for employers and scheme trustees key lifestyle fund due ... · for employers and scheme trustees...

For employers and scheme trustees

Key Lifestyle fund due diligence report Update on how our key workplace lifestyle funds have performed

Quarter one 2020

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ContentsIntroduction 3

About Lifestyling 4

Market review 6

Our key lifestyle default funds – blended solutions 8

Universal Lifestyle Collection 8

MI Workplace Savings funds 9

Our key lifestyle default funds – Active 11

Cautious Lifestyle 11

Balanced Lifestyle 12

Dynamic Lifestyle 13

Ethical Lifestyle 14

Our key lifestyle default funds – Passive 15

Balanced Passive Lifestyle 15

Stakeholder Default 16

GPP Default 17

Aegon BlackRock 50/50 Equity and Bond Tracker Lifestyle 18

Aegon BlackRock 50/50 Global Equity Tracker Lifestyle 19

Aegon BlackRock 75/25 Equity and Bond Tracker Lifestyle 20

Aegon BlackRock Consensus Lifestyle 21

Workplace Target funds 22

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IntroductionThis document details our current lifestyle process and goes on to report on the key drivers of world markets in the most recent quarter. The report then explains the progress of some of our key actively managed and blended lifestyle funds during the growth stage of the lifestyle process: the Universal Lifestyle Collection, the MI Workplace Savings funds, the Cautious Lifestyle fund, the Balanced Lifestyle fund, the Dynamic Lifestyle fund and the Ethical Lifestyle fund. Finally, this report outlines the performance of our key passively managed lifestyle funds.

The information in this report is a factual review of performance only, and shouldn’t be taken as a recommendation or advice. The information in this report is correct to the best of our knowledge at the time of writing. Markets and funds change constantly, so the information it contains may have changed by the time you read this.

The value of the funds in this report may go down as well as up for a number of reasons, for example market and currency movements. Investors may get back less than originally invested.

Please note: all performance data shown in this report is sourced from Financial Express.

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How do the funds work in the lifestyle stage?

The lifestyle stage starts some years* before the start of your member’s target retirement year and recognises that their priorities may change as retirement approaches. It assumes they’ll buy an annuity, to provide themselves with an income (pension) for life (or a specified number of years), when they retire.

Some years before they’re due to retire; we’ll progressively start switching their investment into long gilts (UK Government bonds) with the aim of giving them more certainty about the level of annuity they’ll be able to buy when they retire.

We’ll also move some of their pension pot into cash in the final year or two years* of their investment.

*Please note, the lifestyle stage varies for each fund. Please see the individual factsheets for more information.

About LifestylingThe funds in this investment report show your scheme’s default lifestyle fund during its ‘Growth’ stage. The following table shows the Lifestyle fund and the underlying fund that it invests directly into.

Lifestyle fund Underlying fund

Universal Lifestyle Collection Universal Balanced Collection

Balanced Lifestyle Mixed fund

Ethical Lifestyle Ethical fund

Dynamic Lifestyle Global fund

Cautious Lifestyle Distribution fund

MI Workplace Savings (L) MI Workplace Savings (M)MI Workplace Savings (H)

MI Savings (L) MI Savings (M)MI Savings (H)

Balanced Passive Lifestyle Balanced Passive

Stakeholder Default Growth Tracker (Annuity Target)

GPP Default Growth Tracker (Annuity Target)

Aegon BlackRock 50/50 Equity and Bond Tracker Lifestyle Aegon BlackRock 50/50 Equity and Bond Tracker

Aegon BlackRock 50/50 Global Equity Tracker Lifestyle Aegon BlackRock 50/50 Global Equity Tracker

Aegon BlackRock 75/25 Equity and Bond Tracker Lifestyle Aegon BlackRock 75/25 Equity and Bond Tracker

Aegon BlackRock Consensus Lifestyle Aegon BlackRock Consensus

Funds used in the growth stage Long gilts Cash

80

60

50

40

25

20 40 50 60 75

75

25

0

10

20

30

40

50

60

70

80

90

100

72 60 48 36 24 12

Per

cent

age

of y

our

fund

Months to start of retirement year

Start of retirement year

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Why long gilts?

