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At Aviva Investors, we realise that everyone is unique. That’s why we start by listening closely to our clients and understanding their investment aspirations and concerns.

These include: low prospective investment returns, highly correlated asset prices, the prospect of rising global interest rates and a possible pick up in financial market volatility. Issues such as these concern everyone, from private investors to large corporate pension schemes.

“Investors are moving from a world where asset class choices formed the bedrock of investment decisions, to one where they are looking for investments to meet a specific outcome. I have spent 20 years speaking with clients and found everyone has one of four financial goals.

Whether the client is a pension scheme, corporation, financial adviser or individual saver, what matters most always comes down to: achieving consistent fund growth; securing a reliable income stream; obtaining a return that exceeds inflation; or increasing the likelihood that a specific future financial liability will be met

At Aviva Investors, we believe it’s time to think differently. That’s why our entire organisation is united behind one common goal – to deliver the specific outcomes that matter most to today’s investor.”


Euan Munro, Chief Executive Officer, Aviva Investors

Our role is not only to understand each investor’s desired outcomes. It is also to possess a deep understanding, using our extensive skills and experience, of how we aim to deliver them. We make it our business to know what’s important to our clients and use this insight to develop strategies and funds that aim to cater to their real needs, and help build stronger and deeper long term relationships.

Having the right resources is vital when focusing on the outcomes clients want. We manage over £318bn across a range of asset classes and our operations span 15 financial centres. As such, our clients stand to benefit not just from our significant local knowledge and experience but also from the extensive global investment resources at our disposal.

Although we are a global business, we act as a single team, collaborating to bring together knowledge and capabilities. We value creativity and empower our investment teams to find and execute what they believe are great investment ideas. In depth research and robust risk management underpin every investment decision.

We are also actively responsible investors, and believe that promoting sustainable business practices in global markets encourages greater transparency and better corporate governance. This helps us to reduce risk and strive to enhance the long-term value of our clients’ investments.

In an environment where investors face a bewildering choice of ever more complex financial products, gaining the outcomes they require can be challenging. We have funds and strategies that aim to meet this need, now and over the long term. This is why we are unequivocally for today’s investor.

Responsible investment policy

At Aviva Investors, we have always believed that companies, which conduct their business in a responsible and sustainable manner are more likely to succeed over time, benefiting our customers and society as a whole, than those which do not. So we see factors such as corporate culture, good governance and climate change as core to the success of our clients’ investments over the long term.

That’s why we were one of the first global fund managers to integrate environmental, social and governance (ESG) issues into our investment decision-making and one of the first to express our views through the power of shareholder voting. We have had a team looking at governance matters since the 1990s. We have been voting against companies’ Report and Accounts since 2001 for not having adequate disclosures on ESG matters. While not quite alone in ploughing a furrow for responsible investment over the decades, we were vocal when it was unpopular to be so.

We are a proud founding signatory to the UN-backed Principles of Responsible Investment (PRI) and one of the signatories to the UK Stewardship Code, which aims to enhance the quality of engagement between asset managers and companies to help improve long-term risk-adjusted returns to shareholders.

Our responsible investment approach focuses on:

  • Integration of ESG considerations into investment decisions: we work together with fund managers and analysts to deliver improved investment outcomes for clients
  • Active stewardship: we use our influence to promote good practice among those companies in which we invest, and to gain insight and reduce investment risk on ESG issues for our clients. We focus on generating outcomes that benefit our clients and in many cases society, the environment and the broader economy as well.
  • Shaping markets for sustainability: we advocate policy measures that support longer term, more sustainable capital markets. We aim to correct market failures such as a lack of corporate disclosure on ESG risks and climate change – at a national, European Union, Organisation for Economic Co-operation and Development and United Nations level – to improve long-term policy outcomes.

