Download Select Risk Profile Portfolios – quarterly investment report

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Select Risk Profile Portfolios –
quarterly investment report
Quarter one 2017
Contents
About the Select Risk Profile Portfolios
3
Market review
4
Fund performance
6
Portfolio information
Adventurous Select Portfolio
7
Growth Plus Select Portfolio
8
Growth Select Portfolio
9
Balanced Plus Select Portfolio
10
Balanced Select Portfolio
11
Cautious Select Portfolio
12
Select Sector asset allocation
13
The information contained in this report constitutes a factual review of performance only and is correct as at
31 March 2017. It shouldn’t be taken as a recommendation or advice. Markets and funds change constantly, so the
information it contains may have changed by the time you read this.
There’s no guarantee that fund objectives will be met. The value of these investments can fall as well as rise for a
number of reasons; for example, market and currency movements. Your clients may get back less than originally
invested.
About the Select Risk Profile Portfolios
There are six funds in the Select Risk Profile Portfolio range. Each targets a different level
of risk, ranging from 'below' to 'above average'. The volatility ranges that each portfolio
targets are shown in brackets in the diagram below.
We’ve employed independent consultant Morningstar Investment Management Europe Limited (Morningstar) to
help us build and manage these portfolios. Morningstar takes strategic and tactical asset allocation decisions to
help the portfolios meet their two primary objectives, which are:
to keep within targeted risk ranges over a market cycle, and
to deliver the best possible performance for the amount of risk taken.
To meet these objectives, Morningstar regularly reviews the portfolios and recommends changes where this is
necessary. However, there’s no guarantee that the funds will meet their objectives.
§ § The risk ranges for each portfolio are measured using annualised standard deviation over a market cycle. Standard
deviation measures the extent to which a fund’s returns have historically deviated from its own average. The higher
the percentage, the greater the risk (and, generally, the higher the potential returns). There's no guarantee the
portfolios will sit within their target risk ranges. The asset allocation of each is based on long-term historical volatility
data, which may not be repeated in the future.
The Select Risk Profile Portfolios are built mainly, but not exclusively, from the funds in our Select Sector Portfolio
range. The nine Select Sector Portfolios are made up of what we believe to be the best blend of funds in their
sector, many of which are rated by Morningstar Inc.
The value of these investments can fall as well as rise for a number of reasons; for example, market and currency
movements. Your clients may get back less than originally invested.
For more information on how our Select Risk Profile Portfolios work and how to use them,
please visit our website at www.aegon.co.uk/selectportfolios
3
Market review – quarter one 2017
What drove world markets in quarter one?
For equities across the globe, this was a positive start to the year with gains in all the major regions. The new US
president, Donald Trump, was inaugurated in January and investors saw his promises to reduce taxes, and prioritise jobs
and infrastructure spending, as potentially good for business. Indicators pointed to economic growth and rising
employment in the USA, as US equities soared and many indices experienced record-breaking gains over the period. In
March the US Federal Reserve raised interest rates. Although President Trump immediately withdrew the USA from the
Trans-Pacific Partnership - a trade agreement with Asian economies - both Asian and emerging market equities recovered
from the falls seen towards the end of 2016 and made significant gains over the quarter. Indian and Chinese stock
markets were notably strong with China posting encouraging factory orders and India recovering from a demonetisation
shock. For Europe and the UK, this was also a positive quarter for equities despite the UK’s imminent exit from the EU,
officially set in motion by Prime Minister Theresa May at the end of March. For UK gilts and corporate bonds, despite the
rise in equities, this was a positive quarter as Brexit uncertainty continued to raise demand for safe-haven investments.
Cash investments made only a small return due to the low interest-rate environment.
How did the major markets perform in quarter one?
This was a very positive quarter for global equities. Asia Pacific and emerging market equities made the strongest
gains as investors moved back into these regions. European and US equities also made healthy returns over the
period as these economies gave indications of growth with employment and consumer spending up. The strength
of the yen supported returns from Japanese equities and despite the UK’s looming EU exit, UK equities performed
well over the quarter. UK corporate bonds and gilts made positive returns and cash holdings gained slightly.
45.0
40.0
Return (%)
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
4.0
7.5
FTSE All Share FTSE World
TR
Europe ex UK
TR
11.2
4.8
4.0
S&P 500 TR
Topix TR
8.9
1.6
FTSE Asia
Pacific ex
Japan TR
1.8
0.1
FTSE AW
FTSE A British Markit iBoxx LIBOR GBP 7
Emerging TR Government Sterling Non
Day TR
All Stocks TR Gilts Overall TR
How did the major markets perform over 12 months?
