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THE GROWTH OF MULTI-ASSET FUNDS Justin Onuekwusi, CFA Multi-asset Fund Manager January 2013 This document is for financial advisers only. It is not to be viewed by or used with retail clients. TREND OR FAD?
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Page 1: Aviva investors

THE GROWTH OF MULTI-ASSET FUNDS

Justin Onuekwusi, CFA

Multi-asset Fund Manager

January 2013

This document is for financial advisers only. It is not to be viewed by or used with retail clients.

TREND OR FAD?

Page 2: Aviva investors

EVOLUTION OF MULTI-ASSET FUNDS

2

Page 3: Aviva investors

4%

6%

8%

10%

4% 6% 8% 10% 12% 14% 16%

SMOOTHER RETURNS FOR THE PEER GROUPS?

Source: Lipper Global Funds database. Absolute risk is measured by standard deviation of the monthly returns of the IMA peer group 1 January 1990 to 31 December 2010. Bid to bid, net of fees in sterling. Retail share class and onshore. Global Equity is Association of British Insurers peer group.

IMA multi-asset peer group annual average returns1990-2010

IMA Mixed Investment 20-60% Shares

IMA Mixed Investment 40-85% Shares

IMA Flexible Investment

Global Equity

3

Risk

Retu

rn

Page 4: Aviva investors

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Top performer 4.08 31.18 23.71 32.66 27.17 21.66 14.66 37.47 21.08 8.52

Average

Performance

-17.65 17.40 8.96 19.81 9.84 4.14 -21.75 19.97 12.34 -5.61

Bottom Performer -26.36 9.05 6.00 14.21 -1.93 -2.01 -38.51 -0.01 6.67 -

18.74

FTSE All -Share -22.68 20.86 12.84 22.04 16.75 5.32 -29.93 30.12 14.51 -3.46

GOVERNANCE AND RISK CONTROLS THE COST OF GETTING IT WRONG

4

IMA Mixed Investment 40-85% Shares* – Year on Year Performance table

10% of IMA Mixed Investments 40-85% Shares* underperformed 100% equity index

>50% dispersion between top and bottom performers

*IMA sector name changed on 1 January 2012, previously known as IMA Balanced Managed sector. Source: Lipper Global Funds database as at 31 December 2011. Yearly returns of the IMA Mixed Investment 40-85% Shares peer group. Bid to bid, net of fees in sterling. Retail share class and onshore. Past performance is not a guide to the future.

Page 5: Aviva investors

TARGETING RISK THE EVOLUTION OF MULTI-ASSET FUNDS

Peer group

benchmarks

Target Return

Target Risk

The old way –

traditional

balanced managed

Composite

benchmark vs.

absolute return

Designed to meet your

clients’ attitude to risk

The next generation?

Multi-Asset Funds (MAF) Team 5

…but what

about risk “Looking over your

Shoulder”

Page 6: Aviva investors

EXPANSION OF THE UNIVERSE

Multi-Asset Funds or “New balanced” is now dominating the investment landscape for mixed asset strategies

Traditional Managed Fund

Truly Multi-Asset

Solution

6

Page 7: Aviva investors

BLENDING ACTIVE AND PASSIVE

7

Active Passive

Cost effective, potentially improved

risk-adjusted returns

Page 8: Aviva investors

RISK TARGETING FUNDS THE NEXT GENERATION

8

Page 9: Aviva investors

RETAIL DISTRIBUTION REVIEW SUITABILITY AND OUTSOURCING

Page 10: Aviva investors

INTRODUCING ABSOLUTE RISK FUNDS TARGETING A BAND OF VOLATILITY (6 APRIL 2012)

10

Funds aim to achieve highest return within defined risk bands

The five funds have differing levels of risk target. Note this ‘risk’ is how volatile the fund’s performance is by itself (‘absolute risk’) and not how

volatile it is compared to other funds (‘relative risk’). The Funds aim to remain within volatility bands on a rolling 3-year basis.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

\

II III IV V Volatility

range for each

fund

% Volatility

I

Page 11: Aviva investors

AVIVA INVESTORS MULTI-ASSET FUNDS CHARACTERISTICS

Risk Targeting

Dynamic asset

allocation

Internal and

external managers

Active/ passive blend

NURS

IMA Specialist

Page 12: Aviva investors

KEY BENEFITS AVIVA INVESTORS MULTI-ASSET FUNDS

– Solution to help you meet your clients’ needs in the post RDR environment creat

– Truly long-term diversified multi-asset solution

– Managed by a specialist team – central capability to Aviva Investors

12

For further information about the risks involved when investing in these Funds please read the Key Investor Information Document and Supplementary Information Document when issued. Copies can be obtained by visiting our website www.avivainvestors.co.uk

Page 13: Aviva investors

AVIVA INVESTORS MULTI ASSET FUND II* PERFORMANCE

Source: Aviva Investors / Lipper Hindsight as at 31 December 2012. Performance is net of fees in sterling, retail share class 1, income reinvested, mid prices as of mid day. *The Fund name changed on 6 February 2012 – previously known as Aviva Investors Cautious Multi -asset Fund. Past performance is not a guide to the future.

