30/06/2020
31/07/2020
31/08/2020
30/09/2020
31/10/2020
30/11/2020
31/12/2020
Aviva Investors Mlt-Asst Pl I 2 GBP Acc (Gross)
EAA Fund GBP Moderately Cautious Allocation (Gross)
Page 17Page 18
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
31/12/2017 31/12/2017
31/01/2018 31/01/2018
28/02/2018 28/02/2018
31/03/2018 31/03/2018
30/04/2018 30/04/2018
31/05/2018 31/05/2018
30/06/2018 30/06/2018
31/07/2018 31/07/2018
31/08/2018 31/08/2018
30/09/2018 30/09/2018
Aviva Multi Asset Plus Fund
Aviva Multi Asset Plus Fund
31/10/2018 31/10/2018
Aviva
Aviva
30/11/2018 30/11/2018
31/12/2018 31/12/2018
31/01/2019 31/01/2019
28/02/2019 28/02/2019
31/03/2019 31/03/2019
30/04/2019 30/04/2019
31/05/2019 31/05/2019
30/06/2019 30/06/2019
31/07/2019 31/07/2019
31/08/2019 31/08/2019
30/09/2019 30/09/2019
31/10/2019 31/10/2019
30/11/2019 30/11/2019
31/12/2019 31/12/2019
Aviva Investors Mlt-Asst Pl III 2 GBPAcc (Gross)
II Multi Asset Plus Fund II
31/01/2020
EAA Fund GBP Moderate Allocation (Gross)
31/01/2020
III Multi Asset Plus Fund III
29/02/2020 29/02/2020
Aviva Investors Mlt-Asst Pl II 2 GBP Acc (Gross)
31/03/2020 31/03/2020
30/04/2020 30/04/2020
31/05/2020
EAA Fund GBP Moderately Adventurous Allocation (Gross)
31/05/2020
30/06/2020 30/06/2020
31/07/2020 31/07/2020
31/08/2020 31/08/2020
30/09/2020 30/09/2020
31/10/2020 31/10/2020
30/11/2020 30/11/2020
31/12/2020 31/12/2020Aviva
Aviva Multi Asset Plus Fund IV Multi Asset Plus Fund IV
120.0
115.0
110.0
105.0
100.0
95.0
90.0
85.0
31/07/2019
31/08/2019
30/09/2019
31/10/2019
30/11/2019
31/12/2019
31/01/2020
29/02/2020
31/03/2020
30/04/2020
31/05/2020
30/06/2020
31/07/2020
31/08/2020
30/09/2020
31/10/2020
30/11/2020
31/12/2020
31/12/2017
31/01/2018
28/02/2018
31/03/2018
30/04/2018
31/05/2018
30/06/2018
31/07/2018
31/08/2018
30/09/2018
31/10/2018
30/11/2018
31/12/2018
31/01/2019
28/02/2019
31/03/2019
30/04/2019
31/05/2019
30/06/2019
Aviva Investors Mlt-Asst Pl IV 2 GBP Acc (Gross)
EAA Fund GBP Moderately Adventurous Allocation (Gross)
Aviva Multi Asset Plus Fund V Multi Asset Plus Fund V
Aviva
120.0
115.0
110.0
105.0
100.0
95.0
90.0
85.0
30/11/2019
31/12/2019
31/01/2020
29/02/2020
31/03/2020
30/04/2020
31/05/2020
30/06/2020
31/07/2020
31/08/2020
30/09/2020
31/10/2020
30/11/2020
31/12/2020
31/12/2017
31/01/2018
28/02/2018
31/03/2018
30/04/2018
31/05/2018
30/06/2018
31/07/2018
31/08/2018
30/09/2018
31/10/2018
30/11/2018
31/12/2018
31/01/2019
28/02/2019
31/03/2019
30/04/2019
31/05/2019
30/06/2019
31/07/2019
31/08/2019
30/09/2019
31/10/2019
Aviva Investors Mlt-Asst Pl V 2 GBP Acc (Gross)
EAA Fund GBP Adventurous Allocation (Gross)
The performance patterns are as you would expect in terms of the funds’ risk
profiles and there has been good consistency in relative returns. The lower
risk funds have produced steadier, smoother returns and the higher risk funds
have demonstrated more volatility with larger drawdowns during falling equity
markets but higher returns when equity markets have been rising.
The performance of the funds has been consistent and stable and, until 2020,
based on a momentum driven market post the global financial crisis. There
have been some significant events in the interim such as the Brexit vote in
Page 192016 but the funds managed this period with reasonable performance levels ESG
compared to other multi asset options.