Over the period, equity markets have performed extremely well. With interest rates at historic lows, investors have turned
to higher-risk investments. The Asia Pacific and emerging market regions have been standout performers, with the USA
and Japan not far behind. The promise of a pro-business president caused US and in turn global equities to soar. Despite
Brexit, European and UK equities have made strong gains. The demand for UK corporate bonds and gilts has held and
these have also given good returns. Due to low interest rates, cash investments have made only small gains.
45.0
40.0
34.7
Return (%)
35.0
30.0
25.0
33.0
36.5
35.6
27.9
22.0
20.0
15.0
6.6
10.0
9.2
5.0
0.0
0.3
FTSE All Share FTSE World
TR
Europe ex UK
TR
UK
Europe ex UK
S&P 500 TR
USA
Topix TR
FTSE Asia
Pacific ex
Japan TR
Japan
Asia Pacific
FTSE AW
FTSE A British
Emerging TR Government
All Stocks TR
Emerging
Markets
UK Gilts
Markit iBoxx
Sterling Non
Gilts Overall
TR
UK Corporate
Bonds
LIBOR GBP 7
Day TR
Cash
Source: Morningstar Direct, produced by Aegon. Charts compiled using total return indices to 31 March 2017. Figures in sterling
so include the effect of currency fluctuations.
Past performance is no guide to future performance.
4
What were the key events in the major markets in quarter one?
Here’s a round-up of some of the key events that shaped the investment returns we’ve seen across the major
markets.
For the UK, this quarter was still all about Brexit with a vote in parliament that gave the government permission
to begin exiting the European Union. Theresa May signed Article 50 at the end of March, as the Scottish
National Party demanded a second Scottish independence referendum. Meanwhile, the economy continued to
perform robustly and Chancellor Phillip Hammond delivered a budget aimed at stabilising growth in the run up
to Brexit.
Equities in the US continued to rise as President Donald Trump took office and promised a programme of
measures to boost business. The growth indicators, including rising consumer confidence and the lowest
unemployment rate since 2007, were positive enough for the US Federal Reserve to make the third interest rate
rise since the financial crisis. Figures released during the quarter showed that corporate earnings for the fourth
quarter of 2016 were the strongest in six years.
This was a buoyant quarter for European equities, despite the uncertainties ahead with the UK’s exit and
several key national elections. The Dutch election was not a victory for the extreme right, as had been
feared, and hopes are high that the French election will also deny the far right a majority. The Eurozone’s
GDP expanded in the fourth quarter of 2016. February’s employment figures, plus activity in the
manufacturing and service sectors were also on the rise.
Japanese equities gave a robust performance over the quarter. The yen strengthened against the dollar
over the period as investors bought into the currency for its haven status. Figures released in quarter one
revealed that the country’s GDP advanced by 0.3% in the final quarter of 2016, a fourth consecutive
quarter of growth. Japanese Prime Minister Shinzo Abe was one of the first leaders to visit Donald Trump
to promote trading relations between the two economies.
This was an exceptional quarter for equity markets in the Asian Pacific region. Indian stock markets made a
strong recovery from the demonetisation programme at the end of 2016, encouraged by a pro-business
budget in February. There was a strong rally in Chinese equities as growth indicators appeared positive.
Equities also moved upwards in South Korea, where consumer confidence was boosted by the
impeachment of President Park Geun-hye on corruption charges.
Fixed income: Despite rising inflation and surging equity markets, gilts gained value over February and
March as the official start of the Brexit process approached and then was reached. Growing uncertainty
over the UK’s trading future is maintaining demand for lower-risk assets.. Corporate bonds were supported
by central bank asset purchasing, which in the UK has been at a higher rate than anticipated.
5
Fund performance
3 months
(%)
Year to date
(%)
1 year
(%)
3 years
(% a year)
Adventurous Select Portfolio
5.4
5.4
26.7
11.0
10.7
Growth Plus Select Portfolio
4.9
4.9
22.9
10.0
10.0
Growth Select Portfolio
4.3
4.3
20.0
9.1
9.0
Balanced Plus Select Portfolio
3.8
3.8
17.8
8.5
8.1
Balanced Select Portfolio
3.1
3.1
14.8
7.6
7.3
Cautious Select Portfolio
2.5
2.5
12.4
7.0
n/a
Fund
5 years
(% a year)
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to
31 March 2017. Past performance is no guide to future performance. The value of an investment may go down as well as up and
investors may get back less than originally invested.
