Asset allocation changes to Select Risk Portfolios

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As part of our normal review process, we’ve made some changes to the asset allocations of our Select Risk Portfolios, which you can see details of in the tables below this article. These changes were effective from 19 October 2017.

What’s changed?

The main changes are:

  • The removal of property exposure from all portfolios. Property exposure had previously been gained via the Property fund.
  • Reduced equity (shares) exposure in the five least risky portfolios, including a reduced exposure to Europe ex UK equities and US equities.
  • Increased sterling exposure through cash and UK equities.

As a result of these changes, the fund charge (this is the charge you see on our fund factsheets) for the Balanced Plus Select Portfolio and Cautious Select Portfolio will reduce. Details of this reduction are outlined in the table below:

Fund charge changes to Aegon Retirement Choices (ARC) funds

Fund charge changes to Aegon Retirement Choices (ARC) funds

Fund name

Old fund charge

New fund charge, effective 19 October 2017*

Growth Plus Select Portfolio

0.85%

0.80%

Balanced Select Portfolio

0.75%

0.70%

*This is on top of any product or adviser charge you pay and includes a fixed management fee plus expenses that vary with the day to day costs of running the fund.

Fund charge changes to Packaged funds

Fund charge changes to Packaged funds
Fund nameOld fund chargeNew fund charge, effective 19 October 2017*
Balanced Plus Select Portfolio 1.65% 1.60%
Cautious Select Portfolio 1.55% 1.50%

*This includes a standard 1% product charge, a fixed management fee and expenses that vary with the day to day costs of running the fund. You may pay a different product charge.

Additional charges and expenses for some of the underlying Select Sector funds will also change. This will be detailed in a separate update. Please see the ‘Fund changes and news’ section on our website for more information.

Why have these changes been made?

We use independent consultant, Morningstar Investment Management Europe Limited (Morningstar) to help us build and manage the Select Risk Portfolios. Morningstar takes strategic and tactical asset allocation decisions with the aim of meeting two primary objectives, which are:

  • to keep within targeted risk ranges over a market cycle (which can last three to five years or even longer) and
  • to deliver the best possible performance for the amount of risk taken.

To meet these objectives, Morningstar regularly reviews the portfolios and recommends changes it believes will help the funds best achieve these objectives.

Removal of property exposure

On the removal of property exposure, Morningstar said:

‘UK Commercial Property, which includes direct investments in offices, industrial and retail space, has been a strong contributor to the portfolios performance over the last three years. However, given the narrowing of yields on offer from UK commercial property and the limited capital growth prospects, the asset class is deemed less attractive. As a result, we have taken the allocation to zero’.

(Source: Morningstar)

Reduced equity exposure

Morningstar has reduced equity exposure across all but the Adventurous Select Portfolio because the price of equities has risen and Morningstar believes they now look overvalued. Morningstar notes:

‘Europe ex UK equities have performed particularly strongly in recent months. Following a detailed review of the asset class we have less confidence in this sector’s prospects.’

(Source: Morningstar)

Increased exposure to cash and sterling

On the increase in cash exposure, Morningstar said:

‘Given the lack of attractiveness from equities and fixed income assets, we recommend raising cash levels further across the range of portfolios, partly to help reduce downside risk. We’ve also recommended increased exposure to Sterling through a combination of increasing cash, reduced overseas equity and increased UK equity exposure because, having fallen greatly since Brexit, we expect that over the medium to long term the UK and sterling should outperform given their valuation attractions.’

Please note – we reserve the right to add, remove and replace funds within the Select Risk Profile Portfolios or alter weightings between funds with the aim of making sure they continue to meet their aims and objectives. We reserve the right to change these without prior notification.

Past performance is no guide to future performance. There’s no guarantee that the funds will meet their objectives. The value of investments may go down as well as up. Investors may get back less than they invest.

What does this mean for investors?

Existing investors don’t need to do anything. There are no other changes to the Select Risk Portfolios. The risk ratings, fund objectives have remained the same.  

We’ll be updating our literature with these changes from 19 October 2017 onwards so you may notice both the old and new fund details in use for a time. If you would like more information, please speak to your financial adviser. If you don’t have one, you can find one in your area at unbiased.co.uk

