Download Scottish Equitable JPMorgan Mansart Risk Profile 10 Fund

For customers
Scottish Equitable J.P.Morgan
Mansart Risk Profile 10 Fund
This document is intended for use by individuals who are familiar with investment terminology. Please contact your financial
adviser if you need an explanation of the terms used.
Fund objective
The fund aims to provide capital growth over the medium to long term whilst aiming to keep risk at or below an annual
volatility* of 10%.
It will do so by tracking the performance of developed market and emerging market equities, UK fixed interest and cash
markets, balancing the allocation between these markets to manage volatility.
The fund uses derivatives to gain exposure to the returns of the specified equity and UK fixed interest markets without having
to directly own the underlying securities. You would therefore expect the fund to experience similar (allowing for charges)
returns and risk to the markets it invests in.
*Volatility is a measure of risk and shows how much the fund’s returns have historically deviated from its own average.
To calculate volatility, we look at deviations over a period of three years, and express these as a yearly number.
Key information
The table below provides the key fund information.
Why this fund?
nYou’re
looking for a fund which aims to grow your capital
over the long term.
nYou like the fact that the fund seeks to continuously
keep risk at a level you’ve decided you’re comfortable
with so you don’t have to worry about rebalancing your
portfolio yourself.
nYou like the fact that, in order to manage risk, the fund’s
investment process assesses and responds to prevailing
market conditions on a daily basis, so that risk is managed
continuously, rather than over a full market cycle.
nYou like the fact that the fund is well diversified across
global equity markets, including emerging markets, and
has exposure to UK fixed interest and cash.
nYou’re comfortable that the fund should experience risk
and returns similar to the markets it invests in.
nThe fund’s investment process allows it to quickly and
cost effectively change its asset allocation in response
to changing market conditions.
nYou’re looking to invest for a period of at least five years.
There’s no guarantee the fund objectives will be met.
The value of this investment can fall as well as rise for
a number of reasons, for example market and currency
movements. You may get back less than originally invested.
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Fund name
Scottish Equitable J.P.Morgan
Mansart Risk Profile 10 Fund
Launch date
3 October 2012
Target Risk Level*
10% annual volatility
Risk rating**
Below average
Charges†
The current additional disclosable
yearly charges/expenses 0.35%
**The risk rating for each fund is based on its risk relative
to other funds in our Full Fund Range. This is not the fund’s
risk against industry benchmarks. We regularly review the risk
ratings, so they can change.
†The underlying fund gets its total return through a financial
contract with JPMorgan Chase Bank, N.A. This contract is an
asset of the underlying fund and, as such, the cost of accessing
the contract is deemed a trading cost and not disclosed within
the additional disclosable yearly charges/expenses. This is
consistent with disclosure rules. However, the projected growth
rates in our illustration take these potential costs into account
so you’ll be able to see the effect of these costs on your
projected returns. The additional charges/expenses disclosed
for this fund are estimated. Although the majority is made up
of an agreed management fee, the expenses element depends
on the actual expenses incurred by the underlying fund, so what
you actually pay may vary.
Asset allocation††
The asset allocation (in this case, we mean the split between equities, UK fixed interest securities and cash) at 31 March 2013 for
the underlying fund was:
Emerging market equities 36.9%
North American equities 32.0%
European equities
10.4%
UK equities
5.4%
Japanese equities
Fixed interest
Asia ex Japanese equities
Canadian equities
5.3%
3.6%
3.5%
2.7%
These figures may not add up to exactly 100% due to rounding.
††Source:
J.P.Morgan Securities plc
What about performance?
This fund is new to our range, and the underlying fund is new to the J.P.Morgan Mansart range, so we can’t give you
performance figures yet.
How does this fund differ from other risk profile funds?
Many risk profile funds manage risk with the aim of keeping it within a target volatility range over a market cycle of three
years or more. Therefore, although such funds rebalance their assets periodically, they may register a volatility outside of the
stipulated ranges over periods shorter than a market cycle.
In contrast, this fund’s investment process manages risk on a daily basis with the aim of making sure that volatility never exceeds
the cap of 10%. If the fund achieves this objective you would expect to see fewer fluctuations in fund value compared with funds
managing risk over a market cycle.
Each approach is aiming to do different things and whether or not this type of fund is better suited to you depends largely
on how comfortable you are with short-term fluctuations in the value of your fund.
Further description of the investment process is provided on the following page.
