Download CF Prudential Managed Defensive Fund

CF Prudential Managed Defensive Fund
(formerly Prudential Managed Defensive Fund)
a sub-fund of CF Prudential Investment Funds (1)
(formerly Prudential Investment Funds (1))
ACD’s Annual Short Report
for the year ended 31 October 2014
Investment Objective and Policy
The CF Prudential Managed Defensive Fund’s (‘the Fund’) objective is to deliver long term total
return (the combination of income and growth of capital) with a bias towards income.
The Fund aims to achieve its objective through asset allocation unconstrained by any
benchmark. The Fund may invest globally either directly or via other collective investment
schemes in assets including transferable securities, debt instruments, money market
instruments, cash, near cash, deposits, derivatives, and indirectly in property. Derivative
instruments may be used for both investment purposes and efficient portfolio management. The
Fund will invest no more than 35% of the portfolio in equities.
Risk Profile
The Fund has little exposure to credit or cash flow risk. There are no borrowings or unlisted
securities of a material nature and so there is little exposure to liquidity risk. The main risks it
faces from its financial instruments are market price, foreign currency and interest rate risk. The
ACD reviews the policies for managing these risks in order to follow and achieve the Investment
Objective as summarised above.
Accounting and Distribution Dates
Interim
Final
Accounting
Distribution
30 April
31 October
–
31 December
Ongoing Charges Figure
Expense Type
‘A’
31.10.14
%
‘C’
‘P’
‘R’
31.10.13
%
‘A’
‘C’
‘R’
ACD’s periodic charge
Other expenses
1.35
0.16
–
0.16
0.60
0.16
0.85
0.16
1.35
0.16
–
0.16
0.85
0.16
Collective investment scheme costs
1.51
0.13
0.16
0.13
0.76
0.10
1.01
0.13
1.51
0.14
0.16
0.15
1.01
0.13
Ongoing charges figure
1.64
0.29
0.86
1.14
1.65
0.31
1.14
CF Prudential Managed Defensive Fund
1
Synthetic Risk and Reward Indicator
Performance Record
Typically lower rewards
Typically higher rewards
Lower risk
1
Higher risk
2
3
4
5
6
7
This indicator shows how much a fund has risen and fallen in the past, and therefore how much a
fund’s returns have varied. It is a measure of a fund’s volatility. The higher a fund’s past volatility
the higher the number on the scale and the greater the risk that investors in that fund may have
made losses as well as gains. The lowest number on the scale does not mean that a fund is risk
free.
During the year the indicator has changed from 4 to 3. The Fund has been classed as 3 because
its volatility has been measured as below average.
Non-UCITS Retail Scheme (NURS): The Fund can be less diversified than UCITS schemes as it
has higher investment limits for certain types of asset. It can also invest in assets which are not
available to UCITS schemes. This can increase the potential rewards but can also increase risk.
This indicator is based on historical data and may not be a reliable indication of the future risk
profile of this Fund.
The risk and reward profile shown is not guaranteed to remain the same and may shift over time.
Distributions
Share Class
‘A’ Income
‘A’ Accumulation
‘C’ Income
‘P’ Income
‘P’ Accumulation
‘R’ Accumulation
2
Final
31.10.14
pence per share
2.1936
2.5216
3.5712
2.3312
2.3548
2.4360
CF Prudential Managed Defensive Fund
‘A’ Income shares
Calendar
Year
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
109.05
113.61
114.87
119.15
126.39
128.45
91.20
106.14
107.13
110.13
118.83
122.07
2.8796
2.1208
2.2980
2.0948
2.0296
2.1936
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
113.88
121.57
125.16
134.72
143.16
147.87
94.92
113.51
117.77
122.68
134.58
140.54
2.9973
2.2681
2.4860
2.3376
2.2804
2.5216
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
110.13
114.91
115.79
120.49
127.83
129.79
