Retirement Advantage. Quarterly Report. Quarter 4 January Executive Summary. Outcomes

Transcription

1 Retirement Advantage Quarterly Report Quarter 4 January 2018 Executive Summary There have been no changes to the list of funds over the final quarter of Six of the nine strategies continue to meet their stated objectives and outcomes and therefore meet Square Mile s Green reporting status. One has slipped from Green to Amber, whilst the remaining two funds are unchanged at Pink status. This means that despite the fact they are not fully meeting their outcomes and/or performance objectives, we believe there are mitigating factors that can explain this. Overall, we do not have any pressing concerns over any of the funds on the list and continue to maintain our conviction in all of the strategies within this collection. Outcomes Cautious Balanced Flexible Peer Group Aware Janus Henderson Cautious Managed AXA Framlington Managed Balanced Threadneedle Managed Equity Key: Outcome Orientated Threadneedle Dynamic Real Return Jupiter Merlin Balanced Portfolio Jupiter Merlin Growth Portfolio Meeting Objective Behind Objective Income Bias Invesco Perpetual Distribution AXA Distribution Janus Henderson Global Equity Income Objective Not Met - expected and explainable Objective Not Met INVESTMENT SERVICES

2 GREEN - MEETING OBJECTIVE 2 AXA Distribution AXA Distribution v UK CPI, Rolling 5 Years Monthly (1 Month Delay) Income, Inflation Protection Objective: The managers aim to outperform the IA Mixed Investment 20-6 Shares Sector over the long-term. 9% 8% 7% 6% 5% 4% 3% The fund has a target asset allocation position of 55% in UK equities and 45% in fixed income; the fixed income component comprises of 35% index-linked gilts, 7% conventional gilts and 3% cash. The managers ultimately believe that this asset allocation provides a conservative, stable and diversified platform, from which to build performance across the different stages of the economic cycle. Whilst the fund does not have an explicit inflationlinked objective, the managers aim to deliver a consistent return over the long term from a high-quality portfolio of equities and fixed income stocks that meet or exceed, the rate of inflation. Since the fund s launch, the managers have delivered consistent returns well ahead of the rate of inflation with moderate levels of volatility. 1% -1% - Apr-07 Dec-09 Aug-12 Apr-15 Dec-17 Data as at 30th November % % -0.6% -0.8% AXA Distribution v Composite, Rolling 5 Years Monthly (Composite: 55% FTSE All Share, 17.5% FTSE Brit Gov Index Linked up to 5 yr, 17.5% FTSE Brit Gov Linked All Stocks, 3.5% FTSE BritGov up to 5 yrs, 3.5% FTSE Brit Gov All Stocks) - Over the course of 2017 the fund has performed broadly in line with the IA Mixed Investment 20-6 Shares sector and it delivered a solid absolute return of approximately 7%, which is ahead of UK CPI inflation. The fund s equity exposure has been the biggest driver of returns this year, in what has been a good year for UK shares. Additionally, within the fixed income allocation the preference for index-linked gilts also proved helpful as they outperformed conventional gilts over the period. This is one of the more traditional funds in the peer group and it invests exclusively in UK equities and bonds. Therefore, on a relative basis when compared to the peer group, it lagged other funds that had higher overseas equities weightings, particularly those with exposure to Asia and the emerging markets which delivered exceptionally strong returns over % -1.6% -1.8% Apr-07 Dec-09 Aug-12 Apr-15 Dec % 1.5% AXA Distribution v IA Mixed Investment 2-6 Shares, Rolling 5 Years Monthly As is to be expected with this fund, activity has been modest over the review period, particularly at the asset allocation level. The moderate overweight (c.3%) to equities continues, and the fund now has a slightly lower overweight (c 1%) allocation to index-linked bonds. The underweight (c.4%) to conventional gilts remains unchanged while cash is now. 0.5% May-07 Feb-09 Nov-10 Aug-12 May-14 Feb-16 Nov-17

