THE SCOTTISH WIDOWS APPROACH TO INVESTING This information is for UK financial adviser use only and should not be distributed to, or relied upon by, any other person. START
Contents What makes us different? Our multi-asset portfolio design Our fund design Our fund selection and governance The Scottish Widows difference
What makes us different? 1 At Scottish Widows, we ve been helping people plan for their futures for more than 200 years. And while a lot has changed since we opened our doors in 1815, our commitment to our customers has remained the same. We aim to create investment solutions that help you deliver great client outcomes. To do that, we focus on multi-asset portfolio allocation, fund design and fund selection and we carefully choose and monitor the investment partners who are responsible for the day-to-day oversight of the underlying funds. While we have a strategic partnership with Aberdeen Standard Investments, we have well-established relationships with a number of other fund managers as well. So with Scottish Widows, your clients could benefit from our distinct approach to multi-asset portfolio design, and also from the investment expertise of the specialist fund managers we partner with. Our active multi-asset allocation and portfolio design 2 Our diligent fund selection and governance approach
Our multi-asset portfolio design Asset allocation mixes different types of assets, intending to create the mix that's most likely to meet a portfolio's investment goals. The Scottish Widows team creates diversified portfolios that aim to achieve strong risk-adjusted returns. The expertise of the Scottish Widows Asset Allocation team means they are well equipped to navigate changing economic and market conditions and adjust portfolios accordingly, with the aim of positioning them to better meet our customers' goals. For example, while long-term strategic asset allocation is the primary focus of our multi-asset funds, we also look to identify significant medium-term market opportunities in line with our house view : that is, we make adjustments to the weights of individual asset classes within a fund, based on our outlook for medium-term (18 months to 5 years) performance of those asset classes. We believe that in a multi-asset portfolio, asset allocation has the biggest effect on the portfolio s long-term performance. To learn more about our multi-asset allocation proposition and the team behind it, read our detailed Asset Allocation brochure. We believe that in a multi-asset portfolio, asset allocation has the biggest effect on the portfolio s long-term performance.
Our fund design At Scottish Widows, we don t undertake stock picking in other words, we don t select individual stocks and bonds to invest in directly. Instead, we focus on designing or selecting funds that we believe will be most suited to clients risk-return profiles and investment goals. This includes funds that will be used as building blocks to construct our multi-asset portfolios. Whether we develop or mandate our own fund or choose an existing one is entirely dictated by what we believe will deliver the best outcome for our customers. Mandated Funds Some Scottish Widows funds are designed by us, and the day-to-day management is handled by an external fund manager. We call these our mandated funds because we set the specific requirements: the performance objectives, the assets in which a fund can invest and the level of risk that it can take. Our mandated funds are only available to Scottish Widows customers. 497.667 mm Our Fund Proposition Team designs new funds, while our Fund Governance, Analysis and Performance Team is responsible for the ongoing governance process that ensures all fund mandates are adhered to.
Our fund selection and governance The P6 Model Fund Selection When selecting funds, we do so from those available in the retail marketplace, especially when we are looking to offer our customers specific funds that invest in specialist asset classes. While these selected funds are managed by an external fund manager (with no input from Scottish Widows), we have a very diligent and methodical selection and ongoing governance process to assess if these funds meet our objectives. Our Fund Manager Assessment (FMA) team also search for and recommend a number of new funds solely for use in the multi-asset portfolios and then provide follow-up monitoring to ensure these funds are meeting our expected standards of performance and governance. The Scottish Widows FMA team act as an internal ratings agency, which is an unusual feature among pension providers. They use their proprietary P6 model to assign ratings in six areas: Profile, People, Philosophy, Process, Portfolio and Performance. The team analyse each category for selected funds to monitor if they are meeting our investment objectives for Scottish Widows customers. PROFILE (10%) PERFORMANCE PEOPLE (20%) (20%) OUR P6 PROCESS PORTFOLIO PHILOSOPHY (10%) (15%) PROCESS (25%) Separately, but just as importantly, the FMA team do not make selections based solely on price. Some fund managers may offer lower fees to attract institutional investors, but if the FMA team decides that underlying investments don t have the attributes to meet our clients needs, they will not be selected. Read more about the FMA team and their process.
Governance We take governance extremely seriously, understanding its importance in helping to deliver good outcomes for customers. The ultimate responsibility for our governance lies with two key committees within Scottish Widows the Insurance Investment Strategy Committee (IISC) and the Unit Linked Investment Management Committee (ULIM). Both committees are made up of some of our most senior and experienced executives and investment specialists. Our investments are regularly reviewed, and multi-asset portfolios are rebalanced when deemed necessary. The types of issues we consider include the economic outlook and market changes, and how they might affect the portfolios. IISC is responsible for the overall investment strategy for all Scottish Widows multi-asset portfolios. It must first approve all the asset classes in which we invest and also any medium-term asset allocation positions that the Asset Allocation Team propose to take. ULIM approves the application of IISC s views at the individual multi-asset portfolio level, with the aim of aligning them as closely as possible to our customers expectations and to their individual risk category.
The Scottish Widows difference At Scottish Widows, our approach to investing is aligned with our aim of putting customers first. We are confident that this approach and the expertise of the people behind it will allow us to continue providing a comprehensive range of investment solutions that are valued by advisers and customers now and in the future. If you d like to find out more about our approach to investing or our investment funds, please get in touch with your Scottish Widows contact or visit: www.scottishwidows.co.uk/extranet/funds Please remember that past performance is not an indicator for future results. Investment markets and conditions can change rapidly and, as such, the views expressed in this update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, cannot be guaranteed and should not be relied on when making investment decisions.
Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. 56316 02/18