Latest news about the fund, what it invests in and how it performed in the three months to the end of June 2017

Transcription

1 All data as at <<Insert Date>> unless otherwise stated. My Future (NGP) Second quarter 2017 Latest news about the fund, what it invests in and how it performed in the three months the end of June 2017 This report provides factual information only. The information shown in the report should not be used in isolation for making buying and selling decisions.

2 Contents How does My Future work? Page 3 Fund selection and governance Page 4 Market performance Pages 5 An overview of My Future Growth in Q2 17 Pages 6-7 An overview of My Future Consolidation in Q2 17 Pages 8-9 Fund performance end June 2017 Pages Market performance over the five years end June 2017 Page 12 Glossary and how contact us Page 13 Further information about fund charges and risk ratings Page 14 Special risk warnings Page 15 My Future a quarterly update for 2 All data as at 30 June 2017 unless otherwise stated.

3 % invested Welcome My Future Your pension works by investing contributions. The aim is for them grow in value over time, helping you save for your retirement. But investments can fall in value as well as rise, so it is a good idea review how they re doing. You may not have the time or expertise do this yourself, and this is why the My Future investment programmes are useful. These programmes invest your contributions in funds. At the start the programmes invest in funds that aim grow the value of your savings. They then gradually move in funds that aim reduce the risk of your savings falling in value, as you get closer your planned retirement date. Let s have a look at how My Future works in practice Growth This is the first stage during which your pension savings are invested in the My Future Growth Fund. Think of this stage as the engine room of the pension, which means that the focus is on growing the value of your pension savings. The My Future Growth Fund is designed provide you with the potential for growth in the size of your pension savings. To achieve this, the My Future Growth Fund invests mainly in company shares with some exposure fixed interest investments, including government bonds, in order limit the negative impact of any potential falls in the value of company shares on your pension. Consolidation The second stage is called the Consolidation stage. It begins when you are within 15 years of your planned retirement date. Your savings are gradually moved in the My Future Consolidation Fund from the My Future Growth Fund. The focus at this point is on reducing the risks which your pension savings might be exposed, while continuing provide the opportunity for them grow in value. This means that your pension savings are invested more money in fixed interest assets than company shares. The My Future glidepath The chart below shows how My Future works in practice. All of your pension savings are invested in the My Future Growth Fund up until 15 years before your planned retirement date. Then your pension savings start move in the My Future Consolidation Fund 15 years before your planned retirement date My Future Growth My Future Consolidation Years retirement Source: Friends Life, August All data as at 30 June 2017 unless otherwise stated.

4 How we diversify My Future help reduce risk In both the Growth and the Consolidation funds, your pension savings are invested across a range of different investments, including company shares, government bonds and corporate bonds. Please refer the glossary on page 13 of this report for an explanation of these terms. Investing in different investments helps enable your pension savings benefit from diversification. Diversification, namely investing in several types of investments, is one way lower the risk of your pension savings being exposed the full impact of falls in the sck markets. Diversification aims smooth out the effect of the risks attached investing solely in companies, such as the departure of a well-regarded chief executive officer or the introduction of ugher regulation on certain industries. The value of your investments can fall as well as rise and the value of your pension is not guaranteed. You could get back less than invested. Please check your policy for more information about which solution you have chosen and the details of charges. Fund selection and governance The funds that make up My Future achieve their exposure company shares and fixed interest by investing in a range of funds that have been selected on behalf of our cusmers by our in-house fund selection process. We are committed ensuring that these funds remain suitable for My Future and our cusmers at all times. That s why we have a dedicated investment fund governance team in place. It is the responsibility of the analysts in this team make sure that the funds in My Future continue meet the investment objectives communicated us by the respective fund managers at the outset. A key part of the work by the fund governance team is review fund performance every quarter. The data that comes out of this performance review is used assess whether any further moniring of the funds is required. Our fund governance team is in regular contact with the fund managers of the funds which are included in My Future. 4 All data as at 30 June 2017 unless otherwise stated.

5 Market performance How did the assets which My Future invests in perform in the second quarter of 2017? The indices in the chart below have been chosen because they are a good representation of the performance of the assets in My Future. They include the FTSE All-Share for UK company shares, the MSCI World Index for global company shares, the FTSE Actuaries UK Conventional Gilts All Scks for UK government bonds, the FTSE Actuaries Index-Linked All Scks for UK index-linked government bonds and the iboxx Non-Gilts Corporate Bonds All Maturities Index for UK corporate bonds. The chart shows how these assets performed in the three months the end of June Please refer page 12 of this report for a chart which shows how these assets performed in each of the five years the end of June This information refers the past. Past performance is not a guide future performance. Company shares performed well thanks a favourable environment of low interest rates, modest inflation and positive economic growth. The UK s FTSE All-Share Index posted a positive return in the quarter as companies, which are listed on the FTSE and sell their goods and services abroad, benefited from the decline in sterling (British pound) compared with other currencies. Invesrs have been reducing their holdings in the British pound since before the UK s referendum on the European Union due the uncertainty this situation has created. This has meant that the earnings generated by companies overseas are worth more when brought back the UK and converted in sterling. There were, however, bumps along the way for invesrs in company shares, including questions about whether US President Donald Trump would introduce the pro-economic policies he had promised in November UK government and UK corporate bonds did not perform as well as company shares. This was due many invesrs believing that the Bank of England would raise interest rates sooner rather than later prevent a sharp rise in the cost of living. Friends Life, as at July All data as at 30 June 2017 unless otherwise stated.

6 My Future Growth What is the aim of the fund? The fund aims achieve a tal overall return from capital growth and reinvested income by investing in a diversified portfolio of predominantly passively managed underlying funds. The fund will mainly invest in UK and overseas equities (including emerging markets), with some investment in UK Government (including index-linked) and corporate bonds. It may also invest in overseas government and corporate bonds, money market instruments and cash. Key facts When was the fund launched? March 2013 How much money is in the fund? The fund had 1.1 billion in assets under management at the end June of Who manages the fund? Friends Life Special risk warning A, B, C, D, E, J, L, N The assigned warnings highlight the risks that the fund can be exposed, but at any given point in time the fund may not have exposure all of these risks. Further information about the special risk warning definitions can be found on page 14 of this report. 6 All data as at 30 June 2017 unless otherwise stated.

7 My Future Growth fund facts summary Where does the fund invest? The asset allocation below is in percentages and it shows the different asset classes that the My Future Growth Fund invests in Global equities UK equities UK government bonds Five year plus UK indexlinked government bonds UK corporate bonds 30.7 Source: Friends Life as at 30 June Please note that there may be instances where the allocations do not tal 100% due the rounding of the figures used compile these breakdowns. Please refer page 13 of this report for an explanation of what the terms in the pie chart mean. How does it invest? The My Future Growth Fund is a fund of funds. This means that it achieves exposure the assets in the pie chart above by investing in several funds which we have chosen on behalf of our cusmers, as explained in the fund selection and governance section on page 4 of this report. Facrs affecting the fund in the second quarter of 2017 The fund s allocation UK and global company shares benefited performance in the quarter. Sck markets in the UK, Europe and the US registered fresh record highs thanks the so-called goldilocks environment, namely low inflation, low interest rates and positive economic growth, which sck markets really like. In comparison, the fund s exposure fixed interest assets, including UK government bonds and UK index-linked government bonds, detracted value from performance. There were real worries during the quarter that the Bank of England (BoE) would need raise interest rates sooner rather than later in order prevent inflation from posing a risk the economy. The cost of goods and services in the UK rose again in May, which means that households are under particular strain given that wages remain unchanged. Just below 6% of the fund is invested in corporate bonds and this position added value performance in the quarter. Corporate bonds held up better than government bonds as invesrs were keen pick up the higher levels of income available in this part of the fixed interest market. Source: Friends Life, July Further information about the investment terms used in this section can be found on page All data as at 30 June 2017 unless otherwise stated.

8 My Future Consolidation Fund aim This fund seeks achieve a tal overall return from capital growth and reinvested income by investing in a diversified portfolio of predominantly passively managed underlying funds. A significant proportion of the fund's assets invest in UK government (including index-linked) and corporate bonds. It may also invest in UK and overseas equities (including emerging markets), property, money market instruments and cash. Derivatives may be used by the underlying fund(s) for investment purposes. Key facts When was the fund launched? March 2013 How much money is in the fund? The fund had 244.4million in assets under management as at end June of Who manages the fund? Friends Life Special risk warning A, B, C, D, E, J, L, N The assigned warnings highlight the risks that the fund can be exposed, but at any given point in time the fund may not have exposure all of these risks. Further information about the special risk warning definitions can be found on page 14 of this report. 8 All data as at 30 June 2017 unless otherwise stated.

9 My Future Consolidation fund facts summary Where does the fund invest? The asset allocation below is in percentages and it shows the different asset classes that the My Future Consolidation Fund invests in Up five-year UK government bonds 35.8 Up five-year UK corporate bonds 14.9 Global equities Up five-year UK index-linked government bonds 29.1 UK equities Source: Friends Life as at 30 June Please note that there may be instances where the allocations do not tal 100% due the rounding of the figures used compile these breakdowns. Please refer page 13 of this report for an explanation of what the terms in the pie chart mean. How does the fund invest? The My Future Consolidation Fund is a fund of funds. This means that it achieves exposure the assets in the pie chart above by investing in several funds which we have chosen on behalf of our cusmers, as explained in the fund selection and governance section on page 4 of this report. Facrs affecting the fund in the second quarter of 2017 The fund s much higher allocation fixed interest assets, including conventional government bonds and index-linked government bonds, had a negative impact on performance during the quarter. That said, within fixed income, the fund is invested is shorter-dated government and corporate bonds, and they outperformed their longer dated counterparts in the quarter. As the name implies, shorter dated government and corporate bonds have a shorter lifetime, which means that they pay fewer interest payments pay and so are less vulnerable rises in interest rates, which government and corporate bonds do not like. The fund s position in short-dated corporate bonds added value performance. Corporate bonds held up better than government bonds in the environment of rising interest rate expectations and were also boosted by invesrs wanting capture the higher levels of income available from bonds issued by companies. Corporate bonds pay a higher level of income than government bonds because it is believed that a company issuing a bond is more likely than the UK government default on its debt. Source: Friends Life, July Further information about the investment terms used in this section can be found in the glossary on page All data as at 30 June 2017 unless otherwise stated.

10 Fund performance How has the My Future Growth Fund performed? The table below shows how the My Future Growth Fund has performed, in percentages, in each of the past five years the end of June The chart includes the performance of the ABI Mixed Investment 40%-85% shares secr over the same period. The ABI Mixed Investment 40%-85% shares secr is the relevant secr for the My Future Growth Fund. Fund returns given in the table below include an inet charge. Please refer your policy for more details about the charges which apply your fund. This table can help you see how the My Future Growth Fund and other funds, which invest in similar assets, have performed in different economic conditions and how performance varied year by year. Discrete annual performance end June /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/2013 My Future Growth Fund N/A** ABI Mixed Investment 40%-85% Shares secr Libor GBP 3m +4% N/A** not applicable as the fund was not available during this period. Cumulative past performance end June 2017 Cumulative performance shows percentage growth over specified time periods, aligned the month end. The chart also includes the cumulative performance of the benchmark and the return of the ABI Mixed Investment 40%-85% shares secr over the same period. Fund returns given in the table below include an inet charge. Please refer your policy for more details about the charges which apply your fund. 1yr 3yrs Since launch 26/03/2013 My Future Growth Fund ABI Mixed Investment 40%-85% Shares secr Libor GBP 3m +4% The past performance figures on this page come from a company called FE. The company s website is The performance information shown above refers the past. Past performance is not a guide future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. 10 All data as at 30 June 2017 unless otherwise stated.

11 Fund performance How has the My Future Consolidation Fund performed? The following table shows how the My Future Consolidation Fund has performed, in percentages, in each of the past five years the end of June It includes the performance of the ABI Mixed Investment 0%-35% Shares secr which is the relevant ABI investment secr for this fund. Fund returns given in the table below include an inet charge. Please refer your policy for more details about the charges which apply your fund. This table can help you see how the fund and other funds that hold similar assets have performed in different economic conditions and how performance varied year by year. Discrete performance end June 2017 My Future Consolidation Fund 30/06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ N/A** ABI Mixed Investment 0%-35% Shares secr Libor GBP 3m +1% N/A **The fund was not available during this time frame. Cumulative past performance end June 2017 Cumulative performance shows the percentage growth of the My Future Consolidation Fund over specified time periods, aligned the month end. The chart includes the cumulative performance of the ABI Mixed Investment 0%-35% shares secr over the same period. This is the relevant ABI investment secr for this fund. Fund returns given in the table below include an inet charge. Please refer your policy for more details about the charges which apply your fund. 1yr 3yrs Since launch 26/03/2013 My Future Consolidation Fund ABI Mixed Investment 0%-35% Shares secr Libor GBP 3m +1% The past performance figures on this page come from a company called FE. The company s website is The performance information shown above refers the past. Past performance is not a guide future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. 11 All data as at 30 June 2017 unless otherwise stated.

12 The chart below shows the performance of the assets in My Future over the five years the end of June FTSE All-Share Index 30/06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/2013 (UK equities) FTSE UK Gilts All Scks Index (UK government bonds) MSCI World Index (Global equities) Iboxx UK Non-Gilts All Maturities (UK corporate bonds) FTSE UK Gilts Index-linked All Scks Index (UK index-linked UK government bonds) The past performance figures on this page come from a company called FE. The company s website is The performance information shown above refers the past. Past performance is not a guide future performance. Please be aware that the value of investments can fall as well as rise and are not guaranteed, which means you may get back less than you invested. 12 All data as at 30 June 2017 unless otherwise stated.

13 Glossary The glossary below provides an explanation of the investments in the My Future Growth and My Future Consolidation funds. Company shares Also known as equities, shares are often issued by companies raise money help them grow and develop. Shares are bought and sold on a sck market, such as the London Sck Exchange, and their value can go up and down, sometimes sharply, depending on the fortunes of the company and sck markets in general. Shares have the potential over the long term provide higher returns than money market and fixed interest investments, property. However, these returns will normally fluctuate more and there is also a greater risk that they will fall in value. Fixed Interest Also referred as bonds, fixed interest investments are loans a government or a company. In return you receive regular interest payments for a set period of time and your original investment (or loan) back at a specified date. The regular interest payments are calculated as a fixed percentage of the original amount of money borrowed. The most common forms of fixed interest investments are government bonds (known as gilts in the UK) and corporate bonds (issued by companies). The value of fixed interest investments is influenced by a number of facrs, including interest rates, inflation expectations, and the perception of the government or company s ability make the regular interest payments and repay the original loan. Fixed interest investments will typically provide lower returns over the long term compared shares and property, but their value will normally fluctuate less than the value of shares or property. Fixed interest investments have the potential provide higher returns than money market investments, but their value will normally fluctuate more than the value of a money market investment. Money market Money market is a term that includes various types of investments that are used by companies provide them with short-term funding (or borrowing) enable them run their businesses. Money market investments should not be confused with bank or building society deposit accounts. The returns that money market investments can provide will normally reflect prevailing interest rates and will typically be lower than returns from fixed interest investments, property and shares. While the value of money market instruments will normally fluctuate less than the value of fixed interest investments, property and shares, there is a risk that their pace won t keep pace with inflation. Also, if the annual management charge of a money market fund is higher than prevailing interest rates or the returns generated, the value of the fund will go down. Further information and help If you want more information about the funds in this report, you can find fund factsheets at friendslife.co.uk/cusmer/ funds, or you can phone our helpdesk on If you have any questions about the contents of this report, please speak your financial adviser. If you would like financial advice but don t have an adviser, please speak visit find out details of financial advisers in your area. You may be charged for this advice. Our full contact details are on the back of the final page of this report. 13 All data as at 30 June 2017 unless otherwise stated.

14 Further information Fund key facts Secr classification Friends Life funds and (where applicable) the underlying funds they invest in, are classified in secrs, ensuring that funds operating similar investment strategies are grouped gether and can be compared on a like for like basis. The secrs referred in this document are taken from; the Association of British Insurers (ABI), the Investment Management Association (IMA), or are based on specific fund universes defined by FE - such as FE Unit Trusts & Open Ended Investment Companies (FE UT & OEIC), FCA (Financial Conduct Authority) Offshore Recognised funds (FO) and Offshore Mutual funds (OM). Investment style describes the way a fund is managed (either Active or Passive) based on its investment strategy. Actively managed funds are run by a fund manager who makes specific investments with the goal of achieving performance in line with a stated investment objective. Passive funds (or Tracker funds) are run in accordance with a pre-determined strategy and usually aim track the performance of an index or benchmark. Friends Life fund performance Annual Management Charge (AMC) the annual, expressed as a percentage, which is charged by the product provider. This covers both the costs of running the fund and any product charges which may be applicable. Additional Expenses charged by the fund managers cover expenses, such as fees audirs, trustees and valuers. The value is an indicative figures, which is reviewed regularly and can change. Additional expenses are added the AMC give the tal fund charge. For full details of your policy charges please contact our cusmer services helpline or refer our website at Quartile rank The quartiles divide the data in four equal intervals. Expressed in terms of rank (1, 2,3 or 4), the quartile measure shows how well a fund has performed all other funds in its peer group. Peer group are defined such that funds are ranked only versus other funds that are in the same category. The p 25% of funds (or quarter) are in the first quartile, the next 25% of funds are in the second, and the next group is in the third quartile. The botm 25% of funds with the poorest performance, are in the fourth quartile. Friends Life fund risk rating Friends Life calculates its risk ratings using hisrical performance data, based upon the methods set by European Union rules. We also carry out further research using information from the underlying fund s investment manager(s). We review each fund s risk rating annually and it may change over time. The timing of your investment decisions is very important and you should consult a financial adviser. Past performance is not a guarantee of future performance. Our risk ratings go from 1 7, with 1 being the lowest and 7 the highest. As a point of reference, a fund with a risk rating of 4 (medium volatility) would typically experience the volatility you would expect from a fund invested in a range of different types of investment (for example shares, property and bonds) without any bias a particular investment type. 14 All data as at 30 June 2017 unless otherwise stated. 1. The hisrical performance of funds with this risk rating has typically experienced the lowest volatility of all the funds Friends Life has rated. This means that these funds have the lowest potential for substantial changes in value compared with other Friends Life funds. 2. The hisrical performance of funds with this risk rating has typically experienced low volatility compared with other funds Friends Life has rated. This means that these funds have a low potential for substantial changes in value compared with other Friends Life funds. 3. The hisrical performance of funds with this risk rating has typically experienced low medium volatility compared with other funds Friends Life has rated. This means that these funds have a low medium potential for substantial changes in value compared with other Friends Life funds. 4. The hisrical performance of funds with this risk rating has typically experienced medium volatility compared with other funds Friends Life has rated. This means that these funds have a medium potential for substantial changes in value compared with other Friends Life funds. 5. The hisrical performance of funds with this risk rating has typically experienced medium high volatility compared with other funds Friends Life has rated. This means that these funds have a medium high potential for substantial changes in value compared with other Friends Life funds. 6. The hisrical performance of funds with this risk rating has typically experienced high volatility compared with other funds Friends Life has rated. This means that these funds have a high potential for substantial changes in value compared with other Friends Life funds. 7. The hisrical performance of funds with this risk rating has typically experienced the highest volatility of all the funds Friends Life has rated. This means that these funds have the highest potential for substantial changes in value compared with other Friends Life funds.