    Climate change is one of the issues that greatly concerns us, with trillions of dollars at risk. We have taken the lead in engaging with companies and at the government level on the need to tackle climate change. Before the launch of the Sustainable Development Goals in 2015 and the Paris Agreement on Climate Change, for example, we published our Strategic Response to Climate Change. This set out the five pillars of our approach to tackling climate risk, built on our existing long-term approach to business and investment. We have identified a myriad of factors related to climate change that can affect potential investments and these are now routinely assessed as part of our decision-making process.

    Today, we believe we’re among the leaders in our industry in terms of investing responsibly. We are responsible owners who encourage greater transparency and sustainability and better corporate behaviours that help to reduce the risk for our clients. We challenge accepted practices and promote fresh debate in every industry in which we invest. In doing so, we create greater shareholder value while building a genuine legacy for our customers, our communities and the planet that we all share.

    In 2015 we commissioned The Economist Intelligence Unit to report on the Value at Risk from Climate Change to global investments, pensions and long term savings.

Multi-asset funds for today’s investors

The Aviva Investors multi-asset range of funds (MAF) provides investors with a one-stop investment shop, containing a diverse array of asset classes including equities, fixed income, commodities and property. The funds are run by specialist fund managers who decide how much to invest in the different asset classes and when to adjust the mix.

The MAF range comprises five funds, ranging from cautious to adventurous, so as to appeal to different types of investor. Each fund is carefully managed in an effort to ensure they stay in line with their risk objectives year after year.

Multi-asset investing has been at the heart of our fund management business for more than a decade. Our multi-asset team contains over 32 investment professionals, including economists, strategists and portfolio managers and as at 30 September 2016 oversaw in excess of £80 billion of assets.

Our global reach allows us to identify opportunities from across the world, so avoiding the home bias of many competing funds. Again unlike many other funds, we adjust portfolio positions as market conditions require rather than simply on a quarterly or annual basis.

We recognise that no-one is right all the time, so our team regularly stress tests the portfolios against different scenarios we identify.

A new approach to asset allocation

Traditionally, multi-asset funds have divided the investment universe into three buckets: equities, fixed income, and alternatives. By contrast, we categorize assets as ‘growth’, ‘defensive’, or ‘uncorrelated’.

Growth assets contain equities as well as the more risky areas of fixed income such as emerging-market debt and high-yield corporate bonds.

Defensive assets consist of the low-risk areas of fixed income such as developed government bonds, investment-grade corporate bonds and cash. The defensive bucket should provide some protection to a portfolio when the growth assets come under pressure.

Uncorrelated assets contain absolute-return strategies and property. It is important to have exposure to them as they can reduce portfolio risk since they tend not to move in tandem with equities or bonds.

Moving up the risk spectrum from MAF l to MAF V, the allocation to the growth bucket increases, while the allocation to the defensive and uncorrelated buckets declines. So whereas the growth bucket may account for 20 per cent of MAF I’s assets, it may account for 90 per cent in MAF V. But within the three buckets themselves the proportions stay the same. So for example, if UK equities account for 10 per cent of the growth bucket, that means they would in this instance account for two per cent of MAF I’s assets and nine per cent of MAF V’s.

Normal market conditions

It is important that investors understand exactly what we mean by the terms, growth, defensive and uncorrelated. In each case, the term applies to how we expect particular assets to behave in what we call ‘normal’ market conditions.

By normal we mean when markets behave in a calm and orderly fashion and there is considerable liquidity, which allows investors to easily buy and sell assets, and when there are not large variations in the buying and selling prices. In these circumstances we would expect growth assets to generate capital growth for the portfolio.

Defensive assets should in normal market conditions be relatively uncorrelated to growth assets, and should therefore help protect the portfolio. So, usually, in times of market stress, defensive assets should rise in value and offset some or all of the losses incurred by growth assets, smoothing overall returns.

Finally, uncorrelated assets should in normal market conditions perform independently of the other two categories. In other words, they should deliver positive returns in most market conditions.

Of course, financial conditions are not always normal and sometimes these assets will behave differently to the way described above.

