Aviva Investors AIMS Target Return celebrates strong performance at one year anniversary.
Since launch on 1 July 2014, the fund has returned 8.02%* net of institutional fees. Daily volatility was 4.06% annualised, little more than a third of that of global equities**. By comparison, the fund’s objective is to deliver an average annual return of 5% above the Bank of England base rate before charges over three-year periods with volatility that is less than half that of global equities.***
Euan Munro, Chief Executive, Aviva Investors, said:
“The launch of the AIMS range one year ago was the clear expression of our renewed focus as a business to deliver outcome-oriented solutions shaped to meet the financial goals of customers. AIMS Target Return in particular was launched in the belief our customers were keen to receive steady investment returns regardless of how financial markets were faring. I am delighted that the fund has performed so impressively in its first year and am convinced it is well placed to meet its longer-term objectives."
Speaking on the investment decisions that helped drive fund performance so far, Peter Fitzgerald, Head of Multi-Assets and co-manager of the fund, said:
“We do not believe that anyone can predict the future. It is therefore essential to build a portfolio that will do well even when you are wrong or when markets are volatile. This focus on portfolio construction and risk is an essential part of the process. In the market returns section of the portfolio we favoured European and Japanese equities driven primarily by expansionary policies from their respective central banks.
“In our risk reducing returns section of the portfolio, where we explicitly look for ideas that will do well in difficult periods, the fund held ‘long’ positions in the dollar against a variety of other currencies – notably the euro, sterling, Canadian dollar, Mexican peso and Australian dollar – due to our belief a stronger US economy would push the Federal Reserve ever closer to raising interest rates. These positions were especially profitable as the dollar climbed sharply.
“Our view on the outlook for economies and interest rates guided a variety of strategies in fixed income markets in this section of the portfolio, a number of which again proved profitable. They included long positions in the fixed-income markets of Australia and South Korea, and a strategy that anticipated a flattening of the Italian yield curve. A strategy that anticipated rising US interest rates also paid off.
“Because we implement strategies according to a three-year view, there has been limited turnover of positions since the fund was launched. We have, however, made some adjustments, including recently refining our US equity strategy. Whereas we were previously simply long US equities, we are now long shares in the US ‘consumer discretionary’ sector as we believe commodity prices in general, and oil prices in particular, are likely to remain weak. This should have the effect of boosting spending by US consumers. It should simultaneously depress the share prices of energy, and other raw material producing, companies. We also took profit on our long US dollar/ short Canadian dollar position, while we went short of the Mexican peso and Australian dollar to boost the diversity of our dollar positions.
“Looking forward, we believe economic performance, and hence interest rates, will continue to diverge around the world and this view continues to drive many of the fund’s positions across asset classes.”
The fund was recently added to independent investment research business Square Mile Investment Consulting & Research’s (Square Mile) Academy of Funds, with a Positive Prospect (P+) rating. Square Mile's independent, qualitative research is designed to offer advisers a solid foundation for client investment propositions and recommendations.
Jason Broomer, Square Mile's Head of Investment, said:
"This is a new strategy for Aviva Investors and a complex one at that. Normally we would only consider a fund that has had its robustness tested over at least one market cycle. In this instance we are prepared to consider the fund much earlier largely because of the impetus that Aviva Investors’ CEO, Euan Munro brings to the product.
Aviva Investors Multi-Strategy Target Return Fund also achieved a ‘Positive Watch’ status from City Financial in April 2015.
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* Past performance is not a guide to the future.
** Source: Aviva Investors and Bloomberg, as at 1 July 2015.
*** Source Aviva Investors and Bloomberg as at 1 July 2015. Performance quoted for share class 2 (platform/institutional). Performance is total return on a mid to mid price basis, net ongoing charges with net income reinvested for a UK basic rate taxpayer.