Perceptions of value are constantly changing in the investment industry, which has undergone seismic changes over the last decade so that advisers and their clients get better value for money.
They want solutions that can help them achieve their desired investment objectives, but don't come at a cost that eats into their savings or pension pots. And, with UK inflation at its highest level for decades and the Bank of England raising interest rates six times since December 2021, getting bang for your buck is more important than ever.
Regulation has played a key role in driving fund charges down. In 2011, the year before the changes that resulted from the Retail Distribution Review (RDR) came into effect, UK retail investors were paying on average 1.29 per cent in annual charges on active funds and 0.42 per cent for passive funds.[i]
If they wanted a mixed or multi-asset fund at the time, risk profiling was not part of the package, there was much less choice, while the asset class and geographic exposures was limited. Consideration of environmental, social and governance factors was non-existent, while updates on how funds were performing and how their managers were thinking about key issues were limited to monthly factsheets, received in the mail.
A new definition of value
A lot has changed in the past ten years to improve value for money and transparency for retail investors. RDR was undoubtedly a catalyst, introducing a raft of rules to make the retail investment market work better for consumers, including raising the minimal level of adviser qualifications and improving transparency around charges and services.
Meanwhile, a key outcome from the 2017 final report of the Financial Conduct Authority's Asset Management Study was the requirement for authorised fund managers to carry out annual value assessments for the funds they operate, rules which came into effect in 2020.
With more transparency around charges, performance, and the range of products available, retail investors can move quickly should they perceive a fund to be underperforming, uncompetitively priced, or both.
Not before time, asset managers have had to up their game. Take our multi-asset offering. We pride ourselves on our track record in this area - we've been managing multi-asset portfolios for over four decades, drawing on the expertise and perspectives of investment professionals across geographies and asset classes, and currently run around £98 billion in portfolios for Aviva and our external clients.
We recognise many investors are more price sensitive. They still want risk profiling, diversified exposure in terms of geographies and asset classes, and the prospect of competitive returns, but want to keep charges down.
Introducing MAF Core
This led us to introduce a new range of multi-asset funds in November 2020 - MAF Core. The five funds in the MAF Core range benefit from risk profiling, a global asset allocation approach (including the opportunity to get exposure to markets like global high yield and emerging-market debt), growth and defensive assets.
Furthermore, MAF Core applies an ESG overlay when investing in developed-market equities and sovereign bonds by tilting the benchmark index towards better-scoring[ii] ESG companies and countries, while maintaining a similar risk-return profile to the index.
MAF Core uses passive building blocks to keep charges down, with the ongoing charges figure capped at what we believe is a highly competitive 0.15 per cent a year.
Understanding investors want clarity on the potential performance they can expect as well as on charges, we also introduced a performance objective for MAF Core of 0.3 per cent of additional returns over its benchmark (annually, measured over three-year rolling periods) as well as different volatility risk targets. Setting targets makes us fully accountable for delivering the outcomes our investors expect. We also know that advisers and their clients want regular timely and engaging content that goes beyond what they read on a fact sheet. That's why we also produce a range of support materials - from our weekly Ask the Fund Manager video series to updates on the economic and investment environment, and from educational webinars to stories on ESG.
Retail investors have more investment options and information about how these stack up on costs, performance and ESG than ever before. That puts them in control over how they allocate their hard-earned savings - value-for-money is non-negotiable, which is exactly what we are trying to give them with our MAF Core range. And, as the market and the needs of our customers evolve, managers like us must be prepare.
[ii] benchmark is MSCI® World Index and Bloomberg® Global Aggregate Treasuries Index. Score used is based on our proprietary modelling based on third-party data inputs, including MSCI's ESG scores.
This post is funded by Aviva Investors
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 and exchange rates.
Investors may not get back the original amount invested.
The Fund uses derivatives, these can be complex and highly volatile. This means in unusual market conditions the Fund may suffer significant losses.
The Fund Invests in emerging markets, these markets may be volatile and carry higher risk than developed markets.
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited ("Aviva Investors"). 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 can go down as well as up. Investors may not get back the original amount invested.
The Aviva Investors Multi‐asset Funds comprise two ranges, each with five funds (together the "Funds"):Aviva Investors Multi-asset Plus Fund range comprises the Aviva Investors Multi‐asset Plus Fund I ("MAF Plus I"), the Aviva Investors Multi‐asset Fund Plus II ("MAF Plus II"), the Aviva Investors Multi‐asset Plus Fund III ("MAF Plus III"), the Aviva Investors Multi‐asset Plus Fund IV ("MAF Plus IV") and the Aviva Investors Multi‐asset Plus Fund V ("MAF Plus V") Aviva Investors Multi-asset Core Fund range comprises the Aviva Investors Multi‐asset Core Fund I ("MAF Core I"), the Aviva Investors Multi‐asset Fund Core II ("MAF Core II"), the Aviva Investors Multi‐asset Core Fund III ("MAF Core III"), the Aviva Investors Multi‐asset Core Fund IV ("MAF Core IV") and the Aviva Investors Multi‐asset Core Fund V ("MAF Core V")
The Funds are sub-funds of the Aviva Investors Portfolio Funds ICVC. For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies in English can be obtained free of charge from Aviva Investors UK Fund Services Limited, St Helen's, 1 Undershaft, London EC3P 3DQ. You can also download copies from our website. Issued by Aviva Investors UK Fund Services Limited. Registered in England No 1973412. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119310. Registered address: St.Helen's, 1 Undershaft, London, EC3P 3DQ. An Aviva company.