91.46
106.38
107.27
110.41
119.13
122.52
3.9780
3.3232
3.4952
3.3576
3.3504
3.5712
2009
2010
2011
2012
2013
2014*
‘A’ Accumulation shares
Calendar
Year
2009
2010
2011
2012
2013
2014*
‘C’ Income shares (not publicly available)
Calendar
Year
2009
2010
2011
2012
2013
2014*
CF Prudential Managed Defensive Fund
3
Performance Record (continued)
Net Asset Value
‘P’ Income shares
Calendar
Year
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
2013###
2014*
100.24
104.77
99.01
99.21
–
2.3312
‘P’ Accumulation shares
Calendar
Year
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
2013###
2014*
100.23
104.78
90.01
99.21
–
2.3548
Calendar
Year
Highest
Price
P
Lowest
Price
P
Distribution
per share
P
2012##
2013
2014*
105.23
112.16
116.25
100.00
105.10
110.22
0.5440
2.2008
2.4360
Date
Share Class
Net Asset
Value
£
Shares in
Issue
Net Asset
Value
pence per share
31.10.12
‘A’ Income
‘A’ Accumulation
‘C’ Income
‘R’ Accumulation
3,690,000
22,914,000
183,224,000
1,000
3,182,000
17,443,500
157,869,643
1,000
115.98
131.36
116.06
102.51
31.10.13
‘A’ Income
‘A’ Accumulation
‘C’ Income
‘R’ Accumulation
3,854,000
44,267,000
202,380,000
8,204,000
3,119,000
31,114,500
163,592,584
7,360,000
123.57
142.27
123.71
111.47
31.10.14
‘A’ Income
‘A’ Accumulation
‘C’ Income
‘P’ Income
‘P’ Accumulation
‘R’ Accumulation
3,025,000
33,338,000
202,083,000
2,591,000
52,063,000
8,644,000
2,444,379
22,993,727
163,127,405
2,578,469
50,625,907
7,579,396
123.74
144.99
123.88
100.47
102.84
114.05
1 year
3 years
5 years
1.86
17.96
29.73
‘R’ Accumulation shares
## From 3 August 2012.
### From 15 November 2013.
* To 31 October 2014.
Fund Performance to 31 October 2014 (%)
CF Prudential Managed Defensive
Fund
The performance of the Fund is based on the published price per ‘A’ Accumulation share which
includes reinvested income.
Risk Warning
Please remember that past performance should not be seen as a guide to future performance
and that the value of an investment and the income from it can fall as well as rise and may be
affected by exchange rate variations.
4
CF Prudential Managed Defensive Fund
CF Prudential Managed Defensive Fund
5
ACD’S REPORT
for the year ended 31 October 2014
The Alternative Investment Fund Manager (‘AIFM’) is the legal person appointed on behalf of the
Fund and which (through this appointment) is responsible for managing the Fund in accordance
with the AIFM Directive and The Alternative Investment Fund Managers Regulations 2014. This
role is performed by the Authorised Corporate Director (‘the ACD’) and references to the ACD in
this Annual Short Report include the AIFM as applicable.
Sector Spread of Investments
Continental Europe 8.14% (7.83%)
United Kingdom 7.57% (8.38%)
Important Information
Far East 3.20% (2.95%)
Emerging Markets 2.03% (2.00%)
Equity Investment Instruments 4.12% (4.28%)
With effect from 3 November 2014, the ACD of the Fund changed from Prudential Unit Trusts
Limited to Capita Financial Managers Limited.
Property Portfolios 9.40% (8.79%)
Bond Portfolios 66.38% (66.22%)
Following approval by the Financial Conduct Authority on 22 July 2014, Capita Financial
Managers Limited has been granted permission to manage authorised Alternative Investment
Funds (‘AIFs’). The Fund is an authorised AIF.
With effect from 3 November 2014, the name of the Prudential Investment Funds (1) changed
to CF Prudential Investment Funds (1).
The name of the Fund also changed from Prudential Managed Defensive Fund to CF Prudential
Managed Defensive Fund.
Net other (liabilities) -0.84% (-0.45%)
Full details of the changes can be found in the latest Prospectus.
The figures in brackets show allocations at 31 October 2013.
Capita Financial Managers Limited
ACD of CF Prudential Managed Defensive Fund
10 February 2015
Major Holdings
The top ten holdings at the end of each year are shown below.