The chart below shows the target risk/volatility ranges for each portfolio (the blue bands), expressed in standard deviation terms,
and the orange circles show the actual level of volatility.
Three year annualised volatility, to end March 2017
20
Three year annualised volatility (%)
18
16
14
12
10
8
6
4
2
0
Cautious
Balanced
Balanced Plus
Portfolio risk range
Growth
Growth Plus
Adventurous
Portfolio volatility
Source: Morningstar Direct by Aegon. Figures show annualised volatility from 31 March 2014 to 31 March 2017. Past
performance is no guide to future performance.
Each Select Risk Profile Portfolio has a target risk range that it aims to meet over a market cycle, which can last three
years or more. Currently, each portfolio, except the Cautious Select Portfolio, is lagging behind its respective target
risk range. The Select Risk Profile Portfolios are created based on long-term market analysis, so when market risk is
lower than average, we would expect to see the portfolios fall below their target risk range. Currently, market
volatility is lower than average in most sectors, especially those traditionally considered higher risk, like equities
(shares). This is reflected in the volatility of the Select Risk Profile Portfolios but is even more pronounced at the
higher end of the risk spectrum – the Adventurous Select Portfolio is lagging further behind its target risk range than
the less-risky portfolios.
These target risk ranges may be met by increasing exposure to riskier markets in each portfolio. We believe,
however, that investors are best served by a diversified portfolio that matches their individual risk profile over the
longer term, as opposed to chasing market risk in periods of low volatility. For example, currently the Adventurous
Select Portfolio would have to be 100% invested in global emerging markets to get just within its 16-18% target risk
range. As market volatility returns to normal levels, we expect the Select Risk Profile Portfolios to close the gap on
their target risk ranges. Whether market volatility is high or low, the ranges will offer what we believe is a suitable
level of risk and suitably diversified asset allocation.
6
Adventurous Select Portfolio
This fund aims to target an annualised standard deviation range of 16-18% over a market cycle by investing in a
mix of asset classes, companies, regions and fund managers. Morningstar helps us select and manage the blend
of funds it contains.
Fund
3 months
(%)
1 year
(%)
5.4
26.7
11.0
12.3
6.3
9.5
2.6
4.3
3.9
36.3
22.6
36.7
33.8
33.2
17.1
13.5
Adventurous Select Portfolio
Asian Equity Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
UK Equity Select Portfolio
3 years
(% per year)
7.6
10.9
17.1
18.9
6.0
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 30 September 2009. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Adventurous Select Portfolio as at 31 March 2017.
However, these can change and the performance of the Adventurous Select Portfolio takes these changes into account over
the periods shown above.
Fund commentary, quarter one 2017
The Adventurous Select Portfolio returned 5.4% in the opening quarter of the year. As it is entirely invested in
equities, it gained with the surge in stock markets led by optimism over the new US administration, and a strong
recovery in Asian and emerging market equities.
The most substantial holdings in the UK Equity Select Portfolio and the North American Equity Select Portfolio
made robust returns. US markets touched new highs as President Trump took office and made bold, probusinesses promises, although there was a pullback in March when President Trump’s attempt to reform
healthcare stalled. Despite the initiation of the Brexit process, the UK economy proved resilient, posting an
increase in GDP in the final quarter of 2016. Figures from the turn of the year showed unemployment had fallen
to levels last seen in 2005.
Although European and Japanese equities also made solid returns over the quarter, it was Asian and emerging
market investments that made the standout gains over the quarter. Indian, Chinese and Mexican markets were
among those to soar as investors moved back into riskier overseas markets while the protectionist threat from the
new US administration appeared to fade.
Asset allocation at end February 2017
UK Equity Select Portfolio
7.1%
North American Equity Select Portfolio
11.6%
35.9%
12.4%
14.3%
Global Emerging Markets Equity Select Portfolio
Japan Equity Select Portfolio
European Equity Select Portfolio
18.6%
Asian Equity Select Portfolio
The figures above may not add up to exactly 100% due to rounding.
