MI Savings portfolios
These portfolios cater for savers who are concerned about investment loss. The four funds offer straightforward access to a sophisticated risk-management process, executed by leading fund manager BlackRock. We believe this process can cushion savers from sharp and sustained market falls. All they need to do is agree, and regularly review, their risk appetite with their adviser.
- Let savers choose the balance of risk and long-term growth potential
- Come with an extra layer of risk management that moves some of the fund into safer investments when BlackRock thinks markets are likely to suffer a sharp and sustained fall
- Hold mainly low-cost investments
- Are backed by our Funds Promise, so we monitor them and make changes if we need to.
How the portfolios manage risk
BlackRock uses sophisticated asset allocation techniques to work out the optimal long-term strategic asset mix that matches each portfolio’s target risk level.
The added safeguard moves money out of the diversified mix into safer investments, like cash, when the portfolio’s volatility gets too high and we think markets are likely to suffer large and sustained falls like we saw in the credit crunch. When volatility reduces, the portfolio moves back to its original diversified mix.
Chart depicting how Aegon uses added risk-management safeguard.
If volatility is too high we move 20% into safer investments.
If volatility is low we move back 5% at a time.
BlackRock may use its discretion to de-risk or re-risk by amounts other than those stated above.
Why the safeguard works
When market risk goes up, markets have tended to fall, as you can see from the chart below. By moving into safer investments, savers may be cushioned from the worst of these falls.
Naturally, this can limit returns if risk goes up and markets do too, or if markets bounce back quickly.
Line graph depicting Market value (FTSE 100 unit price range 3000 to 7000), against Market risk (FTSE V/X unit price range 5 to 55) from 2008 to 2013.
Risk management in practice
The chart shows how the process could have worked during the credit crunch, if the funds had been available at that time.
Line graph depicting the return (range between £60 to £110) of a fund with safeguard and a fund without safeguard, between July 2007 and July 2010.
Source: BlackRock. Returns show how MI Savings (M) could have performed, based on its asset allocation at launch in April 2013 (43.8% overseas equity, 26.3% UK equity, 27.3% bonds and 2.6% global property). The chart assumes that the mix of investments only changes when the fund de-risks or re-risks. In reality, BlackRock would have changed it to adapt to market conditions too. The fund didn't exist over this period, so the chart is for illustration only. Past performance, whether simulated or actual, isn't a reliable indicator of future performance.
All our fund ranges are monitored to check we’re keeping our funds promise, but we also apply our Managed Intelligently process to our MI Savings funds. This process:
- Creates funds that meet the needs of savers
- Selects the best manager for the fund
- Regularly reviews the strategy and makes any changes if needed
There’s no guarantee that fund objectives will be met and investors may get back less than originally invested.