3 GREEN - MEETING OBJECTIVE 3 AXA Framlington Managed Balanced AXA Framlington Managed Balanced v IA Mixed Investment 4-85% Shares, Rolling 5 Years Monthly Capital Accumulation Objective: The managers aim to outperform the IA Mixed Investment 4 to 85% shares sector average over the long-term. The fund continues to meet its capital accumulation outcome and the long-term track record against its peer group benchmark remains solid, although the majority of the track record was established under the previous manager, Richard Peirson. This fund is essentially a global equity mandate that uses its fixed income exposure to help reduce overall volatility. Lead manager, Jamie Hooper, is responsible for the UK equity portfolio and the overall asset allocation, whilst the remaining equity element and allocation to bonds is the responsibility of the respective specialist teams within AXA IM. The fund s asset allocation is actively managed but the portfolio tends to have a bias towards equities, as the manager believes in the long-term benefits of holding the asset class and recognising the difficulties in accurately timing markets. 4.5% % % 1.5% 0.5% Feb-99 Nov-02 Aug-06 May-10 Feb-14 Nov % 1 5% AXA Framlington Managed Balanced & IA Mixed Investment 4-85% Shares, Rolling 5 Years Monthly Absolute Returns The fund has performed broadly in line with its peer group over 2017, finishing with a strong last quarter and delivering an absolute return over the year of approximately 1. Over last year and the final quarter, the fund s performance was boosted by its equity allocation where the fund was modestly overweight although the overweight position in cash was something of a drag during such a strong period for global equity markets. At our last review, the fund was positioned neutrally relative to the IA benchmark. There were no significant regional equity overweights but the fund was modestly overweight to cash, approximately. -5% Jan-98 Nov-00 Sep-03 Jul-06 May-09 Mar-12 Jan-15 Nov-17 AXA Framlington Managed Balanced IA Mixed Investment 4-85% Shares Whilst the fund has marginally underperformed the peer group since Jamie Hooper formally took over lead management of fund in March 2017, this is a fairly short time period to analyse in any great detail. We believe the fund is in safe hands, under the watchful eye of the lead manager, and the strategy shows promise as an attractive longterm option for investors.

4 AMBER - BEHIND OBJECTIVE 4 Invesco Perpetual Distribution Invesco Perpetual Distribution v IA Mixed Investment 2-6 Shares, Rolling 5 Years Monthly Capital Accumulation, Income Objective: The aim of the fund is to deliver a combination of income and capital growth over the medium to long term. This fund is a diversified portfolio of bonds, equities and cash, and is managed on a total return basis. Whilst the managers have discretion over the asset mix, at least 6 will be held in bonds whilst the weighting to equities will typically range between 35% and Feb-09 Jan-12 Dec-14 Nov-17 Following a disappointing showing in 2016, the fund marginally outperformed the IA 20-6 Mixed Investment Shares sector in The biggest drivers of return in 2017 were driven largely by financial bonds, which have performed exceptionally well. Corporate hybrids have also added to performance, as has high yield more generally. In contrast to 2016, the equity element of the fund made a good overall contribution to performance. However a lower equity weighting than the broader peer group fund has been a detractor to relative performance during a period when UK equities have performed very well. Distribution (pence) 14.0p 12.0p 10.0p 8.0p 6.0p 4.0p Invesco Perpetual Distribution, Annual Distribution and Yield 6% 5% 4% 3% Yield (%) In terms of overall positioning, the managers have made few changes over the recent period. Exposure to more defensive credits remains low. At review, 63% of assets were in bonds, with around 37% allocated to BB and B rated issues. This compares to less than 1 in AAA and AA rated securities. Equities remained at their typical level of around 35%. 2.0p 0.0p Year Distribution Yield Invesco Perpetual Distribution & IA Mixed Investment 2-6 Shares, Rolling 5 Years Monthly Absolute Return 1% The fund has generated a good level of income in recent years, with the actual income paid by the fund increasing in each of the last 3 years. In an environment of falling yields this is an excellent result. The yield of the fund has fallen slightly this year, but this is understandable given the impact of higher prices of securities. 18% 16% 14% 1 1 8% We retain our positive view of the managers of this strategy. They have good levels of experience and have established a strong track record of managing this mixed asset mandate across a number of market cycles. given the impact of higher prices of securities. 6% 4% Feb-09 Nov-10 Aug-12 May-14 Feb-16 Nov-17 Invesco Perpetual Distribution IA Mixed Investment 2-6 Shares

