Aviva has launched a smooth managed fund in response to adviser and customer demands.
SMF2 is aimed at advised clients who would like to benefit from investment returns rather than holding cash, but have little investing experience.
The smooth growth rate for SMF2 is 3.75 per cent plus the Bank of England’s base rate for the pension, and 3 per cent plus the base rate for the bond. The fund has a Distribution Technology risk rating of 4.
The product comes with a management charge of 0.65 for the pension, and 0.46 per cent for the bond but asset allocation of the SMF2 pension and bond are the same.
Jean-Paul Grenade, head of investment specialist sales at Aviva, said: “We are delighted to announce the launch of the new fund which we believe offers another option for the more cautious investor.
"Understandably, after a period of market turbulence there is more demand for products that offer less volatility, and this fund provides the solution for those that are seeking greater returns than they’d get in deposit accounts but with a fund that has a track record of stability.
"In this fund, around 90 per cent of assets are outside of the UK, which gives a greater spread of risk. It has also experienced higher returns over the last 10 years than UK-only equities.”
The maximum investment per client in the new fund is £1m. If clients want to invest more than £1m into the bond they can request this with Aviva.
Aviva is still offering its existing smooth managed fund, which provides a DT risk rating of 5 for investors with a greater risk tolerance.
The SMF growth rates are 5 per cent plus BoE base rate for the pension, and 4 per cent plus BoE base rate for the bond.
Aviva said the fund has seen investment growth of nearly 12 per cent since its launch in late 2017, despite the market falls in the early months of the pandemic.
Grenade said: “The smoothing mechanism meant that there were two adjustments down because of the variance of the value of the fund and the smoothed price going beyond the 6.5 per cent corridor. This is exactly how the mechanism is designed to work, and the explanation for this is transparent.
“Smoothing makes it easier to maintain a long-term focus on investments, and mitigates against clients making hasty decisions at the bottom of the market.
"As we have now seen, performance was nearly 17 per cent up at the end of March 2021 compared with a year previously, and the smoothing has now taken the fund up again. This is a greatly reassuring message for more risk-averse clients.”
sally.hickey@ft.com