Aviva have a long standing ESG approach which is integrated into the
The Multi-asset funds have benefited from their global approach and relative investment process of each team. They believe in active ownership and have a
lack of exposure to UK / sterling assets (equities and fixed income) during a strong record in engagement with company management and a strong voting
period of large sterling weakness. Sterling appreciated slightly overall in 2017, record. Each manager is responsible for taking ESG factors into account when
which was a headwind, but fund performance continued to be strong as the making investment decisions and they believe this enhances the process and
funds were positive on risk assets and global equities continued to perform identifies better opportunities. Aviva have a team of 25 ESG professionals
well. who specialise in various issues to support the fund management teams. This
team scores over 30,000 securities on a proprietary basis as well as making
More recently of course returns have been dominated by the coronavirus
available thematic and sector research. The MAF team is no exception to this
crisis which hit all investments in March 2020 and caused a global health
and works closely with the ESG team in fund selection idea generation and
crisis with knock-on effects on the global economy which can be seen quite
tactical asset allocation.
clearly on the chart above. The maximum drawdown on the portfolios over the
period was 4.36% for the lowest risk portfolio up to 20.6% for the highest risk Investment integration in the Aviva Investors MAF Plus range
portfolio. This illustrates the effectiveness of the strategies in balancing risk
and return for investors. z The ESG team work in collaboration with the Multi-asset and Macro team
to contribute to the formation of their macro House View and idea generation,
All the portfolios have returned to a positive position for the year after a very such as the tactical asset allocation decisions.
volatile period. The stance coming into 2020 was positive on global growth
and on global equities with the risks of trade disputes and Brexit the main z ESG is embedded into all the actively managed Aviva Investors funds that
sources of negativity. No-one foresaw the health crisis so the overweight to the Multi-asset Fund ranges invest into. ESG factors are considered alongside
equities hit the portfolios quite hard in March and April. The strategic asset a range of financial metrics and research.
allocation is primarily responsible for return and the funds were struggling z Where the fund range invests through other active funds managed outside
as the pandemic caught hold. They sought to mitigate this by reducing risk of Aviva Investors, the ESG policies and procedures of the underlying funds
and felt that whilst lowering equities, the best place for the assets was in will be assessed as part of the fund selection process.
investment grade and high yields debt where spreads had significantly
widened. The thesis that central banks would continue to support bond
markets was correct and they benefited from this. Whilst this proved to be
right, they lost out on some strong global equity performance in the recovery
phase. The funds tend not to have a home (UK) bias which was also a benefit
in 2020 as the UK market suffered from being heavily weighted towards areas
that struggled most, such as energy and financials. The strong weighting
to US equity over the year was important in rebuilding the portfolios even
with a reduced allocation. As we finish the fourth quarter the team are more
optimistic whilst mindful of the risks that still exist.
Page 20CURRENT ASSET ALLOCATION/ECONOMIC AND ASSET CLASS VIEWS
Current Asset Allocation
The following table summarises the asset allocation percentage splits,
as at the end of December 2020.
Exposure (%) Aviva MAF I Aviva MAF II Aviva MAF III Aviva MAF IV Aviva MAF V
Growth assets 15.48 50.96 68.24 87.77 107.01
United Kingdom equities 2.14 6.63 8.73 10.88 13.53
North America equities 2.27 14.78 20.8 27.91 35.73
European equities 0.45 3.64 5.44 7.66 10.01
Japanese equities 0.64 3.18 4.46 5.94 7.57
Asia Pacific equities 0.35 1.86 2.5 3.4 4.3
Emerging Global equities 2.28 5.71 7.41 9.27 11.4
Emerging Market Local and Hard Currency bonds 2.99 6.6 8.08 9.55 11.57
Thematic Equity 1.57 3.19 4.18 5.14 5.07
Emerging Market Corporate bonds 0.29 1.09 1.58 1.96 2.57
Global High Yield Bonds 2.5 4.28 5.06 6.06 5.26
Defensive assets 70.44 38.54 23.26 6.1 -7.03
Global sovereign inflation linked assets 7.15 5.2 3.14 1.76 0
US Treasuries 11.24 11.08 4.77 -1.75 -2.46
UK Gilts 0.9 0.56 0.19 0 0
European Government bonds 1.23 -1.01 -1.63 -1.81 0
Australian Government bonds 4.49 3.51 3.35 2.38 0
Global Credit 30.93 16.83 10.81 2.88 0
Cash & FX 14.5 2.37 2.63 2.64 -4.57
Uncorrelated assets 14.02 10.46 8.45 6.1 0
Absolute Return 10.84 6.75 4.9 2.96 0
Long Short Global Equity Stratagies 0.83 0.92 0.72 0.44 0
Global Convertibles 0.89 0.98 0.99 0.92 0
Asset backed securities 0.49 0.83 0.86 0.81 0
Gold 0.97 0.98 0.98 0.97 0
Duration 4.42 3.31 2.43 1.33 0.49
Source: Aviva Investors
Page 21Economic / Market Views and Current Positioning those areas that benefited by disrupting existing industries continue to
benefit. A demonstration of this is in earnings growth and profitability which
The Aviva house view is close to consensus which the managers are aware
has been evidenced in a wide range of companies, particularly in the US.
