As you are aware, our Focused Managed Funds are funds which invest across a wide range of global equities, global government bonds, commercial property and cash deposits.
The asset mix of these funds will alter according to the fund’s years to maturity (and the views of the Fund Managers) i.e. funds with longer to maturity, will be mainly invested in higher risk assets (equities) than funds with only a few years to retirement. These will be invested in typically less volatile assets (bonds and cash).
We regularly review the operation of these funds and following the latest review, we wished to provide a summary of the current approach to the “de-risking” process i.e. the process by which the asset allocations of the funds alters as the maturity date range approaches.
Currently there are 10 Focused Managed Funds available (series C to L). Each fund should contain policyholders that retire in 5 year bands according to the table below:
Fund | Retirement Dates |
A | 2000 - 2005 |
B | 2006 - 2010 |
C | 2011 - 2015 |
D | 2016 - 2020 |
E | 2021 - 2025 |
F | 2026 - 2030 |
G | 2031 - 2035 |
H | 2036 - 2040 |
I | 2041 - 2045 |
J | 2046 - 2050 |
K | 2051 - 2055 |
L | 2056 - 2061 |
The key points of the operating principles for the derisking of these funds are:
- For the longest dated funds, the central target allocations will be
- Equities – 80%
- Property – 7%
- Bonds – 13%
- Cash – 0%
- The min and max allocations will be an addition/subtraction of ±10% to or from the central allocations (subject to a minimum allocation of 0%).
- Derisking begins 20 years from the middle year of the particular tranches’ range of retirement dates.
- There will be a smooth progression of derisking over those 20 years such that at the retirement date the central/target allocations will be:
- Equities – 0%
- Property – 0%
- Bonds – 75%
- Cash – 25%
The central target allocations (following the 2013 review) for each asset class for the retirement dates are shown in the table below.
To further illustrate the de-risking approach, the de-risking schedule (following the 2013 review) for Focused Managed Fund L is shown in the graph below;
Source: Aviva February 2014
It is important to note that as stated above, we regularly review the operation of these funds and may revise the process as required. We will keep you informed if the process is changed in the future.
