• Fixed Income
  • Credit
  • Strategic Bond

Solving the chocolate box problem: The Aviva Investors Strategic Bond Fund

The opacity and wildly differing risk-return profiles of strategic bond funds can be a headache for advisers. We explain how the Aviva Investors Strategic Bond Fund could provide a viable solution.

“Life is like a box of chocolates; you never know what you’re going to get.” – Forrest Gump

The flexibility of strategic bond funds makes them a popular component of many UK retail investors’ portfolios. With £41 billion in assets managed across 92 funds, the Investment Association’s (IA) Sterling Strategic Bond sector is second only to the Sterling Corporate Bond sector in terms of assets under management within fixed income funds.1

Yet the lack of constraints on asset allocation – managers can invest globally across a range of asset classes, including government bonds, investment-grade credit, high-yield and emerging-market debt, and even hold up to 20 per cent in equities – makes for a diverse population of funds marked by a range of investment approaches and risk/return profiles.

The sector is also opaque. Many strategic bond funds are not managed against a recognised benchmark; instead, many asset managers compare performance with a handpicked peer group of other strategic bond funds, the composition of which is not always disclosed in marketing materials or on their websites.

This diversity and lack of transparency creates a problem for financial advisers: like Forrest Gump’s chocolate box, how do you know what you are going to get when you select a strategic bond fund? How do you know it will meet your clients’ investment needs?

Download ‘Solving the chocolate box problem to understand:

  • The three main problems facing advisers when selecting strategic bond funds
  • The importance of a dynamic approach to fixed income asset allocation
  • Why we believe the Aviva Investors Strategic Bond Fund offers a compelling solution

Key risks

Investment risk and currency risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency exchange rates. Investors may not get back the original amount invested.

Illiquid securities risk

Certain assets held in the fund could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Credit risk

Bond values are affected by changes in interest rates and the bond issuer's creditworthiness. Bonds that offer the potential for a higher income typically have a greater risk of default.

Derivatives risk

The fund uses derivatives; these can be complex and highly volatile. Derivatives may not perform as expected, which means the fund may suffer significant losses.

Convertible securities risk

Convertible bonds can earn less income than comparable debt securities and less growth than comparable equity securities, and carry a high level of risk.

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THIS IS A MARKETING COMMUNICATION

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK Issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: St Helens, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

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The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom. Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is registered with the Ontario Securities Commission (“OSC”) as a Portfolio Manager, an Exempt Market Dealer, and a Commodity Trading Manager. Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas LLC ("AIA") is a federally registered investment advisor with the US Securities and Exchange Commission. AIA is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.