Long gilts are fixed-interest investments issued by the UK government with maturity dates of 15 years or more.

When annuity rates (which determine how much pension your scheme members will get per year) go down, the value of a pension pot that’s invested in long gilts is likely to go up, and vice versa.

This means that if they invest in long gilts, the level of income they’ll get at retirement is less likely to change dramatically if annuity rates move up or down just before they retire.

Long gilt values can go down as well as up. The relationship between long gilts and annuity rates isn’t perfect and can be affected by other factors.

Why cash?

Moving into cash caters for a scheme member’s tax-free cash entitlement.

They can choose how much of their cash entitlement they want to take, but our process assumes they’ll take the maximum which, based on current legislation, is 25% of their pension pot.

Retirement

If they don’t buy an annuity in their selected retirement year, they’ll automatically be switched into a retirement fund. This keeps their asset allocation 75% invested in long gilts and 25% invested in cash. They will remain in this fund until they tell us otherwise.

Our retirement funds are designed for short-term investing, where preserving the size of annuity members can buy is the priority. Returns may not keep pace with inflation.

Please remember, even though they’re investing in a lifestyle fund they should still review their investments on a regular basis, particularly if their financial needs or personal circumstances change.

We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.

Market review – quarter one 2020The first quarter of 2020 saw a sharp downturn for all main global equity markets as the world felt the dramatic impact of the coronavirus (COVID-19) pandemic. First documented in late 2019, coronavirus spread globally at speed with confirmed cases approaching one million at the end of March and tens of thousands succumbing to the illness. Progressively, global governments sought to slow the transmission of the virus and save lives by implementing social distancing policies aimed at reducing contact between individuals. These policies differed from region to region but temporary restrictions on the social liberties of the global population triggered a substantial drop in global economic activity. The UK experienced the largest falls over the period as stocks endured their worst quarter since 1987. Emerging markets also saw substantial declines as investors turned away from Chinese stocks amid coronavirus fears and deteriorating relations between Russia and Saudi Arabia led to an oil price war. European equities experienced similar falls as the region became the epicentre of the pandemic, with spiralling death tolls in both Italy and Spain at the core. US equities tumbled faster than ever before, including in the Great Depression of 1929. The Chicago Board Options Exchange's CBOE Volatility Index (VIX), a measure of US equity volatility, reached the highest level since it launched in 1990. Asian and Japanese equities also fell as economic activity was curtailed by the ongoing pandemic.

In fixed income markets, global corporate bonds suffered losses amidst poor liquidity and concerns that plunging earnings may lead to a credit crisis. Alternatively, economic risks and falling interest rates contributed to increased investor demand for perceived ‘safe-haven’ investments, such as UK Government bonds and gold bullion, which both made gains. Sterling depreciated sharply in currency terms, enhancing the returns that UK investors received from overseas markets.

How did the major markets perform over 12 months? Over the past twelve months, all global equity markets have fallen in value as the scale of the downturn in the first quarter of 2020 eclipsed earlier performance. UK stocks saw the most significant declines as political instability and Brexit uncertainty also weighed on UK assets. Emerging markets, Asian and European equities also declined over a period of challenging economic growth globally. Japanese and US equities fell, but showed signs of some resilience due to positive economic policy earlier in 2019. In fixed income, UK Government bonds (gilts) gave the strongest performance, benefiting from plunging interest rates over the period.

Source: Financial Express, produced by Aegon. Charts compiled using total return indices to 31 March 2020. Figures in sterling so include the effect of currency fluctuations. Past performance is no guide to future performance.