7
Growth Plus Select Portfolio
The fund aims to invest in a mix of asset classes, companies, regions and fund managers, targeting an annualised
standard deviation range of 14-16% over a market cycle. Morningstar helps us select and manage the blend of
funds it contains.
Fund
Growth Plus Select Portfolio
Asian Equity Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
International Bond Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
Property Select Portfolio
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
3 months
(%)
1 year
(%)
3 years
(% per year)
4.9
12.3
6.3
9.5
0.9
2.6
4.3
2.0
1.9
3.9
22.9
36.3
22.6
36.7
4.9
33.8
33.2
-1.8
7.8
17.1
10.0
13.5
7.6
10.9
2.8
17.1
18.9
6.4
5.7
6.0
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 30 September 2009. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Growth Plus Select Portfolio as at 31 March 2017. However,
these can change and the performance of the Growth Plus Select Portfolio takes these changes into account over the periods
shown above.
Fund commentary, quarter one 2017
The Growth Plus Select Portfolio posted a gain of 4.9% over the period. Primarily invested in global equities, the
portfolio was able to benefit from the surge in global markets during the first quarter of the year. US equities
rose steeply in line with investor optimism regarding the new administration, although trended downwards in
March when President Trump failed in his healthcare reform attempt. Asian and emerging markets made an
exceptional recovery over the quarter.
The UK Equity Select Portfolio, the biggest holding in the portfolio, gave a return of 3.9%. Although political
uncertainty lies ahead with the start of the official Brexit process, the UK economy posted solid gains as
unemployment lowered over November to January and GDP increased in the final quarter of 2016. The North
American Select Portfolio was also up, returning 4.3%, in line with rising US stock markets.
The European Equity Select Portfolio made a strong return of 6.3%, as economic indicators in the region were
positive, but the best performances came from the Asian Equity Select Portfolio and Global Emerging Markets
Equity Select Portfolio. Depressed at the end of the year by protectionist rhetoric from the US election
campaign, Asian and emerging markets jumped up over the quarter as fears regarding trade relations waned.
Both the property and corporate bond investments held in the portfolio made gains as demand for lower-risk
investments remained steady.
Asset allocation at end February 2017
4.3%
3.4%
3.3%
UK Equity Select Portfolio
North American Equity Select Portfolio
5.2%
35.9%
10.6%
Global Emerging Markets Equity Select Portfolio
European Equity Select Portfolio
Japan Equity Select Portfolio
Asian Equity Select Portfolio
10.9%
11.5%
14.9%
Property Select Portfolio
UK Corporate Bond Select Portfolio
International Bond Select Portfolio
The figures above may not add up to exactly 100% due to rounding.
8
Growth Select Portfolio
The fund aims to invest in a mix of asset classes, companies, regions and fund managers, targeting an annualised
standard deviation range of 12-14% over a market cycle. Morningstar helps us select and manage the blend of funds
it contains.
Fund
Growth Select Portfolio
Asian Equity Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
International Bond Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
Property Select Portfolio
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
3 months
(%)
1 year
(%)
3 years
(% per year)
4.3
12.3
6.3
9.5
0.9
2.6
4.3
2.0
1.9
3.9
1.3
-0.1
20.0
36.3
22.6
36.7
4.9
33.8
33.2
-1.8
7.8
17.1
5.9
-0.5
9.1
13.5
7.6
10.9
2.8
17.1
18.9
6.4
5.7
6.0
6.9
-0.4
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 30 September 2009. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Growth Select Portfolio as at 31 March 2017. However,
these can change and the performance of the Growth Select Portfolio takes these changes into account over the periods
shown above.
Fund commentary, quarter one 2017
The Growth Select Portfolio made a gain of 4.3% over the quarter. As it invests heavily in equity investments, the
portfolio was able to rise in line with the strong performance of global stock markets as US equities soared amid
positive sentiment towards President Donald Trump and developing markets made a notable recovery. Most of the
portfolio’s lower-risk investments also made positive returns over the quarter, apart from a small negative in cash.
The portfolio’s largest allocation, to the UK Equity Select Portfolio made a 3.9% gain as the UK economy
continued on a relatively secure footing, despite the triggering of the Brexit process. The latest figures showed
unemployment fell between November and January and GDP rose in the fourth quarter of last year. Although
the North American Equity Select Portfolio returns were not as notable as last quarter, the gains were still a
robust 4.3%, as optimism continued over the new US administration.