5 GREEN - MEETING OBJECTIVE 5 Jupiter Merlin Balanced Portfolio Jupiter Merlin Balanced Portfolio v IA Mixed Investment 4-85% Shares, Rolling 5yr Monthly Return Capital Accumulation Objective: The managers aim to outperform the IA Mixed Investment 4 to 85% shares sector average over the long-term. Despite some recent weakness relative to the IA Mixed Investment 40-85% Shares peer group over the short term, absolute returns remain robust. As can be seen from the chart, its rolling five-year performance against the peer group remains credible. The fund outperformed the peer group over 2017 which has helped boost the long-term returns % % 1.5% 0.5% Oct-07 Sep-08 Aug-09 Jul-10 Jun-11 May-12 Apr-13 Mar-14 Feb-15 Jan-16 Dec-16 Nov-17 The Merlin team remains wary of developed market government bonds and interest rate risk, given the low yields on offer and the potential commencement of a more sustained interest rate rising cycle. This has been their central belief for a number of years now and is reflected in their portfolios through the view that on balance, equities, remain better value than bonds. Therefore, the fund s weighting to equities remains close to the upper end of the permitted 40-85% range. That being said, the heavy allocation to equities is somewhat dampened by investing in strategies that typically have a beta below that of the market. More recently, the team have been debating their view on bond yields and have made a number of subtle changes to the portfolio. For example, the long-term holding in AXA Framlington UK Select Opportunities has been trimmed back by around half, with the more recent addition TM Sanditon UK Equity being exited following a poor run of returns. The proceeds of both have funded a larger position in Schroder European Alpha Income. Moves over 2017 were reasonably modest but represent a shift away from more growth-orientated strategies into more valuation aware situations. 18% 16% 14% 1 1 8% 6% 4% Jupiter Merlin Balanced Portfolio v IA Mixed Investment 4-85% Shares, Rolling 5yr Monthly Return - Oct-07 Sep-08 Aug-09 Jul-10 Jun-11 May-12 Apr-13 Mar-14 Feb-15 Jan-16 Dec-16 Nov-17 Jupiter Merlin Balanced IA Mixed Investment 4-85% Shares At review, the fund s allocation to fixed income remains very modest (5%) and is limited to a manager who runs a flexible mandate that has a bias towards credit and higher yielding securities. Of the balance, 27% was held in UK equities, 21% in global equities, 15% in US equities, 6% in Europe and 5% in both Asia and Japan. Around 7% is invested across UK commercial property and a gold ETF. The remaining 9% is held in cash, which was increased over the recent period.

6 GREEN - MEETING OBJECTIVE 6 Jupiter Merlin Growth Portfolio Capital Accumulation Jupiter Merlin Growth Portfolio v IA Flexible Investment, Rolling 5yr Monthly Returns Objective: The managers aim to outperform the IA Flexible Investment sector average over the long-term. The fund continues to deliver a solid positive return over a rolling five-year basis and therefore meets its capital accumulation outcome. The managers primary performance benchmark is to outperform the IA Flexible Investment sector over the long term and as can be seen from the chart, the fund does have a solid record of achieving this objective. The fund provided a strong absolute return over 2017 but marginally underperformed the peer group. The team s preference for higher quality markets at this point in the market cycle, for example, the US, proved a headwind for performance. Underweights to developing regions, like Asia and emerging markets, also held back relative performance. The team retain their preference for equities over other asset classes, particularly against a background of anticipated rate rises and increasing sovereign bond yields. The underlying funds remain biased to managers with a focus on capital preservation and those looking to capture performance in good times while conceding less in challenging conditions Sep-97 Dec-99 Mar-02 Jun-04 Sep-06 Dec-08 Mar-11 Jun-13 Sep-15 Dec-17 25% 2 15% 1 5% Jupiter Merlin Growth Portfolio v IA Flexible Investment, Rolling 5yr Monthly Absolute Returns -5% Sep-97 Dec-99 Mar-02 Jun-04 Sep-06 Dec-08 Mar-11 Jun-13 Sep-15 Dec-17 Jupiter Merlin Growth Portfolio IA Flexible Investment There have been no major changes to the portfolio since the last review, when within the UK fund blend, the managers completed the consolidation of their holdings, selling completely out of Woodford Equity Income, Sanditon UK and Axa Framlington UK Select Opportunities. During this period, new positions were introduced in Old Mutual UK Mid Cap and the team also added to Evenlode Income. Currently, the portfolio has a 34% allocation to US equity, 2 to UK equities, 18% in global equities, 8% in Asia/emerging market equities, 6% in Japanese equities, 5% in European equities and 4% in a physical gold ETF. The balance of approximately 3% is in cash.

