Multi-managerFeb 26 2015

Aegon fund targets low-risk investors

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Aegon UK has launched a low-risk fund which focuses on capital preservation in anticipation of a soar in demand for low-volatility products under new pension freedoms.

Many pensioners are likely to choose drawdown when the retirement income flexibilities are implemented in April, and would want to preserve their savings while offering potential for growth – particularly given the cautious approach by investors in the post-credit crunch environment, according to the investment firm.

The fund, called the Aegon Stability fund, will invest in a mix of UK and overseas equities, bonds, commodities and alternative investments, and aims to limit falls in negative markets and target long-term returns exceeding cash, specifically three-month Libor rates.

It holds an equal mix of four funds: Fulcrum Diversified Core Absolute Return, the Jupiter Strategic Reserve, Newton Global Dynamic Bond, and Kames UK Equity Absolute Return, and will be available across all of its advised propositions with a yearly TER of 0.87 per cent.

Provider view

Nick Dixon, investment director at Aegon UK said: “From April, people will have a lot more control over how they manage their money in retirement. This fund will benefit those savers who want to preserve their hard-earned savings pot and are looking for a straightforward solution, conveniently packaged within one fund.

“We’ve carefully selected four quality funds for this portfolio which have complementary risk/return profiles, high levels of liquidity, and investment strategies which focus on minimising market losses.

“The diversification provided by blending these four managers reduces risk while offering the prospect of growth in excess of cash over the long term. We are confident that this blended approach will offer both reassurance and growth to savers wary of the downside risks of investing their retirement savings.”

Adviser view

Richard Ross, director at Chadwicks, based in Norwich, said: “The proposition sounds quite reasonable, but it is unlikely that we will use it because I am not a fan of the packaged solution. In the past, advisers have not been aware what lies under the bonnet of package deals, which has resulted in undesirable outcomes – although I’m not associating Aegon with this.”

Commenting on the view that retirees will look towards a low-risk option following the pension changes, he added: “I would agree with the statement. I think Aegon has spotted a marketing opportunity which is good for them. However, an adviser could put together a passive portfolio at 15-20 basis point which I believe would achieve the same goal.”

Charges

Annual TER of 0.87 per cent.

Verdict

The pension freedoms which will be implemented in April have introduced a host of opportunities for firms across the industry, not least in the investment sector.

A low-volatility fund offers a degree of safety which would be welcomed by investors who have adopted a more cautious approach after losing out in the financial crisis.

Investors could entrust their hard-earned cash to their financial adviser to set up a passive portfolio which could potentially yield the same result as a packaged proposition but at a fraction of the cost.