Three new sustainability-focused funds for Aegon Master Trust

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For customers

Members of Aegon Master Trust pension schemes can now invest in three new funds that focus on sustainability.

Improving sustainable investment choice

Our customers are increasingly aware of the role their investments can play in helping to improve our environment and address the challenges of climate change. These sustainability-focused funds have strong investment credentials and give scheme members a greater ability to select funds which align with their moral beliefs. In our view, investing in firms that consider sustainability issues could improve long-term returns (returns over five years or more) as the global economy adjusts to reduce the effects of climate change, although it’s important to note that this can’t be guaranteed.

Typically, investing with a focus on sustainability aims to reduce impacts on the environment, support improvements in social factors such as labour standards and human rights issues, and improve company governance in areas such as board diversity and anti-corruption policies. These areas are often grouped together as environmental, social and governance criteria, or ESG for short.  

 

More details about the new funds

These new funds have been selected by the Aegon Master Trust trustees after taking advice from their independent investment adviser, Isio. The funds are in line with the trustees’ sustainability goals and Aegon’s beliefs and aims.

The new funds are:

  • Aegon Baillie Gifford Positive Change – this is an actively managed fund investing in global equities (also known as company stocks and shares). This means the fund manager actively selects 25-50 specific companies that they believe can deliver both good growth and positive change in key areas like the environment, social inclusion and healthcare. Aegon has given the fund a risk rating of 61.
  • Aegon HSBC Developed World Sustainable Equity Index – this is a global equities passive fund, which means it passively tracks the performance of its index by investing in the same companies as that index, in the same proportions. In this case it tracks the FTSE Developed ESG Low Carbon Select Index, which seeks to achieve a reduction in carbon emissions and fossil fuel reserves exposure, and an improvement of the FTSE Russell ESG rating against that of the FTSE Developed Index. Aegon has given the fund a risk rating of 61.
  • Aegon Ninety One Global Multi-Asset Sustainable Growth – this is an actively managed fund that invests in a broad range of global assets, not just equities. The fund manager aims to select companies and countries that aim to either minimise their harmful effects, or to benefit society and the environment. Aegon has given the fund a risk rating of 51.

You can read the full fund objectives and the risks that apply to each fund at the end of this article.

1Risk ratings range from 1 (very low risk, for example a cash fund) to 7 (very high risk, such as an emerging markets equity fund). These risk ratings apply to investment funds available via Aegon Master Trust. Other risk ratings, from Aegon or other providers, aren't comparable. Ratings are reviewed regularly and can change.

 

Improving the sustainability of our fund ranges

These additions follow substantial changes to the Aegon Master Trust default fund – Aegon BlackRock LifePath Flexi – in 2021, which means that in its growth stage it now invests over 80% of its assets in funds that incorporate ESG screens (as at December 2021). A default fund is the fund that investors are automatically placed into if they don’t request an alternative. We will continue to innovate and evolve our default funds as part of our commitment to be net zero for carbon emissions across our default pension options by 2050, and to halving their emissions by 2030.

There’s no guarantee the funds will meet their objectives. The value of an investment can fall as well as rise and isn’t guaranteed. The final value of a member’s pension pot when they come to take benefits may be less than has been paid in.

You can read the funds’ objectives and the fund-specific risks that apply below. You can find out more and view a full list of the funds available to you by logging in to your Aegon Master Trust account. Fund factsheets will be available from March 2022.

If you’re in any doubt about which funds to invest in, you may want to talk to a financial adviser – but please be aware there may be a charge for this. If you don’t have a financial adviser, you can find one in your local area at MoneyHelper.