FTSE Actuaries UK Conventional Gilts All Stocks

TR in GB

UK Gilts

FTSE All Share TR in GB

UK

LIBOR LIBID GBP 1 Week

TR in GB

Cash

IBOXX UK Sterling Non-Gilts

All Maturities TR in GB

UK Corporate Bonds

S&P 500 TR in GB

USA

TSE TOPIX TR in GB

Japan

FTSE World Europe ex UK

GTR in GB

Europe ex UK

FTSE Asia Pacific ex Japan

GTR in GB

Asia Pacific

FTSE Emerging GTR in GB

Emerging Markets

Ret

urn

(%)

-30

-25

-20

-15

-10

-5

0

5

10

-25.1

-14.2-12.0

-19.0

6.3

-3.4

-17.5 -15.8

0.1

FTSE Actuaries UK Conventional Gilts All Stocks

TR in GB

UK Gilts

FTSE All Share TR in GB

UK

LIBOR LIBID GBP 1 Week

TR in GB

Cash

IBOXX UK Sterling Non-Gilts

All Maturities TR in GB

UK Corporate Bonds

S&P 500 TR in GB

USA

TSE TOPIX TR in GB

Japan

FTSE World Europe ex UK

GTR in GB

Europe ex UK

FTSE Asia Pacific ex Japan

GTR in GB

Asia Pacific

FTSE Emerging GTR in GB

Emerging Markets

Ret

urn

(%)

-30

-25

-20

-15

-10

-5

0

5

10

-18.5

-2.8 -2.9

-13.4

9.9

1.5

-8.0-11.5

0.5

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What were the key events in the major markets in quarter one?

Here’s a round-up of some of the key events that shaped the investment returns we’ve seen across the major markets.

The UK left the European Union on 31 January 2020 and entered an 11-month transition period. As COVID-19 spread globally, the Bank of England (BoE) cut interest rates to 0.1%, bought gilts (government bonds) and corporate bonds and incentivised lending to small businesses. The new Chancellor of the Exchequer, Rishi Sunak, announced a raft of government spending measures totalling around 15% of Gross Domestic Product (GDP), designed to support the National Health Service (NHS) and to mitigate the impact of social distancing measures on individual and corporate finances.

In the US, the Senate acquitted President Donald Trump on two articles of impeachment that had been passed by the House of Representatives. The US central bank, the Federal Reserve (Fed), slashed interest rates by 1.5% to near-zero and announced their first ever corporate bond purchase programme. Figures released in March showed more than 3 million new unemployment claims in the previous week; beating the previous record of 695,000 jobless filings in 1982. The US Government responded by passing the Coronavirus Aid, Relief and Economic Security Act, pledging government spending of approximately 10% of GDP to support households and companies affected by the downturn.

In Europe, the spread of coronavirus became the focal point of the world with Spain and Italy particularly impacted from its rapid spread. These countries led the implementation of social distancing policies across much of the continent. In an effort to help countries alleviate the economic burden of extensive lockdown arrangements, the European Commission suspended its rules limiting government spending. This supported the announcement of substantial fiscal support for Italy and Spain, while Germany also abandoned its “black zero” policy of balancing the budget to support the economy.

In Japan, data released over the quarter showed that the economy contracted by 1.8% in the final quarter of 2019 amidst an increase in the consumption tax rate. In keeping with most other developed economies, Japan’s government announced substantial spending measures designed to help households and businesses withstand the economic impact of the COVID-19 outbreak. The spending package is equivalent to more than 10% of GDP. Global restrictions on sporting events to limit the spread of the virus led to the Tokyo Olympics being postponed from 2020 until 2021.

In Asia Pacific regions, China was the first country to enforce significant social distancing policies to combat COVID-19, particularly in the city of Wuhan and the province of Hubei, where the disease first surfaced. Implemented in January, these measures had a substantial economic impact, indicated by record low measures of activity reported in February’s business surveys. Despite recording early infections, South Korea and Singapore appeared to contain the spread of the disease through rigorous infection control measures. In Australia, the expected impact on economic growth led the Royal Bank of Australia to cut interest rates twice in March to 0.25% (previously 0.75%).

In Emerging Markets Iran launched retaliatory strikes against the US following the death of top Iranian general Qasem Soleimani in a drone strike early in the year. The “OPEC+” alliance of oil producers was unable to agree production cuts due to Russian opposition. This triggered a price war that contributed in a collapse in the price of West Texas Intermediate (WTI) crude oil from over $60 at the start of the quarter to $20.48 by the end of March. Moody’s became the final main ratings agency to remove an investment grade rating, a mark of higher quality, from South African debt while the country was in the midst of its own pandemic-related lockdown. This contributed to the Rand reaching its weakest ever level against the US dollar.

In fixed income markets, amidst plummeting interest rates, global government bond yields fell dramatically in March with UK 10-year gilt yield reaching a new record low of 0.16%. Corporate bonds struggled amidst the market turmoil. As corporate earnings expectations fell, credit spreads (the additional yield that investors demand from corporate borrowers over government borrowers) widened significantly. This led to substantial losses in higher-risk sectors such as high-yield bonds. In the March budget, the UK’s Chancellor launched a consultation to reform the retail price index of inflation (RPI). This is a risk to inflation-linked gilts, which are linked to the RPI and may be vulnerable if the government switches to a lower measure of inflation.

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Our key lifestyle default funds (growth stage) – blended solutionsUniversal Lifestyle Collection (Universal Balanced Collection)

The Universal Lifestyle Collection (ULC) uses a two-stage investment process called lifestyling. In the early years (the growth stage) it invests wholly in the Universal Balanced Collection (UBC). The UBC invests in a mix of different funds, from different fund managers, offering a mix of active and passive fund management, which means it doesn’t rely on the performance of one manager or management style alone. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.

How has the fund performed?

Fund3 months

(%)12 months

(%)3 years

(% a year)5 years

(% a year)10 years

(% a year)

Universal Lifestyle Collection (ULC) -13.7 -5.6 0.0 3.3 4.8

ABI Mixed Investment 40% - 85% Shares pension sector median

-15.0 -7.7 -1.1 2.2 4.6

ULC component funds:

Aegon Diversified -14.0 -5.9 n/a n/a n/a

Kames Asset Allocator -11.9 -3.2 1.4 4.5 n/a

External Balanced Collection:

SE Baillie Gifford Balanced Managed -10.3 -0.8 4.1 6.5 7.7

SE BlackRock Balanced Managed -12.8 -3.5 1.5 3.5 4.8

SE Man Balanced Managed -18.1 -11.9 -2.5 0.3 4.2

SE Newton Balanced Managed -12.4 -2.7 0.8 2.8 4.2

Balanced Passive -13.8 -6.5 -0.4 3.2 4.6

Source: Financial Express. Produced by Aegon SE: Scottish Equitable. Figures in £s on a bid-to-bid basis, net of charges with gross income reinvested to 31 March 2020. Past performance is no guide to future performance. The value of investments can go down as well as up for a number of reasons, for example market and currency movements. Investors may get back less than originally invested.

28.4%

North American equities

Japanese equities

UK equities

Global Fixed Interest

Global Emerging Market equities

Asia Pacific ex Japan equities

Cash and others

UK Fixed Interest

European equities25.0% 15.9%

9.5%

17.5%

2.3% 0.6% 0.4% 0.3%

Where the fund investsIn the growth stage, the Universal Lifestyle Collection invests in a mix of investments designed to grow and investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

Source: Aegon UK. The figures above may not add up to exactly 100% due to rounding.

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Asset allocation

Fund name* Volatilityrange

Targetvolatility

GlobalProperty

UK & overseas

governmentbonds

UK & overseascorporate

bonds

UK & overseas equities

MI Workplace Savings (L) 7-10% 9% 0-10% 15-30% 15-30% 40-60%

MI Workplace Savings (M) 9-12% 11% 0-10% 10-20% 10-20% 50-70%

MI Workplace Savings (H) 11-14% 13% 0-10% 5-15% 5-15% 60-80%

*The MI Workplace Savings funds invest in the underlying MI Savings funds in the growth stage.

How have the funds performed?