of. Although they are not set up to be contrarian managers there is some
risk in adopting the market view if there is an inflection point or crisis such Brexit has been a key concern in the UK and the managers have tried to
as Covid-19. This view is positive, as it was at the beginning of the 2020 position the portfolios so as not to be reliant on any one eventuality, as the
based on improvements in economic news and the roll out of vaccines as outcome remained uncertain right up the end of 2020. The initial impact,
well as a US election that has seen the introduction of what is seen as the positive or negative, was likely to be on sterling, so they have been hedging
more pragmatic candidate. There are risks of course with the coronavirus some exposure to foreign currency through the year.
case count rising and further economic restrictions in place as well an
escalation of trade disputes between the US and China or indeed Europe. The managers only hold a very small weighting in UK fixed income
investments, as the associated asset classes continue to look expensive
The team would admit that the positioning they took at the beginning of and yields could rise in a number of different post Brexit scenarios, so they
2020 was pro-economic growth and favoured equities over bonds and prefer to hold global fixed income until things settle down.
defensive assets. This led to an overweight in equity that was a clear
negative in March and April when the coronavirus hit across the globe. The managers have added other strategies to the ‘Uncorrelated Assets’
They felt this cost them between 0.75% and 1% in returns. Although this part of the portfolios to diversify risk and returns and this is the only area
positioning was a negative, as the year has progressed the recovery has where they use external funds to deliver on ideas. They have allocations to
been equally as dramatic in markets. Initially a more defensive stance was TwentyFour Income investment trust and the BlackRock European Absolute
taken, with the strategy taking on more global bond holdings, particularly Alpha fund. This is a rare occurrence and any new holding would need to be
investment grade which saw spreads widen and then quickly come back in a longer-term investment with the independent Multi-Manager team a key
again. This helped to compensate for a lower equity weighting. The belief influence for any new alternative holding.
that global monetary policy would be once again co-ordinated and that
corporate debt would be supported helped to underpin these beliefs.
At the time of writing, the managers see a number of positives with the
rollout of vaccines and continued fiscal and monetary support. Overall the
global backdrop feels more positive to them and whilst there has been a
value rally in the fourth quarter because of the vaccine news and the US
election they do not believe this is going to take too much away from the
growth and technology stocks in the medium term. Inflation looks benign
for the time being and is unlikely to influence markets in the short term
with the US Federal Reserve relaxed about it rising above 2%. The value
rally has certainly helped those sectors hit the hardest by the pandemic
including air travel, hospitality and energy but these sectors will be
changed forever, and any recovery is likely to be more protracted, whilst
Page 22CONCLUSION
After a tumultuous and volatile year, the dangers of longer-term predictions The investment process aims to take a longer-term view and looks at a variety
could never be better illustrated. After a huge hit to economic activity in the of factors to determine the attractiveness of asset classes. It incorporates
first half of 2020 economies, aided by huge monetary (central bank) and even strategic and tactical asset allocation together with investment selection to
more importantly government fiscal support, have started the long road to generate good risk-adjusted returns. This is nothing unusual for multi-asset
recovery. With a huge abundance of global liquidity stock markets, together funds but they see a key differentiator as being their lack of home bias, i.e.
with corporate credit, have front run the anticipated upturn in economic global diversification with no particular focus on UK/sterling assets and, again,
activity with markets bottoming-out at the end March / early April. Stock this is borne out by the asset allocation data. The managers particularly
markets have always looked forward and in the period post the Financial benefit from the ‘House View’ and the output from the Asset Allocation
Crisis, have done so at a faster rate than previously. Investors are now looking Committee but they are fully responsible for the positioning of the portfolios.
out to the end of 2021 and beyond to try and see how far the global economy
Potential investments are grouped by their general characteristics (Growth,
will be below what it would have been pre-Covid-19 and more importantly
Defensive and Uncorrelated) and allocated with commonality of relative
whether the economic cycle can resume.
positions across the fund range. The managers can use a variety of
With this as a background Aviva Investors offers a strong multi-asset investment strategies within the funds; active/passive, internal/external and
proposition based on their global research capabilities and dedicated single physical/synthetic, which provides a lot of choice. The bias is typically towards
asset class teams. The three fund managers, Paul Parascandalo, Sunil internal and passive, which helps to keep the fund costs very competitive.