 

Fund objectives

Aegon Baillie Gifford Positive Change

The fund aims to outperform the MSCI ACWI Index (after charges) by at least 2% per year over rolling five-year periods. It does so by investing in an actively managed portfolio of 25-50 global high-quality growth companies which can deliver positive change in one of a range of themes such as social inclusion and education, environment and resource needs, healthcare and quality of life; and base of the pyramid addressing the needs of the world's poorest populations. These themes may change over time. Baillie Gifford’s Positive Change team generate ideas from a diverse range of sources. With a focus on fundamental in-house research, the group complete a two-stage analysis of all holdings, looking at both the financial and positive change aspects case for each stock using a consistent framework. The output is a high conviction and differentiated portfolio.

Risks that apply (see Risks section below for details):

Concentration risk, Country/Region risk, Currency risk, Investment restrictions, Third party risk

Aegon HSBC Developed World Sustainable Equity Index

The fund aims to track the performance of the FTSE Developed ESG Low Carbon Select Index (before charges). It does so by investing directly in shares of all of the companies that make up the index in the same or very similar proportions in which they are included in the Index. The index is comprised of the shares (equities) of large and medium sized companies from developed markets. The index seeks to achieve a reduction in carbon emissions and fossil fuel reserves exposure and an improvement of the FTSE Russell ESG rating against that of the FTSE Developed Index. The index also excludes the shares of certain companies based on sustainability criteria.

Risks that apply (see Risks section below for details):

Country/Region risk, Currency risk, Derivative risk, Index-Tracking risk, Investment Restrictions, Third Party risk

Aegon Ninety One Global Multi-Asset Sustainable Growth

The fund aims to provide real returns (in excess of UK inflation, currently measured by the increase in the UK Consumer Price Index (CPI)) through capital growth and income over at least five years. The fund targets a return of UK CPI +4% (before charges) per year over rolling five-year periods. It aims to do this by investing in a broad range of assets around the world. These assets include the shares of companies, bonds (or similar debt-based assets), commodities, property and alternative assets (such as hedge funds, infrastructure funds and private equity funds). The fund focuses on investing in companies and countries the fund manager believes to have policies, operations and/or business models that aim to minimise their harmful effects on society and the environment, or whose products and/or services seek to benefit society and the environment. While the fund aims to achieve capital growth and its performance target, there is no guarantee that either will be achieved over rolling five-year periods, or over any period of time and there is a risk of loss.  Derivatives may be used for investment purposes and/or managing the fund in a way that is designed to reduce risk or cost and/or generate income or growth with a low level of risk.

Risks that apply (see Risks section below for details):

Country/Region risk, Currency risk, Derivative risk, Fixed interest risk, Investment Restrictions, Third party risk.

 

Risks

1.Concentration risk    

This fund invests in a smaller number of stocks (company shares) than most other, similar funds. This means there’s a greater chance of loss if one or more of those stocks goes down in value.

2.Country/Region risk

This fund invests in a region that’s particularly risky due to the lack of company regulation, political instability or war, for example. This means that its value will fluctuate more than funds invested in more developed countries or regions.

3.Currency risk    

This fund invests overseas so its value will go up and down in line with changes in currency exchange rates. This could be good for the fund or bad, particularly if exchange rates are volatile.

4.Derivative risk 

This fund will use derivatives, which allow the manager to buy or sell an investment at a specified future date for a specified price. However, this means the fund could be exposed to additional risks if the market moves up when the manager expected it to go down or vice versa.

5.Fixed interest risk  

This fund invests in bonds, which are essentially loans to companies, governments or local authorities, so there's a risk that these entities may default on the loan. Interest rate changes could affect the value of bond investments. Where long-term interest rates rise, the value of bonds is likely to fall, and vice versa.

6.Index-Tracking risk

The fund will invest in funds which seek to track the performance of their respective Benchmark Indices. There’s no guarantee that they’ll achieve perfect tracking.

7.Investment Restrictions  

This fund’s ethical/socially responsible mandate narrows the investment options available, which may increase risks to the fund.

8.Third party risk

In the event that the underlying investments which the fund invests in suspend trading, Aegon may defer trading and/or payment to investors. The value ultimately payable will depend on the amount Aegon receives or expects to receive from the underlying investments.