-4

-2

0

2

4

6

8

10

12

Perc

en

tag

e g

row

th

Percentage Growth Total Return, Tax default, in LC

Aviva Investors Multi-asset Fund II

IMA Mixed Investment 20-60% Shares

13

Page 14: Aviva investors

AVIVA INVESTORS MULTI-ASSET FUND IV* PERFORMANCE

Source: Aviva Investors / Lipper Hindsight as at 31 December 2012. Performance is net of fees in sterling, retail share class 1, income reinvested, mid prices as of mid day. *The Fund name changed on 6 February 2012 – previously known as Aviva Investors Balanced Multi -asset Fund. Past performance is not a guide to the future.

-10

-5

0

5

10

15

Perc

en

tag

e g

row

th

Percentage Growth Total Return, Tax default, in LC

Aviva Investors Multi-asset Fund IV

IMA Flexible

14

Page 15: Aviva investors

AVIVA INVESTORS MULTI-ASSET FUND V* PERFORMANCE

Source: Aviva Investors / Lipper Hindsight as at 31 December 2012. Performance is net of fees in sterling, retail share class 1, income reinvested, mid prices as of mid day. *The Fund name changed on 6 February 2012 – previously known as Aviva Investors Adventurous Multi -asset Fund. Past performance is not a guide to the future.

-15

-10

-5

0

5

10

15

Perc

en

tag

e g

row

th

Percentage Growth Total Return, Tax default, in LC

Aviva Investors Multi-asset Fund V

IMA Global

15

Page 16: Aviva investors

FUND POSITIONING AS AT 31 DECEMBER 2012

Exposure (%) MAF I MAF II MAF III MAF IV MAF V

UK Equity 4.1% 5.1% 9.7% 10.4% 6.8%

European Equity 2.7% 11.0% 12.7% 17.6% 6.2%

North America Equity 8.0% 17.2% 24.6% 24.9% 7.4%

Japanese Equity 1.0% 1.9% 3.0% 3.4% 3.4%

Pacific Basin Equity 2.1% 5.2% 5.1% 12.6% 5.0%

EMEA equities 0.1% 0.7% 1.5% 2.8% 16.9%

Asia equities 0.3% 2.3% 5.1% 9.7% 28.4%

LATAM equities 0.1% 0.8% 1.7% 3.3% 20.9%

Total equities 18.3% 44.2% 63.5% 84.6% 95.0%

Convertibles 0.0% 2.0% 3.0% 1.9% 0.0%

Gilts 4.7% 3.9% 0.2% 0.0% 0.0%

UK Credits 3.0% 4.4% 4.9% 0.9% 0.0%

EM Govt Bonds(local ccy) 1.0% 2.4% 2.8% 1.8% 2.7%

EM Bonds ($) 0.0% 0.0% 0.0% 0.0% 0.0%

EM Linkers 0.0% 0.0% 0.0% 0.4% 0.0%

Developed Bonds 28.1% 24.2% 8.7% 0.9% 0.0%

Global High Yield 2.8% 2.1% 5.0% 1.0% 1.9%

Total Fixed Income 39.6% 37.1% 21.5% 4.9% 4.6%

Commodities 0.4% 1.7% 3.5% 2.2% 0.8%

Property 3.4% 4.3% 3.2% 2.8% 0.0%

Absolute Return 2.2% 1.4% 1.1% 0.9% 0.0%

Cash 36.0% 9.3% 4.3% 2.6% 0.0%

16 Source: Aviva Investors

Page 17: Aviva investors

SUMMARY

– Multi-asset funds becoming more popular due to their many benefits

– Evolution of multi-asset funds – From peer groups to absolute risk

– Trend or Fad?

– Absolute risk – the next generation of multi-asset funds

17

Page 18: Aviva investors

IMPORTANT INFORMATION

This document is intended for professional investors and experienced advisors only. The content is not approved for use with retail investors. The information provided in this document and any appendix is confidential and should only be used for the purposes requested. Except where stated as otherwise, the source of all information is Aviva Investors as at 31 December 2012. Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors. No part of this document is intended to constitute advice or recommendations of any nature. Where performance has been illustrated it is not intended to be a guide to the future. Full details of the Aviva Investors products and services are available on request. The value of assets are subject to market fluctuations and can move irrationally and be unpredictably affected by many and various factors including political and economic events and rumours and as such the value of investments may go down as well as up and your clients may receive less than the original amount invested. Past performance is not a guide to the future. There can be no assurance that these Funds will meet their investment objectives or that they will stay within their target volatility ranges. As the Funds will be subject to short-term market fluctuations and they aim, on average, to reflect investor risk profiles, over any three year period, they should be viewed as medium to long-term investments. As these Funds may invest outside of the UK in assets denominated in currencies other than sterling, any currency exchange rate movement may cause the value of an investment to fall as well as rise. For further information please read the Key Investor Information Document and Supplementary Information Document. Copies can be obtained by visiting our website www.avivainvestors.co.uk Aviva Investors is a business name of Aviva Investors UK Fund Services Limited, the Authorised Fund Manager. Registered in England No. 1973412. Authorised and regulated by the Financial Services Authority. FSA Registered No. 119310. Registered address: No 1. Poultry, London EC2R 8EJ. An Aviva company. www.avivainvestors.co.uk

CI062230 09/2012 18


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