The return from European equities was strong, as both fourth quarter GDP in the eurozone and recent
employment figures showed a rise. However, the most marked gains came from the Asian and emerging-market
holdings. These markets, which had been depressed during the US election campaign as investors grew
concerned over strained trade relations, staged a significant recovery over the opening quarter of the year. With
the continuing demand for lower-risk holdings, the portfolio’s non-equity holdings all made positive returns,
apart from cash where low interest rates caused a slight negative return.
Asset allocation at end February 2017
1.7%
4.2%
2.5%
UK Equity Select Portfolio
North American Equity Select Portfolio
5.1%
European Equity Select Portfolio
6.1%
32.6%
Japan Equity Select Portfolio
6.2%
Global Emerging Markets Equity Select Portfolio
8.6%
Property Select Portfolio
9.8%
UK Corporate Bond Select Portfolio
10.2%
13.0%
International Bond Select Portfolio
Asian Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
The figures above may not add up to exactly 100% due to rounding.
98
Balanced Plus Select Portfolio
The fund aims to invest in a mix of asset classes, companies, regions and fund managers, targeting an annualised
standard deviation range of 10-12% over a market cycle. Morningstar helps us select and manage the blend of
funds it holds.
Fund
Balanced Plus Select Portfolio
Asian Equity Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Index Linked
International Bond Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
Property Select Portfolio
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
3 months
(%)
1 year
(%)
3 years
(% per year)
3.8
12.3
6.3
9.5
1.6
0.9
2.6
4.3
2.0
1.9
3.9
1.3
-0.1
17.8
36.3
22.6
36.7
19.8
4.9
33.8
33.2
-1.8
7.8
17.1
5.9
-0.5
8.5
13.5
7.6
10.9
12.5
2.8
17.1
18.9
6.4
5.7
6.0
6.9
-0.4
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 30 September 2009. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Balanced Plus Select Portfolio as at 31 March 2017.
However, these can change and the performance of the Balanced Plus Select Portfolio takes these changes into account over
the periods shown above.
Fund commentary, quarter one 2017
This was a positive quarter for the Balanced Plus Select Portfolio which gave a return of 3.8%. The equity
holdings in the portfolio benefited from growth on world stock markets over the period and the lower-risk
elements also gained, as there is still strong demand for ‘safer havens’ due to ongoing political uncertainties.
The largest equity holdings in the portfolio, the UK Equity Select and the North American Equity Select
portfolios, made positive gains in line with rising stock markets. US markets were up as investors read President
Trump as a force for business. UK markets also rose, despite the European Union exit that lies ahead, as the
economy remains resilient; recently released figures show GDP rose in quarter four of 2016 and employment
levels are also up. The portfolio’s Asian and emerging market equity holdings made marked gains as these
regions staged a strong recovery from the downturn caused by concerns over US trade relations.
The portfolio’s fixed-income investments in UK corporate bonds, international bonds, index-linked holdings and
UK gilts all made positive returns over the quarter. Despite rising inflation and soaring global stock markets, the
political uncertainties surrounding Brexit and the new US President have kept demand high for more predictable
investments. The cash holding made a slight negative.
Asset allocation at end February 2017
1.7%
3.7% 2.2%
4.3%
5.4%
28.2%
7.7%
7.8%
8.7%
11.1%
9.4%
9.9%
UK Equity Select Portfolio
North American Equity Select Portfolio
UK Corporate Bond Select Portfolio
European Equity Select Portfolio
International Bond Select Portfolio
Japan Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Property Select Portfolio
Index-Linked
Asian Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
The figures above may not add up to exactly 100% due to rounding.
10
Balanced Select Portfolio
The fund aims to invest in a mix of asset classes, companies, regions and fund managers, targeting an annualised
standard deviation range of 8-10% over a market cycle. Morningstar helps us select and manage the blend of
funds it contains.
Fund
Balanced Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Index Linked
International Bond Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
Property Select Portfolio
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
3 months
(%)
1 year
(%)
3 years
(% per year)
3.1
6.3
9.5
1.6
0.9
2.6
4.3
2.0
1.9
3.9
1.3
-0.1
14.8
22.6
36.7
19.8
4.9
33.8
33.2
-1.8
7.8
17.1
5.9
-0.5
7.6
7.6
10.9
12.5
2.8
17.1
18.9
6.4
5.7
6.0
6.9
-0.4
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 30 September 2009. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Balanced Select Portfolio as at 31 March 2017. However,
these can change and the performance of the Balanced Select Portfolio takes these changes into account over the periods
shown above.