Holding
% of Fund Holding
as at 31.10.14
M&G Corporate Bond Fund Sterling
Class ‘I’ (Income)
M&G European Corporate Bond
Fund Sterling Class ‘A’
M&G Short Dated Corporate Bond
Fund Sterling Class ‘A’ (Income)
M&G Property Portfolio Sterling
Class ‘I’ (Income)
M&G Pan European Fund Sterling
Class ‘A’ (Income)
M&G Global High Yield Bond Fund
Sterling Class ‘X’
CF Prudential UK Growth QIS
Sterling Class ‘C’
CF Prudential Pacific Markets Trust
Sterling Class ‘C’
M&G European Loan Fund Sterling
Class ‘A’ (Income)
M&G Global Convertibles Fund
Sterling Class ‘I’
6
21.93
21.66
10.11
9.40
8.14
7.92
7.57
3.20
2.59
2.17
% of Fund
as at 31.10.13
M&G Corporate Bond Fund Sterling
Class ‘I’ (Income)
M&G European Corporate Bond
Fund Sterling Class ‘A’
M&G Short Dated Corporate Bond
Fund Sterling Class ‘A’ (Income)
M&G Property Portfolio Sterling
Class ‘I’ (Income)
CF Prudential UK Growth QIS
Sterling Class ‘C’
M&G Pan European Fund Sterling
Class ‘A’ (Income)
M&G High Yield Corporate Bond
Fund Sterling Class ‘C’
CF Prudential Pacific Markets Trust
Sterling Class ‘C’
M&G European Loan Fund Sterling
Class ‘A’ (Income)
iShares MSCI Emerging Markets
Index Fund
22.02
21.97
10.06
8.79
8.38
7.83
7.68
2.95
2.53
2.00
CF Prudential Managed Defensive Fund
CF Prudential Managed Defensive Fund
7
PORTFOLIO MANAGER’S REPORT
for the year ended 31 October 2014
Between 1 November 2013 (the start of the review period) and 31 October 2014, the Fund’s
total return (capital performance with gross income reinvested) was 1.9%. This compares with
the average total return of 2.7%* in the Fund’s peer group, the IMA Mixed Investment 0-35%
Shares Sector.
Global stockmarkets were volatile for much of the year under review and many markets
struggled, although US equities, or company shares, bucked the trend and produced solid
returns. Investor sentiment was subdued partly because of geopolitical tension in Ukraine and
the Middle East and worries about the Ebola crisis in West Africa. In addition, a slowdown in
China’s economic growth and weaker economic activity in some emerging markets and the
eurozone resulted in fears about the sustainability of the global recovery. This anxiety was
exacerbated by some disappointing data from the US towards the end of the 12 months.
In terms of contributors to performance, although Asian markets overall were unremarkable
during the year under review, stock selection in the CF Prudential Pacific Market QIS fund was
modestly helpful.
The Fund is also invested in commercial property, which performed well, and the position in the
M&G Property Portfolio was therefore beneficial over the 12 months. The Portfolio Manager is
aiming for a 9% weighting in property.
Meanwhile, economic growth in the eurozone slowed from already weak levels and recent signs
indicated that the German powerhouse may be losing momentum. In the circumstances, the
M&G Pan European fund held back returns.
The Fund also has exposure to emerging market equities, which came under pressure over the
12 months as investors worried that a shift in US monetary policy could lead to the possibility
of capital outflows from the region. The holding in the iShares MSCI Emerging Markets ETF
therefore cost some performance.
Against a backdrop of unexceptional performance from many assets, contributions from a
number of holdings in the portfolio were broadly neutral; for example, the CF Prudential UK
Growth QIS fund. The UK stockmarket was lacklustre over the 12 months, despite robust
growth in the domestic economy.
Similarly, returns from the fixed income component of the portfolio were muted. The impact
from the Fund’s position in high yield corporate bonds via the M&G Global High Yield
Bond fund (previously the M&G High Yield Corporate Bond fund) was largely neutral. High
yield corporate bonds refer to interest-bearing loans issued by lower quality companies,
which typically pay a greater level of income than their higher quality, or investment grade,
counterparts.
While recognising that the global economy continues to face risks, most notably from
geopolitical upsets and growth setbacks, the Portfolio Manager feels that equity markets have
already factored much potential bad news into prices. The global economy is improving, albeit
at only a modest pace and with obstacles arising from time to time. Overall he feels that equity
markets remain reasonably valued.
Rather than increasing the exposure to equities, the Portfolio Manager left the portfolio broadly
unchanged as he believes that the current level of risk in the portfolio is appropriate, given the
objectives of the Fund’s mandate. He is aiming for a weighting of just over 20% in equities, split
between the UK and Europe (7.75% each), Asia (3%) and emerging markets (2%).
The Portfolio Manager did, however, make some adjustments to the portfolio with the aim of
taking some existing positions closer to their target weights. For example, he added to positions
in the M&G Corporate Bond fund, the M&G Short Dated Corporate Bond fund, the M&G
European Corporate Bond fund and the M&G Global High Yield Bond fund.
Outlook
The Portfolio Manager believes that the global economy should continue to make progress,
although the pace is likely to remain slow and short-term problems may well occur along the
way. As European equities represent one of the larger components of the portfolio, he awaits
greater clarity about the path of the eurozone economy. However, he recognises the trading
bloc’s vulnerability, given its current lacklustre economic growth.
Policymakers have done their best in the recent past to support economic activity by keeping
interest rates down and the subdued pace of growth suggests that borrowing costs will remain
low for some time to come. Central bank interest rates are a key input into the level of bond
yields so an environment of low bond yields(a) seems likely for the short term at least.