15 Special Risk Warning A General Investment is not guaranteed: The value of an investment is not guaranteed and can go down as Price: At times, a fund may need change the way its price is calculated ensure that those moving in and out of the fund and existing unit-holders/shareholders are treated fairly and are not disadvantaged by any large cashflows. Suspend trading: Fund managers have the ability, in certain circumstances, suspend trading in their funds for as long as necessary. When this occurs we will need delay the cashing in or switching of units in the relevant fund. You may not be able access your money during this period. The circumstances in which we may delay a switch, withdrawal or transfer can include but are not limited the following: if a large number of cusmers want take money out of the same fund at the same time; if there are practical problems selling the assets in which a fund is invested; if the fund (or part of it) is managed by an external company, they may insist on a delay. Sck Lending: Where a fund is involved in the temporary transfer of securities, there is a risk that the borrower may not be able return the security its owner. This may have a negative effect on the performance of the fund. Derivatives: Most funds can invest in derivatives for the purpose of efficient portfolio management or risk reduction. For funds that also use derivatives for investment purposes we apply an additional risk warning due the possible increase in risk and volatility. B - Currency Risk: Where a fun invests in share classes or securities priced in currencies other than the fund s base currency, changes in exchange rates can contribute the value of the investment going up or down. C - Emerging Markets: Where a fund invests in emerging markets, it is likely be more volatile than one that invests in developed markets. These markets may not be as strictly regulated and securities may be harder buy and sell than those in more developed markets. These markets may also be politically unstable which can result in the fund carrying more risk. D - Smaller Companies: Where a fund invests in the shares of smaller companies, these shares can be more volatile and may be harder buy and sell than larger company shares which can result in the fund carrying more risk. E - Fixed Interest: Where a fund invests in fixed interest securities, such as corporate or government bonds, changes in interest rates can contribute the value of the investment going up or down. If interest rates rise, the value is likely fall. Bonds with a lower credit rating are known as sub-investment grade or junk bonds. These carry an increased risk that the issuer of the bond will be unable continue the interest payments or return the capital at maturity. F - Specialist: Where a fund invests only in a specific or limited range of industry secrs, it may carry more risk than funds that invest across a broader range or variety of secrs. These funds can be more volatile and carry higher risk due their lack of diversification. G - Derivatives: Where a fund uses derivatives for investment purposes, there may be an increase in the risk and volatility of the fund. Some derivative investments also expose invesrs counterparty or default risk where another party is unable meets its obligations and pay what is due, which could result in the loss of the value of the derivative itself. H Cash/Money Market Funds: These are not cash deposit accounts but invest in money market instruments and short-term bonds and can fall in value. In a low interest rate environment the charges applied a cash fund may be greater than its return, so you could get back less than you have paid in. I - Physical Property: Where a fund invests in physical property, these properties are not easy buy or sell. In exceptional circumstances, we may need delay the cashing in or switching of units in the fund and you may not be able access your money during this period. The value of properties held is generally a matter of the valuer s opinion rather than fact. J - Index-Linked: Where a fund invests in indexlinked bonds, changes in inflation rates can contribute the value of the investment going up or down. If inflation falls, the value is likely fall. K - High Cash Levels: Due the way some funds are managed there may be periods when they have large cash holdings. This can be a deliberate asset allocation decision or while suitable investment opportunities are researched and selected. A fund s growth potential may be less during this period. L - Reinsured Funds: Where a fund invests in an underlying fund operated by another insurance company through a reinsurance agreement, if the other insurance company were become insolvent, you could lose some or all of the value of your investment in this fund. M - Ethical: Where a fund invests only in secrs and securities that meet its agreed ethical criteria, it may carry more risk than funds which are free from these restrictions. The ethical companies invested in can be involved in new and innovative technologies or new markets and can therefore have a higher risk profile than organisations involved in more mainstream activities. N - Alternative Investments: Where a fund invests in alternatives, it may carry more risk as these instruments are generally priced less regularly and may be harder buy and sell than investments in more conventional asset classes. Alternatives include commodities, hedge funds, private equity, real estate investment trusts (REITS), venture capital and currencies. O - Convertible Bonds: Where a fund invests in convertible bonds, it will experience the risks associated with holding bonds until conversion at which point it will experience the risks associated with holding equities. To compensate for having additional value through the option convert from a bond an equity, a convertible bond typically has a coupon rate lower than that of a similar, non-convertible bond. 15 All data as at 30 June 2017 unless otherwise stated.

16 Need some help? Call: Please note that calls may be recorded improve the quality of our services. Write Friends Life, PO Box 2282, Salisbury SP2 2HY For more information on pension changes visit: Friends Life and Pensions Limited Incorporated company limited by shares and registered in England and Wales number Registered Office: Pixham End, Dorking, Surrey RH4 1QA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Telephone telephone calls may be recorded.