7 GREEN - MEETING OBJECTIVE 7 Threadneedle Managed Equity Threadneedle Managed Equity v IA Flexible Investment, Rolling 5 Years Monthly Capital Accumulation Objective: To deliver returns that are in the top quartile of the IA Flexible Investment sector over rolling three-year periods. 3.5% % 1.5% This fettered fund-of-funds continues to deliver returns that are consistently above its peer group benchmark and fully meets its capital accumulation outcome. It is managed using an approach that makes small and gradual changes to its asset allocation and underlying fund selection. Whilst many of the underlying managers at Columbia Threadneedle have an investment approach which favours growth type businesses, the multi-asset team are pragmatic and attempt to outperform the benchmark throughout the market cycle. 0.5% -0.5% - Aug-02 Sep-07 Oct-12 Nov-17 2 Threadneedle Managed Equity v IA Flexible Investment Absolute Returns, Rolling 5 Years Monthly The fund continues its impressive relative calendar year performance record over 2017, once again outperforming the peer group over the period. Good asset allocation was a key driver of the fund s relative outperformance as well as strong absolute performance over the last year. At a broad level, the managers favoured equities over bonds. Within the fund s equity element, regional allocations also proved positive with the fund largely being overweight the stronger performing markets of Japan, Asian and European and underweight to neutral those which performed less well, including the UK and US. Whilst fixed income only constitutes a relatively small part of the portfolio, the managers preference for credit over government bonds also proved beneficial. 15% 1 5% -5% Aug-02 Sep-07 Oct-12 Nov-17 Threadneedle Managed Equity IA Flexible Investment In terms of current positioning, the managers retain an overweight to equities as they believe the economic backdrop remains supportive for now and relative to fixed income they offer better value. The fund continues to predominantly invest in global equities with some smaller diversifying positions, namely 5% in global fixed income and 3% in UK fixed income, whilst 6% is held in cash. In terms of equity exposure, the fund is fairly evenly split between the main developed markets of the UK, US and Europe. The balance of the portfolio is mainly an 8% weighting in Japan and an 11% weighting in Asia.

8 GREEN - MEETING OBJECTIVE 8 Threadneedle Dynamic Real Return Capital Accumulation, Inflation Protection Objective: UK CPI + 3% p.a. (net of fees) over 5-7 years and positive returns over rolling 3 year periods Threadneedle Dynamic Real Return v CPI, Rolling 3 yrs Monthly This fund draws on the best ideas of Columbia Threadneedle s highly regarded multi-asset team and results in a portfolio that is constructed in a simple and unconstrained manner. This means the manager will only invest in asset classes or regions that he feels will aid the fund in achieving its long-term growth objective in a relatively conservative way. Although the strategy has a reasonably short track record, it is comfortably ahead of its performance target since launch. At review, the portfolio held around 4 in equities, with Europe ex UK and Japan the preferred areas (15% allocation to each). The remainder was allocated to the UK and emerging markets (6% and 5%, respectively). 37% of assets are held in bonds. A little over half of the fixed income exposure was in short-dated investment grade credit, with the balance allocated to shortdated gilts, high yield bonds and local currency emerging market debt. Around 6% of the portfolio is in commodities and 5% in UK commercial property. Cash is around 11%. Exposure to overseas currencies is in the region of 4. Jun-16 Data as at 30th November % % 1.5% 0.5% Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Threadneedle Dynamic Real Return v IA Targeted Absolute Return, Rolling 3 yrs Monthly Threadneedle Dynamic Real Return v IA Targeted Absolute Return, Rolling 3 yrs monthly Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 There has been little activity in the portfolio over the review period. The manager has taken down the emerging market government bond position as well as marginally reducing the fund s high yield exposure as he believes its risk/reward profile has become less compelling. Elsewhere the manager has continued to increase Japanese equity exposure. This reflects the broader team s positivity on the region following a recent visit and is based on a number of factors including a perceived reduction in political risk and improved business sentiment. The multi-asset team s broad views remain largely unchanged. They continue to prefer equities over bonds, however they remain cognisant of the many risks that could potentially destabilise markets.

