Changes to our Universal Balanced Collection, Universal Lifestyle Collection & UBC Workplace Target funds

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For customers

We’re making changes to our Universal Balanced Collection (UBC), Universal Lifestyle Collection (ULC) and UBC Workplace Target funds.

We’re making some changes to the Universal Balanced Collection (UBC) and all funds which use the UBC as part of their investment strategy across our pension fund ranges. The changes will be completed by 30 April 2018.

We’re making these changes to improve the fund’s ability to meet its stated objectives. The UBC has a flexible mandate which allows us to change the asset allocation and underlying investments.  We’re therefore changing some of the underlying funds in the UBC (and associated funds) and the mix of underlying investments. We’re also making some changes to the fund description to better reflect the flexibility of the fund’s mandate.

The fund charge will not change as a result of the changes we are making.

The affected funds are:

  • Universal Balanced Collection pension
  • Universal Balanced Collection (ARC)
  • Universal Lifestyle Collection pension
  • Universal Lifestyle Collection (ARC)
  • Universal Balanced Collection (Annuity Target) pension
  • Universal Balanced Collection (Annuity Target) ARC
  • Universal Balanced Collection (Flexible Target) pension
  • Universal Balanced Collection (Flexible Target) ARC

Please note, our life and Aegon Ireland versions of the fund will not change.

We reserve the right to add, remove and replace funds within the UBC with the aim of making sure it continues to meet its aims and objectives.

How the UBC currently invests?

The UBC currently invests in three funds:

  • Balanced Passive fund – 65% of the fund – managed by BlackRock.
  • External Balanced Collection (EBC) – 20% of the fund split equally between five managers including, Baillie Gifford, BlackRock, Newton, Man GLG, and UBS.
  • Kames Asset Allocator fund – 15% of the fund managed by Kames Capital.

What’s changing from 30 April 2018?

  • The Balanced Passive fund will be replaced by the Aegon Diversified fund and its allocation will increase from 65% to 70%.
  • The EBC will be removed and replaced by 4 of the 5 funds that it currently invests in. This will account for 15% of the UBC as opposed to 20% currently allocated to the EBC.
  • The UBC’s investment in the Kames Asset Allocator remains unchanged at 15%.
Current UBC structure prior to 30 April 2018 New UBC structure from to 30 April 2018
Fund Allocation Fund Allocation
Balanced Passive 65% Aegon Diversified 70%
EBC 20%
  • SE BlackRock Balanced Managed
  • SE Newton Balanced Managed
  • SE MAN GLG Balanced Managed
  • SE Baillie Gifford Balanced Managed
15% split equally (3.75%) between four funds
Kames Asset Allocator 15% No change 15%
Total 100%   100%

We will review this regularly and may make changes from time to time.

Changes in more detail

Balanced Passive

The Balanced Passive will be replaced by the Aegon Diversified fund and the amount of the UBC it makes up will increase to 70%. The main difference between the two funds is that, while both are managed by BlackRock and invest in passive underlying investments, the investment mix (asset allocation) of the new fund is actively managed.

The differences between each fund are outlined below:

  Balanced Passive Aegon Diversified
Fund manager BlackRock BlackRock
Management style
  • Passive management.
  • The manager aims to match the performance of a benchmark index by investing in the same, or highly comparable, assets in the same proportions as the index.
  • Active asset allocation of passive investments.
  • The manager uses passive investments but actively decides the amount to invest in each one rather than trying to match a benchmark index or market.
Fund aim
  • To achieve long-term capital growth in line with the index it seeks to match
  • To achieve long-term capital growth which exceeds the index
Currency hedging
  • The fund does not use currency hedging.
  • The fund can be affected by changes to currency exchange rates.
  • The fund has the ability to hedge to sterling.
  • This is designed to manage risks of currency exchange rate changes.
Withholding tax efficiency (tax paid on overseas dividends)
  • Balanced Passive – does not benefit from withholding tax efficiency
  • Aegon Diversified – fund structure does benefit from withholding tax efficiency on dividends paid by US and Japanese companies for the benefit of investors

External Balanced Collection

The External Balanced Collection currently makes up 20% of the UBC. It invests in a mix of funds from five of our investment managers, currently Baillie Gifford, BlackRock, Newton, GLG Partners and UBS Global Asset Management.

The EBC will be removed from the UBC and replaced by four of the five funds that currently make up the EBC. These will now be held individually by the UBC. It will also reduce from 20% of the fund to 15%. The remaining funds are listed below and will each comprise 3.75% of the UBC:

  • SE Baillie Gifford Balanced Managed
  • SE BlackRock Balanced Managed
  • SE Man GLG Balanced Managed
  • SE Newton Balanced Managed

The SE UBS Balanced managed fund will no longer form part of the overall UBC.

Kames Asset Allocator fund

There will be no change to the UBC’s investment in the Kames Asset Allocator fund.

Why we’re making these changes

We believe the changes we’re making will give us greater flexibility to adapt to different market conditions.

By separating out the active funds held in the EBC, it will be simpler to replace managers and increase or decrease the proportion invested in each. We also believe that this change will improve the performance of the UBC given all components will now benefit from more active asset allocation, although there is no guarantee this will be the case.

By replacing the Balanced Passive with the new Aegon Diversified fund, we will also be able to better manage currency risk and improve tax efficiency.

What this means for investors

The fund’s objectives, Aegon risk rating, and the charges you pay for the UBC remain the same. 

There are some one-off costs associated with these changes, which are standard expenses when investments are traded in a fund to change the mix of investments. The changes will take place over the course of several weeks to try to minimise their cost impact. As with any investment fund, charges and additional expenses can vary over time. However, we expect any costs to be neutral over a one-year period due to taxation gains as a result of the changes, however there is of course no guarantee.

You’ll also notice updated fund objectives on the factsheets for all funds investing in the UBC from 30 April 2018 onwards. The old and new fund descriptions for the main UBC fund are outlined below.

UBC fund objective prior to 30 April 2018 UBC fund objective post 30 April 2018
This fund aims to achieve long-term capital growth by investing in an internationally diversified portfolio, largely made up of equities (shares in companies). It currently invests 65% in the Balanced Passive Fund, 20% in the External Balanced Collection (EBC) and 15% in the Kames Asset Allocator fund. The Balanced Passive is passively managed and aims to broadly match the performance of the Association of British Insurers (ABI) Mixed Investment 40-85% Shares sector average but may fall short of this aim when market conditions offer particularly strong opportunities to actively managed funds. The EBC invests in a mix of actively managed funds from five investment managers, currently Baillie Gifford, BlackRock, Newton, GLG and UBS Global Asset Management. We reserve the right to add, remove and replace funds within the Universal Balanced Collection with the aim of making sure they continue to meet their aims and objectives. This fund aims to achieve long-term capital growth by investing in an internationally diversified portfolio, largely made up of equities (shares in companies). It currently invests in a mix of different funds, from different fund managers, offering a mix of active and passive fund management, which means it doesn’t rely on the performance of one manager or management style alone. We reserve the right to add, remove and replace funds within the Universal Balanced Collection with the aim of making sure it continues to meet its aims and objectives.

Source: Aegon UK – March 2018

There is no guarantee the fund will meet its objective. The value of an investment can fall as well as rise and investors could get back less than they invest.