For example, we are conscious that interest rates, having been on a downward trend for decades, will go up eventually. That will potentially cause bond prices to fall. So at present, our funds have a greater allocation to uncorrelated assets and less to bonds, than in the case of many of our competitors.

The Aviva Investors multi-strategy range of funds

At Aviva Investors we want to take some of the fear of uncertainty out of the lives of investors while still aiming for a level of return they will be happy with.

That is why we designed the Aviva Investors multi-strategy (AIMS) range, which to date consists of the AIMS Target Income and AIMS Target Return funds.

Both funds look to achieve their objectives by combining a diverse range of strategies. The funds are very flexible. They are not constrained by a benchmark, and are not wholly dependent on ideas that are linked to the economic cycle.

The ability to hold both ‘long’ and ‘short’ positions means multi-strategy funds can perform well in all kinds of market conditions. Furthermore, returns tend to be relatively uncorrelated to equities, bonds and other traditional asset classes.

The AIMS Target Return fund

Key benefits:

Growing your clients’ investments

  • The fund targets a gross annual return of five per cent above the Bank of England’s base rate over rolling three-year periods under all market conditions.

Smoother returns in a range of market conditions

  • The fund has exposure to currencies, interest rates, equities, bonds, property and other more esoteric derivative contracts. Our fund managers combine a diverse mix of strategies that are expected to work well together however markets are performing.
  • Investing in multiple strategies rather than a single asset class, such as equities, can help to deliver smoother returns over time. The fund is managed with the aim of meeting its return objective with less than half the level of volatility of global equities.

We categorise the fund’s strategies into three types:

  • Market strategies aim to generate returns when our ‘house view’ - our assessment of the macroeconomic and financial market outlook - proves correct.
  • Opportunistic strategies focus on finding opportunities created when one asset looks mispriced relative to another. Such opportunities often occur as a result of the actions of governments or central banks.
  • Risk-reducing strategies aim to support performance in times of market stresses.

Of course, your client should consider that the fund’s objectives are not guaranteed and so their capital is at risk. They may get back less than they invested.

The AIMS Target Income fund

Key benefits:

Regular monthly income

  • The fund looks to earn an annual income of 4 per cent above the Bank of England base rate before corporation tax. Distributions are managed with the aim of paying out roughly one twelfth of the annual income target each month. To help in our efforts to make regular monthly payments we source income from various sources: dividends on equities, coupons from government and corporate bonds, dividends on REITs and option premia.
  • Corporation tax is payable on some, although not necessarily all, of the fund's income. As a result, the income actually received by your clients may be up to 20 per cent less than that generated by the fund. However, although corporation tax paid by the fund cannot be claimed back by investors, the distribution from the fund will carry a tax credit which may reduce their overall tax liability.

Capital preservation

  • The fund simultaneously seeks to generate sufficient growth to preserve capital regardless of how financial markets are faring. So income is never paid out of investors’ capital and the fund’s managers aim to ensure performance is less than half as volatile as that of global equities over any three-year period. The fund allows your clients full access to their capital at any time. Their investment can be passed directly to beneficiaries in the event of their death (subject to the relevant tax charges).

Diversification

  • To achieve these goals the fund’s managers combine a diverse range of investment strategies, drawing on ideas generated by investment professionals across our business.
  • The fund’s innovative investment approach means it can increase the diversification of traditional multi-asset portfolios. Furthermore, the use of derivatives means the portfolio can be quickly adjusted to ensure it remains appropriately positioned as the outlook for markets and economies shifts.

From April 2015, new UK government legislation provided investors with more flexibility in terms of their retirement plans. This fund is an attractive option for those looking for regular and attractive levels of income.

We aim to achieve these objectives regardless of what the markets are doing. These aims, however, are not guaranteed. The income your clients receive could be lower or higher than the stated objective. They may not get back the original amount invested.

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WA03386 11/2016