The asset allocation changes in more detail

Cautious Select Portfolio
Cautious Select PortfolioOld allocationNew allocationDifference -/+
UK Corporate Bond Select Portfolio 19.0% 19.0% 0.0%
UK Equity Select Portfolio 16.0% 17.0% 1.0%
International Bond Select Portfolio 13.0% 14.0% 1.0%
Scottish Equitable Cash 12.0% 21.0% 9.0%
UK Gilts All Stocks Tracker 10.0% 10.0% 0.0%
Scottish Equitable Index Linked 8.0% 5.0% -3.0%
North American Equity Select Portfolio 6.0% 4.0% -2.0%
European Equity Select Portfolio 5.0% 3.0% -2.0%
Japanese Equity Select Portfolio 4.0% 4.0% 0.0%
Property Select Portfolio 4.0% 0.0% -4.0%
Global Emerging Markets Equity Select Portfolio 3.0% 3.0% 0.0%
Balanced Select Portfolio
Balanced Select PortfolioOld allocationNew allocationDifference -/+
UK Equity Select Portfolio 23.0% 24.0% 1.0%
UK Corporate Bond Select Portfolio 17.0% 17.0% 0.0%
International Bond Select Portfolio 12.0% 13.0% 1.0%
Scottish Equitable Cash 8.0% 16.0% 8.0%
North American Equity Select Portfolio 7.0% 6.0% -1.0%
European Equity Select Portfolio 7.0% 6.0% -1.0%
Property Select Portfolio 6.0% 0.0% -6.0%
UK Gilts All Stocks Tracker 6.0% 6.0% 0.0%
Japanese Equity Select Portfolio 5.0% 5.0% 0.0%
Global Emerging Markets Equity Select Portfolio 5.0% 5.0% 0.0%
Scottish Equitable Index Linked 4.0% 2.0% -2.0%
Balanced Plus Select Portfolio
Balanced Plus Select PortfolioOld allocationNew allocationDifference -/+
UK Equity Select Portfolio 27.0% 28.0% 1.0%
UK Corporate Bond Select Portfolio 11.0% 11.0% 0.0%
North American Equity Select Portfolio 10.0% 9.0% -1.0%
International Bond Select Portfolio 10.0% 12.0% 2.0%
European Equity Select Portfolio 9.0% 8.0% -1.0%
Japanese Equity Select Portfolio 7.0% 7.0% 0.0%
Global Emerging Markets Equity Select Portfolio 7.0% 7.0% 0.0%
Property Select Portfolio 6.0% 0.0% -6.0%
Scottish Equitable Cash 5.0% 11.0% 6.0%
Scottish Equitable Index Linked 4.0% 2.0% -2.0%
Asian Equity Select Portfolio 2.0% 3.0% 1.0%
UK Gilts All Stocks Tracker 2.0% 2.0% 0.0%
Growth Select Portfolio
Growth Select PortfolioOld allocationNew allocationDifference -/+
UK Equity Select Portfolio 32.0% 34.0% 2.0%
North American Equity Select Portfolio 12.0% 10.0% -2.0%
European Equity Select Portfolio 10.0% 9.0% -1.0%
Japanese Equity Select Portfolio 9.0% 9.0% 0.0%
Global Emerging Markets Equity Select Portfolio 8.0% 10.0% 2.0%
Property Select Portfolio 7.0% 0.0% -7.0%
UK Corporate Bond Select Portfolio 7.0% 7.0% 0.0%
International Bond Select Portfolio 6.0% 6.0% 0.0%
Asian Equity Select Portfolio 4.0% 4.0% 0.0%
Scottish Equitable Cash 3.0% 9.0% 6.0%
UK Gilts All Stocks Tracker 2.0% 2.0% 0.0%
Growth Plus Select Portfolio
Growth Plus Select PortfolioOld allocationNew allocationDifference -/+
UK Equity Select Portfolio 36.0% 40.0% 4.0%
North American Equity Select Portfolio 14.0% 11.0% -3.0%
European Equity Select Portfolio 11.0% 11.0% 0.0%
Global Emerging Markets Equity Select Portfolio 11.0% 12.0% 1.0%
Japanese Equity Select Portfolio 10.0% 10.0% 0.0%/td>
Asian Equity Select Portfolio 5.0% 5.0% 0.0%
Property Select Portfolio 5.0% 0.0% -5.0%
International Bond Select Portfolio 4.0% 4.0% 0.0%
UK Corporate Bond Select Portfolio 4.0% 4.0% 0.0%
Scottish Equitable Cash 0.0% 3.0% 3.0%
Adventurous Select Portfolio
Adventurous Select PortfolioOld allocationNew allocationDifference -/+
UK Equity Select Portfolio 37.0% 42.0% 5.0%
North American Equity Select Portfolio 18.0% 14.0% -4.0%
Global Emerging Markets Equity Select Portfolio 14.0% 14.0% 0.0%
European Equity Select Portfolio 12.0% 12.0% 0.0%
Japanese Equity Select Portfolio 12.0% 12.0% 0.0%
Asian Equity Select Portfolio 7.0% 6.0% -1.0%

Source: Aegon UK & Morningstar – October 2017

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