9 PINK - OBJECTIVE NOT MET - EXPECTED AND EXPLAINABLE 9 Janus Henderson Cautious Managed Capital Accumulation Janus Henderson Cautious Managed v Composite*, Rolling 5 years Monthly (Composite 5 FTSE All Share, 5 The BofA ML 5 15 Year Sterling Non Gilt) Objective: The manager looks to deliver a return that is ahead of the composite benchmark of 5 FTSE All-Share Index and 5 Merrill Lynch 5-15 years GBP Non Gilt Index. This is a plain vanilla fund that invests primarily in UK equities, UK fixed income and cash. The fund looks to deliver a return that is ahead of its composite benchmark and to remain competitive in relation to peers.the fund s long standing manager, Chris Burvill, and the more recently appointed, Stephen Payne, are acutely aware of the fund s conservative investor base. When compared to peers the fund has no unhedged foreign currency exposure and this can influence its performance relative to the IA Mixed Investment 2-6 shares sector. -0.5% % % -3. Jan-12 Mar-13 May-14 Jul-15 Sep-16 Nov % Janus Henderson Cautious Managed v IA Mixed Investment 2-6, Rolling 5yr Monthly The fund continues to meet our capital accumulation outcome delivering returns that have been above that of the peer group over the longer term. Indeed, the fund is ahead of the sector since its launch in early 2003, and over both five and 10 years. The unwavering adherence to the managers contrarian and value-biased approach has been somewhat of a headwind over more recent timeframes, particularly when comparing performance to the fund s composite benchmark which it has consistently lagged. Despite a strong finish to the year, the fund lagged over 2017 as the value bias and sterling focus has continued to hinder returns. The valuation discipline and risk-averse nature of the fund means that it has held a long-standing underweight to bonds versus the 50:50 equity/ bond benchmark. At review, the fund held 31% in fixed interest securities with a bias to index linked and investment grade corporate bonds. The fund retains a reasonable amount of interest rate sensitivity but is below that of the benchmark. The fund also holds 16% in cash which is held as part of the bond allocation and reflects the managers generally negative view on fixed income as they anticipate a risking yield environment as QE unwinds. The allocation to UK equities is 55% which is close to the 6 maximum reflecting their preference for equities at the asset allocation level. 1.5% 0.5% -0.5% Jan-12 Mar-13 May-14 Jul-15 Sep-16 Nov-17 16% 14% 1 1 8% 6% 4% Janus Henderson Cautious Managed & Composite Benchmark*, Rolling 5yrs Monthly Absolute Return (Composite 5 FTSE All Share, 5 The BofA ML 5 15 Year Sterling Non Gilt) Jan-12 Mar-13 May-14 Jul-15 Sep-16 Nov-17 Henderson Cautious Managed A Acc Composite Benchmark