Unexpected developments aside, the Portfolio Manager feels the next major event is likely to
be the start of interest rate increases and investors’ reaction to this could lead to a period of
volatility. Overall though, he thinks that equities are better placed to benefit from this scenario
than bonds, where yields are already at very low levels.
(a)
This refers to the interest received from a fixed income security and is usually expressed annually
as a percentage based on the investment’s cost, its current market value or its face value.
M&G Investment Management Limited
Portfolio Manager
18 November 2014
Meanwhile, the contribution from the M&G Corporate Bond fund, which is invested in good
quality corporate bonds, was broadly flat too, although the M&G European Corporate Bond
fund held back returns slightly. The Portfolio Manager is aiming for a weighting of 43% in
investment grade bonds and 10% in high yield bonds.
In other assets, the M&G European Loan fund was weak, hindering returns. This fund invests in
leveraged loans, which refers to debt issued by companies, typically to finance internal growth,
acquisitions, mergers and leveraged buy-outs by private equity sponsors.
* Source: Morningstar. The IMA Mixed Investment 0.35% Shares Sector is used by the Portfolio
Manager for comparison; no benchmark is required to be disclosed per the Prospectus.
8
CF Prudential Managed Defensive Fund
CF Prudential Managed Defensive Fund
9
Buying and Selling Shares
The ACD will accept orders to deal in the shares on normal business days between 8.30am and
5.30pm London time and transactions will be effected at prices determined by the following
valuation. Instructions to buy or sell shares may be either in writing to: 2 The Boulevard, City
West One Office Park, Gelderd Road, Leeds LS12 6NT or by telephone on 0845 600 2821. A
contract note will be issued by close of business on the next business day after the dealing date
to confirm the transaction.
Reports and Accounts
This document is a short report of the CF Prudential Managed Defensive Fund for the year
ended 31 October 2014. The full Report and Accounts for the Fund is available free of charge
upon written request to Capita Financial Managers Limited, 40 Dukes Place, London EC3A
7NH and can be found on our website, www.capitafinancial.com, by following the link ‘Fund
Information’.
Other Information
The information in this report is designed to enable you to make an informed judgement on the
activities of the Fund during the year it covers and the results of those activities at the end of
the year.
10
CF Prudential Managed Defensive Fund
40 Dukes Place, London EC3A 7NH
T 0870 607 2555 F 0870 607 2550 www.capitafinancial.com
AUTHORISED CORPORATE DIRECTOR (‘ACD’)
AND ALTERNATIVE INVESTMENT FUND
MANAGER (‘AIFM’)
(To 2 November 2014)
Prudential Unit Trusts Limited
Laurence Pountney Hill
London EC4R 0HH
Telephone: 0845 783 5500
(Authorised and regulated by the
Financial Conduct Authority)
DEPOSITARY
National Westminster Bank Plc
Trustee & Depositary Services
Younger Building, First floor
3 Redheughs Avenue
Edinburgh EH12 9RH
(Authorised by the Prudential Regulation
Authority and regulated by the Financial
Conduct Authority and Prudential Regulation
Authority)
(From 3 November 2014)
Capita Financial Managers Limited
Head Office:
40 Dukes Place
London EC3A 7NH
Telephone: 0870 607 2555
Fax: 0870 607 2550
Email: enquiries@capitafinancial.com
(Authorised and regulated by the
Financial Conduct Authority)
REGISTRARS
(To 2 November 2014)
International Financial Data
Services (UK) Limited
IFDS House, St. Nicholas Lane,
Basildon, Essex SS15 5FS
(Authorised and regulated by the
Financial Conduct Authority)
DIRECTORS OF THE ACD
(To 2 November 2014)
M. Lewis
G.W. MacDowall
L.J. Mumford
W.J. Nott
J. Warburton
(From 3 November 2014)
C. Addenbrooke
N. Boyling
C. Hayes
K.J. Midl
J.E. Millan
PORTFOLIO MANAGER
M&G Investment Management Limited
Laurence Pountney Hill
London EC4R 0HH
(Authorised and regulated by the
Financial Conduct Authority)
6107 – SF – 25/02/2015
(From 3 November 2014)
Capita Financial Administrators Limited
Customer Service Centre:
2 The Boulevard
City West One Office Park
Gelderd Road
Leeds LS12 6NT
Telephone: 0845 922 0044
Fax: 0113 224 6001
(Authorised and regulated by the
Financial Conduct Authority)
INDEPENDENT AUDITOR
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT