Changes to the Select Risk Profile Portfolios

Fund_Update.jpg

For customers

We’re making changes to our Select Portfolios across our pension and Aegon Retirement Choices (ARC) fund ranges. The changes include:

  • Updates to the forward-looking target volatility ranges for each fund.
  • Clarification on how much each fund can invest in equities (company shares).

These changes will be implemented from October 2020 onwards. Each fund’s objective will be updated to reflect the changes. You can see the old and new fund objectives below.

Select Portfolios

Cautious Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 6-8% over a market cycle, which the fund manager defines as being three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Cautious Select Portfolio invests mainly in less risky assets like cash, government bonds (gilts), corporate bonds and property. It also invests to a lesser extent (around 30%) in riskier equities (shares in companies). This is the least risky of the Select Risk Profile Portfolios, so it may not return as much as other funds in the range over the longer term. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 5.5-9.5% over a market cycle, which the fund manager defines as being three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund invests mainly in traditionally lower risk assets, including investment grade corporate bonds, government bonds (gilts) and cash. It will also invest to a lesser extent in traditionally riskier assets such as equities (shares in companies), including developed and emerging markets equities. To be consistent with the target volatility range, the fund would typically be expected to invest between 20-50% in equities. This is the least risky of the Select Risk Profile Portfolios, so it may not return as much as other funds in the range over the longer term. The underlying assumptions that support the volatility and equity ranges are at the fund manager's discretion and are subject to change.
Balanced Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 8-10% over a market cycle, which the fund manager defines as three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Balanced Select Portfolio invests around 50% in a mix of less risky assets, like cash, bonds and property, with around 50% invested in riskier assets, such as equities (shares of companies), including some in emerging markets equities. This is the second least risky of the Select Risk Profile Portfolios, so it may not return as much as other portfolios in the range over the longer term. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 7-11% over a market cycle, which the fund manager defines as being three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund invests in a balanced mix of traditionally lower risk assets (including investment grade corporate bonds, government bonds (gilts) and cash) and traditionally riskier assets such as equities (shares in companies) including developed and emerging markets equities. To be consistent with the target volatility range, the fund would typically be expected to invest between 35-65% in equities. This is the second least risky of the Select Risk Profile Portfolios, so it may not return as much as other portfolios in the range over the longer term. The underlying assumptions that underpin the volatility and equity ranges are subject to change at the fund manager's discretion.
Balanced Plus Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 10-12% over a market cycle, which the manager defines as being three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Balanced Plus Select Portfolio invests around 60% in riskier assets such as equities (shares of companies), including some in emerging markets equities, and around 40% in a mix of less risky assets, like cash, bonds and property. This means it sits towards the middle of the Select Risk Profile Portfolio range in terms of risk and long term growth potential. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 8.5-12.5% over a market cycle, which the fund manager defines as being three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund invests in a mix of riskier assets, such as equities (shares in companies), including developed and emerging markets equities. It can also invest to a lesser extent in traditionally lower risk assets, including investment grade corporate bonds, government bonds (gilts) and cash. To be consistent with the target volatility range, the fund would typically be expected to invest between 50-80% in equities. This means it sits towards the middle of the Select Risk Profile Portfolio range in terms of risk and long-term growth potential. The underlying assumptions that support the volatility and equity ranges are at the fund manager's discretion and are subject to change.
Growth Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 12-14% over a market cycle, which the fund manager defines as being three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Growth Select Portfolio invests in a mix of assets, like equities (shares in companies), bonds and property, but with the majority (around 70%) invested in riskier assets, such as equities, including emerging markets equities. This means it sits towards the upper end of the Select Risk Profile Portfolio range in terms of risk and long term growth potential. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 10.5-14.5% over a market cycle, which the fund manager defines as being three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund predominantly invests in riskier assets, such as equities (shares in companies), including developed and emerging markets equities. It can also invest to a lesser extent in traditionally lower risk assets, including investment grade corporate bonds, government bonds (gilts) and cash. To be consistent with the target volatility range, the fund would typically be expected to invest between 65-95% in equities. This means it sits towards the upper end of the Select Risk Profile Portfolio range in terms of risk and long-term growth potential. The underlying assumptions that support the volatility and equity ranges are at the fund manager's discretion and are subject to change.
Growth Plus Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 14-16% over a market cycle, which the fund manager defines as being three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Growth Plus Select Portfolio can invest in a mix of assets, like equities (shares in companies), bonds and property, but with the majority (around 90%) invested in riskier assets, such as equities, including emerging markets equities. This makes it our second highest-risk of our Select Risk Profile Portfolios, but with the potential for higher long-term returns. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 12-16% over a market cycle, which the fund manager defines as being three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund predominantly invests in riskier assets, such as equities (shares in companies), including developed and emerging markets equities. It can also invest to a lesser extent in traditionally lower risk assets, including investment grade corporate bonds, government bonds (gilts) and cash. To be consistent with the target volatility range, the fund would typically be expected to invest between 75-100% in equities. This makes it our second highest-risk of our Select Risk Profile Portfolios, but with the potential for higher long-term returns. The underlying assumptions that support the volatility and equity ranges are at the fund manager's discretion and are subject to change.
Adventurous Select Portfolio
Old fund objective New fund objective from October 2020
This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 16-18% over a market cycle, which can last three years or more. We’ve engaged Morningstar to help us select and manage the blend of funds it contains. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what we and Morningstar believe to be the best blend of funds in their respective sectors. The Adventurous Select Portfolio invests almost exclusively in riskier assets, such as equities (shares of companies) and may hold 30% or more in highly volatile emerging markets equities. As such, it’s the highest risk of our Select Risk Profile Portfolios, but has the potential for higher long-term returns. This portfolio aims to provide long-term capital growth while keeping risk in a target volatility range of 13.5-17.5% over a market cycle, which can last three years or more. The portfolio is built using our Select Sector Portfolios. Each of the Select Sector Portfolios is made up of what the fund manager believes to be the best blend of available funds in their respective sectors. The fund invests almost exclusively in riskier assets, such as equities (shares of companies). including developed and emerging markets equities. To be consistent with the target volatility range, the fund would typically be expected to invest between 85-100% in equities. It’s the highest risk of our Select Risk Profile Portfolios, but has the potential for higher long-term returns. The underlying assumptions that support the volatility and equity ranges are at the fund manager's discretion and are subject to change.

Why we’re making these changes

Each portfolio has a target volatility range that it expects to meet over a market cycle, which can last 3 years or more. Since the funds launched in 2009, the assumptions used to calculate those targets have changed as market volatility has changed. As a result, the target range for each portfolio has been updated.

The amount each portfolio can invest in equities has also been updated to be more representative of how each fund invests to meet its target volatility range.

What this means for you

You’ll see the new information in the fund objectives for each fund from October onwards.

The changes will be implemented gradually across our material, so you may notice both the old and new information in use for a time.

There’s no guarantee the funds will meet their objectives. The value of an investment can fall as well as rise and is not guaranteed. You could get back less than you originally invested.

For more information on these funds, you can view individual fund factsheets via the ‘Fund prices and performance’ page on our website and selecting ‘Other fund ranges’.

What you need to do

You don’t need to do anything. If you’d like more information, please speak to your financial adviser. If you don’t have one, you can find one in your area at moneyadviceservice.org.uk