10 PINK - OBJECTIVE NOT MET - EXPECTED AND EXPLAINABLE 10 Janus Henderson Global Equity Income Janus Henderson Global Equity Income v MSCI World, Rolling 3 Years Monthly Capital Accumulation, Income Objective: The managers aim to outperform the MSCI World Index by to 3% p.a. over the course of an investment cycle. Initially announced in October 2016, the merger of Henderson Global Investors with Janus Capital Group has subsequently completed, however the management of this fund has not been materially affected by this development. Over the calendar year 2017 the fund was marginally behind its MSCI World benchmark, having produced a return of 11.1% versus 11.8%. At the regional level, European and emerging market exposure have both boosted performance. Offsetting this, stock selection within the US and Japan has been problematic whilst from the sector standpoint favouring industrials at the expense of technology have detracted from performance. This is not an aggressively managed fund and therefore tends to have a naturally more defensive return profile. As a result of the approach, returns typically lag during periods of strongly rising markets, but it has proved resilient during more challenging conditions. This in part explains the fund s rather lacklustre performance against the benchmark over the medium term. Over the past few years, the strength of the US market has been the primary driver of relative underperformance, as a number of the better performing US-listed stocks do not meet the managers strict yield and valuation criteria. Up until very recently, this has been further exacerbated by a preference for European equities which, in the managers view, are far more attractively valued with solid prospects for future dividend growth. Despite high market valuations coupled with the strict screening criteria, the opportunity set remains fruitful and currently produces a list of several hundred stocks, a number of which are listed in emerging markets. Distribution (Pence) 4.5p 4.0p 3.5p 3.0p 2.5p 2.0p 1.5p 1.0p 0.5p 0.0p Sep-12 Jun-14 Mar-16 Dec-17 Janus Henderson Global Equity Income, Annual Distribution and Yield 16% 14% 1 1 8% 6% 4% *The red line in the rolling performance chart refers to the managers performance objective over the benchmark Year Distribution Yield MSCI World Yield Janus Henderson Global Equity Income & MSCI World, Rolling 3yrs Monthly % % % 1.5% 0.5% Yield (%) Overall, there has been little change to the portfolio. It remains heavily underweight to the US and, to a lesser extent, Japan. Conversely, the main overweights are to Europe and the UK. On the surface, this looks like a significant skew to Europe, however a large chunk of the company earnings are attributable to their emerging market operations. Jan-12 Mar-13 May-14 Jul-15 Sep-16 Nov-17 Janus Henderson Cautious Managed A Acc Composite Benchmark

11 Legacy funds

12 PINK - OBJECTIVE NOT MET - EXPECTED AND EXPLAINABLE 12 Investec Cautious Managed Investec Cautious Managed v UK CPI*, Rolling 5 Years Monthly * UK CPI from 01/02/2014 and composite 5 FTSE All-Share Index and 5 Merrill Lynch GBP Broad Market (bond) index benchmark prior. 5 Merrill Lynch GBP Broad Market (bond) index benchmark prior. Capital Accumulation Objective: On a net of fees basis, the performance target is to outperform UK CPI by 3. p.a. over the course of a market cycle. We would consider this to be at least 5 years in length The fund s manager, Alastair Mundy, is very much a contrarian investor and as a result, this portfolio can look and behave very differently from a number of competitor strategies. Its return profile can also be variable over shorter timeframes but unfortunately the run of more lacklustre returns has extended to now impact the medium-term numbers. However, aside from the second half of 2016, when returns were boosted from its positions in commodity-related equities and allocation to physical gold and silver, the manager s investment style has been out of favour for some time. over 2017 has also been behind the benchmark and peer group Aug-07 Jan-11 Jun-14 Nov-17 Blue Cirlce represents when the benchmarked changed. Data as at 30th November Investec Cautious Managed v IA Mixed Investment 2-6 Shares, rolling 5yr Monthly Return return The central view is that with interest rates starting to rise, Mr Mundy follows the logic that what had worked so well in a period of declining bond yields, is likely to work badly as bond yields increase. He thinks there is a risk that the market loses faith in central banks and this could be a difficult environment for both equities and bonds, hence the need for diversifying assets. Therefore, low risk becomes high risk and high risk morphs to low risk. There has been limited change to the overall shape of the portfolio for some time but the manager is a long-term value investor willing to be patient and wait for value to be realised in his holdings Mar-03 Nov-06 Jul-10 Mar-14 Nov-17 Current positioning of the portfolio consisted of 28% in UK equities, 17% in US equities (offset with the long standing short S&P Future of -26%), 13% in cash and short dated bonds and around 1 index-linked gilts. The remainder of the portfolio is well diversified across a range of international equities and government bonds. Gold and silver shares account for 4% of the portfolio. We think the reasons for the underperformance are reasonable and explainable, performance does hinge on the wider market coming around to the manager s central thesis. Patience is required as this fund is unlikely to suit investors that are seeking more consistent type returns over shorter time periods.