Fund commentary, quarter one 2017
In the first quarter of the year, the Balanced Select Portfolio made a return of 3.1%. Its equity holdings gained
with the strong upwards trend in global equities as emerging markets recovered and US markets were buoyed
with optimism at a new pro-business president. The portfolio’s lower-risk investments also performed well as
demand for these remained high.
The UK Equity Select Portfolio, the largest asset allocation, returned 3.9% over the quarter as the UK economy
continued to perform well, despite the imminent exit from the European Union. Both fourth quarter GDP and the
latest employment figures, rose steadily. The holdings in US and European equities made good returns as both
economies gave positive indications of growth. However, the strongest gains came from the Global Emerging
Markets Equity Select Portfolio as markets including India and Mexico staged a recovery from the downturn at
the end of 2016.
The portfolio’s significant holdings in UK corporate bonds and international bonds made positive returns. Central
bank asset buying is holding up prices in this area. The property, UK gilts and index-linked investments also
gained in value as Brexit uncertainty maintained demand for safer havens. Only the cash holding made a
negative in the low interest rate environment.
Asset allocation at end February 2017
3.8%
5.0%
6.5%
5.1%
24.1%
6.3%
6.6%
15.4%
7.7%
8.9% 10.6%
UK Equity Select Portfolio
UK Corporate Bond Select Portfolio
International Bond Select Portfolio
North American Equity Select Portfolio
European Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Japan Equity Select Portfolio
UK Gilts All Stocks Tracker
Property Select Portfolio
Index-Linked
Cash
The figures above may not add up to exactly 100% due to rounding.
11
Cautious Select Portfolio
The fund aims to invest in a mix of asset classes, companies, regions and fund managers, targeting an annualised
standard deviation range of 6-8% over a market cycle. Morningstar helps us select and manage the blend of
funds it contains.
Fund
Cautious Select Portfolio
Global Emerging Markets Equity Select Portfolio
European Equity Select Portfolio
Index Linked
International Bond Select Portfolio
Japan Equity Select Portfolio
North American Equity Select Portfolio
Property Select Portfolio
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
UK Gilts All Stocks Tracker
Cash
3 months
(%)
1 year
(%)
3 years
(% per year)
2.5
9.5
6.3
1.6
0.9
2.6
4.3
2.0
1.9
3.9
12.4
36.7
22.6
19.8
4.9
33.8
33.2
-1.8
7.8
17.1
7.0
10.9
7.6
12.5
2.8
17.1
18.9
6.4
5.7
6.0
1.3
-0.1
5.9
-0.5
6.9
-0.4
Source: Morningstar Direct. Produced by Aegon. Figures in £s, bid-to-bid basis, net of charges, with gross income reinvested to 31
March 2017. Fund launched on 26 September 2012. Past performance is no guide to future performance. The value of an
investment may go down as well as up and investors may get back less than originally invested.
Please note: the funds shown in italics are the components of the Cautious Select Portfolio as at 31 March 2017. However,
these can change and the performance of the Cautious Select Portfolio takes these changes into account over the periods
shown above.
Fund commentary, quarter one 2017
The Cautious Select Portfolio returned 2.5% over the quarter. It invests primarily in lower-risk assets and these made
steady gains over the quarter as investors sought safer havens in the atmosphere of political risk created by Brexit and
an untested new US administration. The portfolio’s equity holdings benefited from the rise in stock markets.
The UK Corporate Bond Select Portfolio, which forms the portfolio’s largest allocation, gained 1.9% as central
bank asset buying continues to underpin prices in this area. The international bond holdings also made positive
returns, as too did the property part of the portfolio and the UK gilt and index-linked holdings. The ongoing
uncertainty over the UK’s exit from the European Union supports these lower-risk investments.
The portfolio’s equity holdings in the UK and the US both posted solid gains. The UK economy continues to
perform well with both last quarter’s GDP and the most recent employment figures up. US equities have surged
with optimism at a pro-business president. The standout performer for the portfolio was the Global Emerging
Markets Equity Select holding which gained markedly as developing economy equities recovered from the
downturn suffered during President Trump’s ‘America First’ election campaign.
