Managing the fund
A delicate balance
The Aviva Investors Multi-Strategy (AIMS) Target Income Fund uses a diverse range of income-producing strategies to meet income objectives, pay out at regular intervals, and preserve capital. All regardless of how financial markets are performing. All income paid out to investors is derived from income receipts alone, and not from a reduction in the fund's capital.
The freedom to meet objectives
Since the income generated by individual asset classes can fluctuate, building a portfolio to meet these goals is far from straightforward. To address these challenges, we do not benchmark the fund against any market or peer group. This gives managers the freedom to invest when and where they want, with income sources including dividends on equities and real-estate investment trusts, coupons on both government and corporate bonds and option premia.
The three investment strategies
In general, fund managers implement investment strategies that fall into three groups:
1. Market strategies to generate income
Looks at where our analysis of market conditions differs from others as it identifies opportunities that offer greatest value.
- Equities and REITS for dividend income.
- Higher-yielding bonds for coupon payments.
2. Opportunistic strategies to find short-term value
Focuses on identifying opportunities created by the actions of other market participants, such as over-reaction to short-term events.
Example: We write ‘out-of-the-money’ call options on individual equities that the fund already owns in cases where we believe the stock has limited upside potential.
3. Risk-reducing strategies to preserve capital and returns
Aim to add returns in difficult market conditions by seeking to identify strategies that make money if near-term market predictions don’t play out.
Example: ‘Long’ of Australian bonds. As one of the world’s biggest commodity exporters, Australia’s economy is especially sensitive to fortunes elsewhere. Were they to deteriorate, Australian bond prices ought to rise.
The investment process
To gauge the potential risk and reward of various investment ideas, Aviva Investors consider how our views differ from market expectations and, more importantly, why. We stress test them against a range of potential market scenarios, looking to capitalise on opportunities over three-year timeframes.
The five key components of our investment process
- House view. Our view on market outlook, business risk and potential value.
- Idea generation. Identifying suitable investment opportunities in the context of market conditions and Fund goals.
- Idea evaluation. Formulating market, opportunistic and risk reducing strategies. Assessing the strength of individual ideas.
- Portfolio construction. Blending strategies that work well together. Controlling, monitoring and testing strategies to ensure they diversify risk.
- Fund management. Managing the fund, cash flows and liquidity. Monitoring and rebalancing the portfolio.