Performance 3 months (%)

12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

MI Workplace Savings (L) -10.5 -4.0 0.4 3.1 n/a

MI Workplace Savings (M) -14.0 -6.5 0.0 2.9 n/a

MI Workplace Savings (H) -17.2 -9.0 -0.4 2.6 n/a

Source: Financial Express. Produced by Aegon. Figures in £s on a bid-to-bid basis, net of charges with gross income reinvested to 31 March 2020. Past performance is no guide to future performance. The value of investments can go down as well as up for a number of reasons, for example market and currency movements. Investors may get back less than originally invested.

MI Workplace Savings funds (MI Savings funds)

The MI Workplace Savings funds invest in a diversified portfolio so that you’re not relying on the success of just one investment type. Our range offers a choice of funds to suit those with different attitudes to risk. When markets become more volatile, the funds replace some of the investments with lower-risk assets like cash, which we believe can help to limit the impact of extreme and sustained market falls. We also believe this approach could provide returns greater than inflation over the long term.

What do the funds invest in?

Each MI Workplace Savings fund holds a mix of investment types to match its risk level. The ranges shown are for illustrative purposes only and are based on long-term projected asset allocations, so they can change.

The Universal Lifestyle Collection (ULC) fell by -13.7% over the first quarter of 2020, outperforming the Association of British Insurer’s (ABI’s) Mixed Investment 40% - 85% Shares sector median return of -15.0%.

All component funds in the portfolio fell over the period as the economic impact of the coronavirus pandemic became evident in global markets. The best performance came from the Scottish Equitable Baillie Gifford Balanced Managed fund with -10.3%. Following closely behind with -11.9% was the Kames Asset Allocator fund (AAF), which currently makes up 15% of the ULC.

Elsewhere, the Scottish Equitable BlackRock Balanced Managed fund gave a decline of -12.8%, while the Aegon Diversified fund, which takes up 70% of holdings in the portfolio, posted -14.0%. The Scottish Equitable Newton Balanced Managed delivered -12.4%. Underperforming the benchmark, the Scottish Equitable Man Balanced Managed fund gave -18.1%.

Universal Lifestyle fund commentary covering quarter one 2020

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The year began on an optimistic note as markets rallied following the December agreement between the US and China for a ‘phase-one’ trade deal, further stabilisation in economic data releases in early January and further support from central banks. However, the outbreak of the coronavirus became the focus of investor attention as the quarter progressed given both the terrible human cost, and the longer-term implications for the global economy. As the virus contagion spread across the globe, a realisation that the global pandemic could have material implications for global economic growth, business stability and society more broadly triggered some of the sharpest price movements in asset prices that we have seen since the stock market crash in 1987 and the Global Financial Crisis in 2008. Unsurprisingly, record large daily moves in equity prices trickled into market volatility, causing the VIX index to surpass its previous record high seen in 2008. During March, as authorities increasingly stepped in to halt activity and the movement of people (in an effort to slow the spread of the virus), we witnessed significant fluctuations in equity and bond prices. Equity markets fell by over 20% (as measured by the MSCI World Index) as global growth estimates for 2020 plummeted and concern escalated over the rate of contagion and implications for emerging markets and lower income economies.

The portfolios had a strong first half of Q1 largely following risk assets higher as many equity indices reached their peak in mid-February. After a broad sell-off in markets due to COVID-19 that started in late February, ex-ante risk measures picked up across all four funds, triggering our de-risking mechanisms at the start of March. The market sell-off was further exacerbated by price shocks in the oil markets, the increased spread of the virus, and lockdown measures across many nations. Continued market perturbations caused the portfolio to de-risk in every week for the rest of March, where the average cash balance across the portfolio was 60+% across the range of funds.

Given the unprecedented level of market volatility in the quarter, the funds performed in line with our expectations and de-risked accordingly to keep the short-term ex-ante risk measure within the stated volatility ranges across all funds. We continue to monitor these short-term measures to ensure the portfolios meet their stated objectives.