Asset allocation at end February 2017
3.7%
3.7%
10.6%
4.7%
5.3%
18.3%
16.3%
7.4%
8.2%
9.5%
12.4%
UK Corporate Bond Select Portfolio
UK Equity Select Portfolio
International Bond Select Portfolio
UK Gilts All Stocks Tracker
Index-Linked
North American Equity Select Portfolio
European Equity Select Portfolio
Japan Equity Select Portfolio
Global Emerging Markets Equity Select Portfolio
Property Select Portfolio
Cash
The figures above may not add up to exactly 100% due to rounding.
12
Select Sector Portfolio asset allocation
(as at 30 February)
The Select Risk Profile Portfolios are mainly made up from funds in our Select Sector Portfolio range. These are 9
portfolios covering the major regions and asset classes and they're carefully selected from our range, on
recommendations from Morningstar, as the best blend of funds in their respective sectors. The tables below
show the current asset allocation of the Select Sector Portfolios that make up our Select Risk Profile Portfolio
range.
Asian Equity Select Portfolio
(%)
European Equity Select Portfolio
Pacific ex-Japan Equity Tracker
25.4
SE Investec Asia ex-Japan
24.2
Continental European Equity Tracker
29.4
SE Aberdeen Asia Pacific Equity
19.1
SE Schroder European Opportunities
20.5
SE Fidelity South East Asia
15.7
SE Schroder Asian Alpha Plus
15.5
Global Emerging Markets Equity
Select Portfolio
(%)
(%)
SE Henderson European Select Opportunities 17.6
SE BlackRock European Dynamic
17.1
SE Jupiter European Special Situations
15.5
International Bond Select Portfolio
(%)
Emerging Markets Equity Tracker
24.8
Overseas Government Bond Tracker
34.0
SE Lazard Emerging Markets
18.6
SE Newton International Bond
27.4
SE Aberdeen Emerging Markets (blend)
15.6
Overseas Corporate Bond Tracker
20.4
SE JPM Emerging Markets
15.3
SE Templeton Global Total Return Bond
18.2
SE M&G Global Emerging Markets
14.8
SE Somerset Global Emerging Markets
10.9
Japanese Equity Select Portfolio
(%)
Japan Equity Tracker
38.6
SE Schroder Tokyo
25.3
SE Man GLG Japan Core Alpha
21.2
SE Jupiter Japan Income
14.8
North American Equity Select Portfolio
(%)
North American Equity Tracker
40.1
SE JPM US Equity
21.9
SE Schroder US Mid Cap
20.6
SE AXA Framlington American Growth
17.4
Property Select Portfolio
(%)
UK Corporate Bond Select Portfolio
(%)
SE M&G Property Portfolio
28.8
SE L&G UK Property
26.1
SE Fidelity Money Builder Income
27.7
Property
20.3
SE Kames Investment Grade Bond
25.1
SE Threadneedle UK Property
15.3
SE M&G Strategic Corporate Bond
20.0
Aegon Active Value Property
9.4
SE Royal London Corporate Bond
15.1
SE Henderson Strategic Bond
12.0
UK Equity Select Portfolio
(%)
UK Index Tracker
35.5
SE Artemis Income
14.8
SE AXA Framlington UK Select Opportunities 14.2
SE Threadneedle UK Equity Income
10.2
SE BlackRock UK Special Situations
10.1
SE Artemis Special Situations
9.5
SE Old Mutual UK Smaller Companies
5.8
13
Important information
Please note – we reserve the right to add, remove and replace funds within the Select Risk Profile Portfolios or
alter weightings between funds with the aim of making sure they continue to meet their aims and objectives. This
may affect the additional charges/expenses we disclose for the portfolios. We reserve the right to change these
without prior notification. We’ll announce any changes on the ‘Fund changes and news' section of our website:
www.aegon.co.uk/about-aegon/investments/fund-changes-and-news.html
Important information about property – your client may not be able to cash in or switch out of any fund investing
wholly or partly in direct property when they want to. We may have to delay your client’s payment for up to 12
months if market conditions make it hard for the manager of the fund to sell properties at a fair price.
Your client should also be aware that property funds can experience larger price movements (up or down) than
other types of funds, either due to changes in valuations (which are a matter of an independent valuer’s opinion
rather than fact) or as a result of a change in the valuation basis.
Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE.
Registered in Scotland (No. 144517). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority. Financial Services Register number 165548. An Aegon company.
www.aegon.co.uk. © 2017 AEGON UK plc
INV 00375615 04/17