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The investment process in brief
Below is a brief step-by-step outline of the investment process:
Step 1: Growth forecast
The strategic equity asset allocation is determined periodically by looking at economic growth forecasts for
developed markets relative to emerging markets.
Step 2: Risk assessment
The prevailing level of risk is assessed daily, looking at different measures of asset volatility and correlation
and is evaluated versus the target level of risk.
Step 3: Asset allocation review
The allocations between equities, UK fixed interest and cash are reviewed daily with a view to maximising the fund’s
exposure to equities whilst seeking to maintain risk at or below the target level.
Step 4: Rebalancing
If the target portfolio is sufficiently different to the current portfolio then a rebalance occurs and the new allocations
are implemented.
How the Scottish Equitable J.P.Morgan Mansart Risk Profile 10 Fund works – in more detail
The fund seeks to achieve capital growth over the medium to long term without breaching an annual volatility cap of 10%.
It does so in four main ways:
n Dynamic-passive investment process
n Active risk budgeting
nDiversification
n Managing global equity exposure
Dynamic-passive investment process
The fund uses a systematic investment process which dynamically adjusts its allocation to passive investments, across global
equities, UK fixed interest and UK cash markets. The fund uses certain derivatives to provide an efficient way to gain access
to the returns of these investments. This enables it to offer global diversification and risk management at a relatively low
cost to the investor.
The fund closely controls the exposure between equities, the growth element of the portfolio, UK fixed interest, the defensive
component of the portfolio and cash, which is used in the fund in periods of extreme volatility.
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Active risk budgeting
Risk management is at the heart of the fund’s investment process. In practice, this means that risk is managed on a daily basis
through a systematic investment process.
The fund takes a dynamic approach to asset allocation, seeking to cap the volatility of the fund according to its risk profile
while improving risk-adjusted returns.
This means that the asset allocation of the funds is free to change on a daily basis, meaning it can react quickly to changing
market conditions.
Through this active risk budgeting process, the fund is seeking to generate improved risk adjusted returns by systematically
reducing exposure to equities when volatility has been high and increasing exposure to equities when volatility has been lower.
By using this process the fund is seeking to exploit the dynamics of the relationships between volatility and the returns of bond
and equity markets.
Diversification
The fund gains multi-asset exposure across global equity markets, sterling denominated fixed interest and UK cash.
Equity indices provide the growth component of the fund, giving access to global equities spanning developed and emerging
markets. This exposure is achieved by tracking the performance of recognised benchmark indices.
Fixed income provides the defensive component of the portfolio and provides diversification from equity exposure. The fixed
income component provides exposure to the 10 year sterling fixed interest rate benchmark.
Cash provides a further source of diversification for the fund and is used to reduce risk in the portfolio in periods of
extreme volatility.
Managing global equity exposure
This is a growth-orientated fund providing access to global developed and emerging equity markets, with the exposure to each
market driven by future growth expectations for the regions.
In determining the amount invested in developed markets and in emerging markets, the fund will follow trends in the growth
forecasts for the regions, as measured by gross domestic product (GDP). This approach has the ultimate aim of providing
the best growth possible within the fund’s risk constraints.
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Important information
Please note that the fund will use derivatives in a number of ways to achieve its objectives. This means the fund could be
exposed to additional risks if the market moves against it.
Although the fund is exposed to overseas investments, all foreign investments are hedged back to sterling with the aim of
minimising currency exchange rate risk.
In the event that the underlying investments which the fund invests in suspend trading, Aegon may defer trading and/or
payment to investors. The value ultimately payable will depend on the amount Aegon receives or expects to receive from
the underlying investments.
Aegon Retirement Choices (ARC) customers should view the ARC investment list or asset picker for the equivalent ARC
fund price.
Scottish Equitable plc is solely responsible for this document. Accordingly, no representation is made to any person by any
J.P. Morgan group entity, and no reliance should be placed on any J.P. Morgan group entity in relation to this document or the
information contained herein.
About J.P.Morgan Mansart Investments
J.P.Morgan Mansart Investments, the investment manager of the underlying J.P.Morgan Mansart Risk Profile 10 Fund, operates
as an independent investment manager, aligned with JP Morgan Chase & Co. Founded in 2002, J.P.Morgan Mansart Investments
specialises in outcome orientated, passive and dynamic-passive investment solutions.
Who can invest?
This fund is available to most Aegon pension planholders.
For more information, please speak to your financial adviser.
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. FCA register number
165548. An Aegon company. www.aegon.co.uk
© 2013 Aegon UK plc
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