Multi-strategy approach pays off for Aviva fund

A mixture of investment strategies has helped the Aviva Investors Multi-Strategy Target Return Fund to hit its one-year performance target return, Peter Fitzgerald, co-manager, has said.

Third quarter global markets presented many different scenarios that had served to test the fund, he said.

However, by using a multi-strategy investment approach, the fund’s performance proved positive in all three months, in contrast to the global equity markets, many of which suffered loss.

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He said this was because three of the portfolio’s so-called ‘buckets’ – market, risk-reducing and opportunistic return strategies – contributed positively to overall performance and helped to diversify the fund.

Mr Fitzgerald said: “What this means is that the fund succeeded in capturing upside performance in its market returns section when risky assets prices rose, as they most notably did in August. It also managed to cap downside risk in its risk-reducing returns section when risk-aversion prevailed, as it did in September.”

The co-manager said he also looked to exploit bouts of risk aversion in order to add positions to the portfolio, rather than seek to reduce risk.

He added: “This illustrates the role that the Aims Target Return Fund can play in portfolios, aiming to deliver equity-like returns, but with less than half of the volatility.”

Over the course of the quarter, the fund returned 1.96 per cent, net of charges, well ahead of its yearly performance target of cash plus 5 per cent.

The returns were close to that of global equity markets, but with a quarter of the volatility. Global equities, as represented by the MSCI World Index, rose by 2.30 per cent over the quarter in sterling terms with a realised volatility of 8.85 per cent, compared with the fund’s 2.36 per cent.

Adviser view

Gordon Bowden, director of Buckinghamshire-based Quainton Hills Financial Planning, said: “I am a bit cynical about multi-strategy style funds, because in the good times, sometimes equity returns tend to lag performance because of the limited upside.

“Aviva claims that in the past three months of volatility the strategic diversification has protected returns, but this is not a big deal. The FTSE 100 may have gone down slightly but the US market has risen over three months – a straighforward diversification strategy would have achieved similar results. So this is not a big deal, and would not make me sit up and take note.”