MI Workplace Savings commentary covering quarter one 2020

Commentary and figures sourced: BlackRock, March 2020

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Our key lifestyle default funds (growth stage) – Active



12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Cautious Lifestyle -12.6 -8.1 -1.5 0.9 4.0

Benchmark:

ABI Mixed Investment 20%-60% Shares pension sector median

-12.5 -7.2 -1.5 0.9 3.7


Cautious Lifestyle (Distribution)

The Cautious lifestyle fund uses a two-stage investment process called lifestyling. It aims to perform better than its benchmark in the early years (the growth stage), and give you more certainty about the amount of pension you can buy via an annuity when you retire (the lifestyle stage). Growth stage: During the early years of your investment, the Cautious Lifestyle fund aims to provide long-term capital growth by investing in UK equities (shares) and UK fixed interest securities (bonds). It may also, on occasion, invest overseas.

33.1%

UK Fixed Interest

Pacific ex Japan equities


UK equities

European equities

31.1%

23.5%

4.8%

3.5% 2.2% 1.3% 0.4%


Japanese equities

Cash and others

Where the fund investsIn the growth stage, the Cautious Lifestyle invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.


The fund returned -12.6% over the first quarter, modestly outperforming the peer group median return of -12.5%.

The fixed income component of the fund benefited from maintaining a long interest rate risk position. However this comment masks the high degree of intra-period volatility witnessed in government bond markets during the period. In credit, fixed income assets saw fluctuations in both valuations and liquidity levels, in particular during March, when an escalation in Covid impacts came ahead of central bank action to counter.

The UK equity portfolio fell over the quarter, but performed in line with the FTSE All-Share index. The best performing areas were more defensive in nature like non-life insurance, while stocks with a more cyclical tilt, whether domestic or international, were weakest. Overseas equity exposure performed well against peers, and outperformed the UK market, particularly when adjusted for the weakness of sterling against the dollar.

Source: Kames Capital March 2020

Cautious Lifestyle (Distribution) fund commentary covering quarter one 2020

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Balanced Lifestyle (Mixed)

The fund uses a two-stage investment process called lifestyling. It aims to perform better than its benchmark in the early years (the growth stage) and give you more certainty about the amount of pension you can buy via an annuity when you retire (the lifestyle stage). Growth stage: the fund aims to provide long-term capital growth by investing wholly in our Mixed fund, which aims to produce returns greater than the ABI Mixed Investment 40-85% Shares sector median over the long term. It invests in a diversified portfolio of mainly UK equities (shares), but also overseas equities, fixed interest securities and cash.



12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Balanced Lifestyle -8.7 1.1 1.8 4.1 5.4

Benchmark:

ABI Mixed Investment 40%-85% Shares pension sector median

-15.0 -7.7 -1.1 2.2 4.6


The fund was not immune to the dramatic sell-off in markets seen over the quarter but it did significantly outperform the peer group median return. The fund returned -8.7% compared to -15.0% for the sector median.

We progressively reduced risk in the fund during the period, which helped given the severe move seen within the market. In particular, we increased the cash level significantly, which was a positive relative contributor. We also added relative value by reducing regional equity allocations. Stock selection added some relative value with our focus on growth over lower-quality value and cyclicals the main contributor. Overall, both sector and regional stock selection outperformed in relative terms. We increased exposure to both UK and overseas fixed income, which was positive.


22.7%

UK equities

Japanese equities

European equities




Cash and others

UK Fixed Interest

Global Fixed Interest18.1%

11.2%

8.9%

15.6% 0.4%

14.1%

4.6%

4.3%

Where the fund investsIn the growth stage, the Balanced Lifestyle fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.


Balanced Lifestyle (Mixed) fund commentary covering quarter one 2020

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Dynamic Lifestyle (Global)

The fund uses a two-stage investment process called lifestyling. It aims to perform better than its benchmark in the early years (the growth stage) and give you more certainty about the amount of pension you can buy via an annuity when you retire (the lifestyle stage). Growth stage: the fund aims to provide long-term capital growth by investing wholly in our Global fund, which in turn invests in several of our regional and specialist funds. The Global fund mainly invests in equities (shares) in a range of international companies, but may also hold a small proportion in fixed income (bonds) and cash.



