The UK’s shock vote on 23 June to leave the European Union provided a stark reminder that nobody can predict the future. This kind of event shows the importance of building highly diversified portfolios capable of navigating volatile market environments.

Positioning

The AIMS fund range is designed to diversify risk whether asset prices are rising or falling and as such the ‘risk-reducing’ part of the portfolio seeks to provide a counterbalance to falling market returns.

In particular, the AIMS funds ‘long’ volatility positions across rates, equities and currencies fared well in the aftermath of the referendum, along with a defensive European credit strategy. Additionally, long Australian and Korean rates strategies aided performance, offsetting some of the negative returns generated by the market strategies.

Among market-return strategies, equity positions in continental Europe and Japan detracted the most from performance, though losses were limited due to their implementation via call options.

Finally, the funds’ opportunistic strategies also generated positive returns. Namely, short positions in equities and a US rates volatility position more than compensated for the negative contributions from inflation and negative-duration strategies.

Outlook

We believe that building a well-diversified portfolio aimed at being resilient whatever the investment climate is much more efficient than trading in difficult markets with heightened volatility and tight liquidity. The only change implemented in the portfolios following the referendum result was to add a short sterling currency position to benefit from any further weakness in the currency. The position has contributed positively towards performance in the days following the vote. We continue to scan the market for investment opportunities reflecting our long-term investment horizon of  three years.

Important information

This document is for professional clients and institutional/qualified investors only.   It is not to be distributed to or relied on by retail clients.

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 05 July 2016. Unless stated otherwise any opinions  expressed 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. 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.  Past performance is not a guide to the future.

Portfolio holdings are subject to change at any time without notice and information about specific securities should not be construed as a recommendation to buy or sell any securities.

Aviva Investors Multi Strategy Target Return Fund and the Aviva Investors Multi-Strategy Target Income Fund are sub-funds of Aviva Investors SICAV I; an open-ended investment company incorporated as a Société d'Investissement à Capital Variable in Luxembourg. It is authorised by the Commission de Surveillance du Secteur Financier (CSSF) and qualifies as an Undertaking for Collective Investment in Transferable Securities (UCITS) under Part I of the law of 17 December 2010 relating to undertakings for collective investment. The Management Company is Aviva Investors Luxembourg S.A. The Investment Manager is Aviva Investors Global Services Limited, regulated and authorised by the Financial Conduct Authority.

Issued and approved by Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: No. 1 Poultry, London EC2R 8EJ. Authorised and regulated by the Financial Conduct Authority and a member of the Investment Association. Contact us at Aviva Investors Global Services Limited, No. 1 Poultry, London EC2R 8EJ. Telephone calls to Aviva Investors may be recorded for training or monitoring purposes.

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