13 PINK - OBJECTIVE NOT MET - EXPECTED AND EXPLAINABLE 13 Newton Multi-Asset Balanced Newton Multi Asset Balanced v IA Mixed 4-85%, Rolling 5yr Monthly Capital Accumulation Objective: The managers have a focus on constraining volatility while delivering long term returns that are ahead of the fund s index, the IA Mixed Investment 4 to 85% Shares category. This is a relatively straightforward multiasset strategy seeking to deliver long-term returns through capital growth and income, that over the long run, are ahead of the IA Mixed Investment 4 to 85% Shares peer group. However, the managers are aware of market risk and aim to deliver steady returns while moderating some of the volatility typically associated with financial markets Jan-10 Aug-11 Mar-13 Oct-14 May-16 Dec-17 Newton Multi Asset Balanced v Composite*, Rolling 5yr Monthly *Composite: 12.5% FTSE Actuaries UK Conventional Gilts All Stocks, 37.5% FTSE All Share, 12.5% IBOXX UK Sterling Corporate All Maturities, 37.5% FTSE World ex UK The key attractions of this fund are the established Newton Global Thematic approach that is at the core of the process. From a performance perspective, over 2017, the fund provided good positive absolute terms, although this was some way behind the IA sector average. Relative underperformance over the year was primarily due to the fund s preference for more established and reliable businesses, which have proven beneficial for the fund at times when safety has been very much at the forefront of investors minds. The fund s general overweight to bonds and underweight to equities has also proved a headwind. Underperformance was more pronounced over second half of 2017 when more cyclically sensitive equities rallied strongly. The fund s generally defensive positioning has largely caused it to lag over five years but it is well ahead on a 10 year view. We believe the reasons for the underperformance are explainable and reasonable but over shorter time frames fund returns may continue to be quite variable relative to the peer group given the managers more longer-term asset allocation decisions Jan-10 Aug-11 Mar-13 Oct-14 May-16 Dec-17 In November BNY Mellon announced that Mr Stewart would be scaling back his hours and focusing on his Real Return mandate. Whilst he will continue to be a member of the multi-asset team he will no longer be actively involved in the daily decision-making on this fund. We are reassured that co-manager, Matthew Brown, will now be supported on the fund by two senior members of the multi-asset team and therefore we are comfortable with the level of continuity of the fund s management going forward.

14 GREEN - MEETING OBJECTIVE 14 Insight Liquidity 0.0 Insight Liquidity v LIBID 7 Day GBP, 5yr Rolling Monthly Capital Accumulation, Capital Preservation -0.0 Objective: To achieve stability of capital and daily liquidity with an income which is comparable to Sterling denominated short dated money market interest rates. Perfromance -0.04% -0.06% -0.08% Feb-15 Jul-16 Dec-17 Insight Liquidity v IA Money Market, Rolling 5yr Monthly % 0.16% 0.14% % 0.06% 0.04% Feb-15 Jul-16 Dec-17 Insight Liquidity v IA Money Market, Absolute Rolling 5yr Monthly 0.45% % % % % 0.0 Feb-15 Jul-16 Dec-17 Insight Liquidity IA Money Market