12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Dynamic Lifestyle -12.8 0.6 2.9 6.1 6.4

Benchmark:

ABI Global Equities pension sector median -17.6 -7.8 -0.1 4.2 6.5


The fund outperformed its peer group median, although in absolute terms it fell sharply, in line with global equity markets. The fund returned -12.8% compared to -17.6% for the sector median.

Both stock selection and sector allocation added value to relative performance. Our cash holdings, which we increased progressively over the period, was also beneficial and helped shield the fund from the worst of the sell-off. Stock selection was particularly positive; in general, we favoured quality and growth over lower-quality value and cyclicals (e.g. banks/oil/materials). This positioning worked well in relative terms.


40.8% North American equities

UK Fixed Interest

UK equities

European equities



Cash and others

Japanese equities


23.6%

13.1%

1.1%

8.2%

5.7%

0.5% 0.4% 6.5%

Where the fund investsIn the growth stage, the Dynamic Lifestyle fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.


Dynamic Lifestyle (Global) fund commentary covering quarter one 2020

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Ethical Lifestyle (Ethical)

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) it invests wholly in the Ethical fund, which aims to maximise its total return (the combination of income plus capital growth) by investing in equities (shares) and equity type securities of companies based in the UK, mainly conducting business in the UK or listed on the UK stockmarket, which meet the fund’s predefined ethical criteria. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.



12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Ethical Lifestyle -24.6 -10.1 -3.1 -0.4 n/a

Benchmark:

FTSE All-Share TR Index -25.1 -18.5 -4.2 0.6 4.4

ABI sector:

ABI UK All Companies pension sector median

-27.9 -20.6 -6.1 -1.2 3.7


89.5%

UK equities

European equities

Cash and others

4.4% 6.1%

Where the fund investsIn the growth stage, the Ethical Lifestyle (Ethical) fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.


The fund returned -24.6% compared to the peer group median return of -27.9%. The fund was not immune to the severe sell-off within markets, which is reflected in the absolute negative return for the quarter. Relative to the peer group median, however, the fund added some value with stock selection the main contributor. The key holdings included stocks with business models that have been less disrupted by the coronavirus backdrop, and those with some revenue visibility. These included Relx, Avast, Sanne and John Laing Group.

Within the domestically-focused names, the more defensive businesses also delivered better relative returns such as Pennon (agreed the sale of its waste business) and Softcat (IT services business).

Stocks held that detracted included many of the more consumer-related domestic names as well as selective global cyclicals. Sector allocation detracted slightly, in part due to the fund’s exposure to industrials, namely transportation and support services.

In addition, the lack of exposure to many of the more traditional defensive areas of the market, such as pharmaceuticals, was also a challenge. However, having no positions in either oil & gas producers or banks was beneficial, as was the preference for owning businesses with financial strength.


Ethical Lifestyle (Ethical) fund commentary covering quarter one 2020

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Our key lifestyle default funds (growth stage) – PassiveIn this section, you’ll find information on the investment performance of the passive funds most commonly used as default funds by our corporate pension clients.

Balanced Passive Lifestyle

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) it invests in our Balanced Passive fund. It's passively managed and invests mainly in UK and overseas equities (shares of companies), fixed interest investments (bonds) and cash. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Balanced Passive Lifestyle -13.8 -6.5 -0.4 3.2 4.6

Benchmark:

ABI Mixed Investment 40% - 85% Shares pension sector average

-14.3 -7.0 -0.7 2.3 4.6


24.9%

UK equities

UK Fixed Interest



Cash and others

Japanese equities

20.8%

14.2%

13.0%

18.5%

4.7%

European equities

3.9%

Where the fund investsThis fund is passively managed, so it aims to broadly match the performance of the Association of British Insurers (ABI) Mixed Investment 40%-85% Shares sector average. The fund’s performance may not always precisely track the average. For example, when market conditions offer particularly strong opportunities to actively managed funds, the fund’s returns may be lower than the sector average.