Krishnan and Guillaume Paillat, benefit from the significant resources within
What we can see from the performance and volatility data is an expected
both the Multi-Asset and Macro team plus the wider Aviva Investors business
pattern of returns, given the market conditions, with the more risk tolerant
and actively use these within the investment process. Aviva Investors has been
funds producing the highest returns but also seeing the largest drawdowns
investing in their multi-asset proposition and has added further key personnel
during falling equity markets. The funds’ natural beta to global equity markets
to widen the team over the last couple of years. The Multi asset Plus portfolios
means they may suffer larger drawdowns than some other volatility-targeted
are part of a range that also offers a recently launched Core option.
funds should volatility spike upwards but, conversely, they may be able to
The funds take a slightly different approach to many funds in the sector in participate better in rising/rebounding market conditions. This is particularly
that they have two targets. The main focus is the volatility targets which are relevant to the highest risk Multi-asset V fund, which has employed gearing/
based on relative volatility levels versus the main global equity index rather leverage to have more than 100% of assets invested since 2014.
than an absolute target number or target range. Aviva Investors believe this is
The Aviva Investors Multi-asset Funds provide a strong option for investors
a better way to target volatility, as they would not need to significantly reduce
looking for a range of multi-asset solutions covering different risk profiles.
or add risk if there were significant changes to volatility levels within asset
There is a well-resourced and experienced multi-asset team, a well-
classes, particularly equities. This should lead to more gradual asset allocation
established and detailed investment process and the funds are very
changes and this is borne out by the asset allocation data. The second
competitively charged. Risk-adjusted performance has been good across
target is a performance target, recently introduced, which is to produce an
the range and we believe the factors are in place for the funds to continue
average return of at least 1.3% (gross) ahead of the performance benchmark
performing very competitively in most market conditions.
measured over three year rolling periods.
Page 23ABOUT US
Established in 2004 RSMR provides research and analysis to firms working Ratings
across the UK’s personal financial services marketplace.
Our innovative range of ratings are now recognised as market leading and
Our work is completed with total impartiality and without any conflict cover a broad area of investment solutions including single strategy funds,
of interest and delivered to a high professional standard by a team of SRI funds, Multimanager and multi-asset funds, DFMs and investment
experienced and highly qualified people. trusts. Our familiar ‘R’ logo is now recognised as a trusted badge of
quality by advisers and providers alike and a ‘must-have’ when selecting
Working with advisers funds. Our ratings are founded on a strict methodology that considers
We provide specialist research, analysis and support to a diverse range of performance and risk measures but places a greater emphasis on the
financial advisers and planners helping them to deliver sound advice to ability of fund managers to continue to deliver performance in the years
their clients backed by rigorous and structured research and due diligence. ahead based on our in-depth face-to-face meetings with fund managers
across the globe.
The main regulatory body in the UK, the FCA, states that personal
recommendations made by advisers should be ‘based on a comprehensive We understand financial services and we will work alongside you to deliver
and fair analysis of the relevant market’ and this has led to closer scrutiny tailored solutions that are right for your clients and your business.
of the whole advice process. Our solutions are designed to help advisers Our research. Your success.
meet these challenges whilst recognising that advisory firms require a
range of flexible options that best meet their own business needs and
those of their clients.
Working with providers
We work with all the leading fund groups, life and pension companies The data and information in this document does not constitute advice
or recommendation. We do not warrant that any data collected by us,
and platform operators across the financial services sector offering
or supplied by any third party is wholly accurate or complete and we
straight forward and pragmatic advice to help add value and improve their will not be liable for any actions taken on the basis of the content or
business performance and efficiency whilst treating customers fairly in line for any errors or omissions in the content supplied.
with FCA requirements. All opinions included in this document and/or associated documents
constitute our judgement as at the date indicated and may be changed
at any time without notice and do not establish suitability in any
individual regard.
©RSMR 2021. All rights reserved.
Page 24NOTES
_______________________________________________________ ______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ ______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
Page 25You can also read
