Managed by Dan James (pictured), Global Head of Fixed Income; James McAlevey, Senior Portfolio Manager; Orla Garvey, Senior Portfolio Manager; and Joubeen Hurren, Portfolio Manager, the fund is built around the same architecture as the other AIMS funds.
But, the firm said, it should be seen as a separate entity rather than merely a carve out of the fixed income portion of the other AIMS funds.
According to James, the rationale for the fund stemmed from Aviva’s broader goal which is to be the global leader in outcome-oriented solutions.
“One of the solutions required by our customer base is a fixed income solution. Typically people hold fixed income either as a diversifier or because it provides a stable income stream. But, given where yields are and given the impact of the duration expansion across the fixed income complex, to own that index outright is quite a risky proposition now because, you no longer have the yield cushion you once did to protect against an increase in rates.”
The AIMS fund is targeting a 3% gross return per annum over cash and takes an unconstrained approach to the sector. According to Aviva, it will invest in a diversified portfolio of between 25-35 strategies, constructed into three categories: market strategies, opportunistic strategies and risk-reducing strategies.”
According to James, the risk reducing bucket of strategies is one of the key differentiators for the fund, because as he admits, the managers are not always going to get their calls right and so it is important to ensure the portfolios are both robust and sustainable.
“When we are wrong whatever the magnitude of wrong, those risk-reducing strategies kick in and act like capital buffers that preserve capital,” he said, adding that this makes a huge difference both in terms of how the portfolio is constructed and how it is run.
“Without those strategies, in times of stress, risk managers will often step in and force managers to reduce risk, something they can only do by selling the good quality assets still on the books.
The other key focus of the fund is the unconstrained nature of the vehicle which, James said is vital in the current environment.
“Fixed income is not just about duration. Increasingly it is going to be important to exploit all the dimensions of risk across the fixed income spectrum.”
Such an unconstrained approach, he said: “Allows you to make sure you get paid for the risk you are taking, but it also means you don’t have to take risks you don’t want to take.”
The fund has an annual management fee of 0.35% and a total expense ratio capped at 0.45%. It will initially be available in three institutional share class formats: EUR, GBP (hedged) and USD (hedged).