15 NO RAG(P) STATUS 15 Investec Multi-Asset Protector Capital Accumulation, Capital Preservation Objective: The fund aims to provide capital growth from a multi asset portfolio and to deliver protection at 8 of the investment s highest price to date. The fund invests in UK and global equities, bonds, property, commodities, cash and alternatives. From time to time the allocation to low risk instruments and cash will be increased. Unit Price Investec Multi-Asset Protector (MAP) v 8 Limits, Cumulative unit price 0 Jul-12 Aug-13 Sep-14 Oct-15 Nov-16 Dec-17 Maximum Unit Price 8 Maximum Unit Price Unit Price Investec Multi-Asset Protector (MAP) v Composite, 3yr Rolling Monthly (Composite: 45% MSCI AC World, 26% US 3 Month Treasury Bills,15% FTSE All Share, 14% BofA Merrill Lynch 1-10 year UK Gilt) 3% 1% 1% -1% -1% % -3% Jul-15 Feb-16 Sep-16 Apr-17 Nov-17 Investec Multi-Asset Protector (MAP) v IA Protected, 3yr Rolling Monthly 2.5% 1.5% 0.5% -0.5% Jul-15 Feb-16 Sep-16 Apr-17 Nov-17

16 NO RAG(P) STATUS 16 Retirement Advantage 8 Protected Index Portfolio 140 Retirement Advantage 8 Protected Index Portfolio v 8 Limits, Cumulative unit price Capital Accumulation, Capital Preservation Objective: The objective is to provide investors with long term capital growth from a multi-asset portfolio and to deliver protection at 8 of the highest net asset value ever achieved by the fund, although this is not guaranteed. Unit Price Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Maximum Unit Price 8 Maximum Unit Price Unit Price Retirement Advantage 8 Protected Index Portfolio v IA Unclassified, 1yr Rolling Monthly 1yr Rolling Monthly -1% - -3% -4% -5% -6% -7% Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

17 NO RAG(P) STATUS 17 Retirement Advantage Adventurous Passive Retirement Advantage Adventurous Passive v IA Flexible Investment, Rolling 5yr Monthly Capital Accumulation, Capital Preservation 3% 3% Objective: To achieve long term capital growth by managing the asset allocation of a portfolio of predominantly UK and overseas equities. 1% 1% Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Adventurous Passive v IA Flexible Investment, Absolute Rolling 5yr Monthly 14% 1 1 8% 6% 4% Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Adventurous Passive IA Flexible Investment

18 NO RAG(P) STATUS 18 Retirement Advantage Balanced Passive Capital Accumulation, Capital Preservation 0.8% 0.6% Retirement Advantage Balanced Passive v IA Mixed Investment 4-85% Shares, Rolling 5yr Monthly Shares, Rolling 5yr Monthly Objective: To achieve a combination of capital growth and capital preservation by managing the asset allocation of a portfolio of predominantly equities and fixed income. 0.4% % -0.6% Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Balanced Passive v IA Mixed Investment 4-85% Shares, Absolute Rolling 5yr Monthly 1 1 8% 6% 4% Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Balanced Passive IA Mixed Investment 4-85% Shares

19 NO RAG(P) STATUS 19 Retirement Advantage Cautious Passive Capital Accumulation, Capital Preservation 1.4% 1. Retirement Advantage Cautious Passive v IA Mixed Investment 20-6 Shares, Rolling 5yr Monthly Monthly Objective: To achieve capital preservation with some opportunity for growth in the medium term by managing the asset allocation of a portfolio of predominantly fixed income and cash with some equities. 0.8% 0.6% 0.4% 0. Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Cautious Passive v IA Mixed Investment 20-6 Shares, Absolute Rolling 5yr Monthly 9% 8% 7% 6% 5% 4% 3% 1% Feb-15 Jan-16 Dec-16 Nov-17 Retirement Advantage Cautious Passive IA Mixed Investment 20-6 Shares

20 INVESTMENT SERVICES For further information contact us on: T: E: Important Information This document is for the use of Retirement Advantage only and is not intended for the use of Financial Advisers or Retail Investors. Square Mile Investment Services Limited makes no warranties or representations regarding the accuracy or completeness of the information contained herein. SM does not offer investment advice or make recommendations regarding investments and nothing in this document shall be deemed to constitute financial or investment advice in anyway. This document shall not constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Past performance is not a guide to future returns and the value of capital invested and any income generated from it may fluctuate in value. Unless indicated, all figures are sourced from Financial Express Ltd. Square Mile Investment Services Limited is registered in England and Wales ( ) and is authorised and regulated by the Financial Conduct Authority (625562).