The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.


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Stakeholder Default

This fund uses a two-stage investment process. In the early years (the growth stage) it aims to grow savings over the long term by investing mainly in global equities (company shares) with the remainder (around 25%) in UK bonds (a blend of UK corporate, UK index-linked and conventional government bonds). It’s designed to track the markets it invests in, so performance should be similar to those markets. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Stakeholder default -14.9 -7.5 -0.4 3.3 4.6


Where the fund investsIn the growth stage, the Stakeholder Default fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

37.2% UK equities

Japanese equities

UK Fixed Interest



European equities

Global Fixed Interest Cash and others

25.2%

17.6%

6.2%

3.4%

7.2%

3.2% 0.1%


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GPP Default

This fund uses a two-stage investment process. In the early years (the growth stage) it aims to grow savings over the long term by investing mainly in global equities (company shares) with the remainder (around 25%) in UK bonds (a blend of UK corporate, UK index-linked and conventional government bonds). It’s designed to track the markets it invests in, so performance should be similar to those markets. Six years before the start of your target retirement year (the lifestyle stage), we’ll progressively start switching your investment into our Long Gilt and (in the final year) Cash fund, with the aim of giving you more certainty about the level of annuity you’ll be able to buy when you retire and to cater for your maximum tax-free cash entitlement, currently 25% of your pension pot. We reserve the right to change our lifestyle funds. The fund is only available to Aegon Group Personal Pension planholders whose scheme started on or after 1 December 2008.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

GPP default -15.0 -7.5 -0.4 3.3 4.7


Where the fund investsIn the growth stage, the GPP Default fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

37.2% UK equities

Japanese equities

UK Fixed Interest



European equities

Global Fixed Interest Cash and others

25.2%

17.6%

6.2%

3.4%

7.2%

3.2% 0.1%


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Aegon BlackRock 50/50 Equity and Bond Tracker Lifestyle

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) it aims for returns consistent with the markets it invests in by investing 50% in UK and overseas equities (shares) and 50% in gilts and sterling investment-grade corporate bonds with maturity periods of 15 years or longer. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Aegon BlackRock 50/50 Bond & Equity Index Lifestyle

-10.0 -2.6 1.2 4.0 6.9


Where the fund investsIn the growth stage, the Aegon BlackRock 50/50 Equity and Bond Tracker Lifestyle fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

49.2%

UK Fixed Interest

Property


UK equities


Japanese equities

Cash and others


European equities23.1%

9.3%

4.5% 4.1%

0.1% 0.1%

8.8%

0.8%


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Aegon BlackRock 50/50 Global Equity Tracker Lifestyle

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) aims to provide returns consistent with the markets it invests in by investing in the Aegon BlackRock 50/50 Global Equity Tracker fund. This fund invests approximately 50% in UK equities (shares) and 50% in overseas equities (excluding the UK). We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Aegon BlackRock 50/50 Global Equity Index Lifestyle

-20.8 -13.3 -2.6 2.1 5.2


Where the fund investsIn the growth stage, the Aegon BlackRock 50/50 Global Equity Tracker Lifestyle fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

47.6%

UK equities

Japanese equities


European equities


18.4%

16.9%

8.6%

8.4%


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Aegon BlackRock 75/25 Equity and Bond Tracker Lifestyle

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) it aims to provide returns consistent with the markets it invests in by investing wholly in the Aegon BlackRock 75/25 Equity and Bond Tracker fund, which invests approximately 75% in UK and overseas equities (shares) and the rest in fixed interest securities (bonds). We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.


12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Aegon BlackRock 75/25 Equity & Bond Index Lifestyle

-15.7 -9.6 -1.4 2.5 5.7


Where the fund investsThis fund aims to achieve returns consistent with the markets it invests in by investing approximately 70% in shares (equities) and the rest in fixed interest securities through a number of underlying BlackRock regional equity and fixed interest tracker funds.

In the growth stage, the Aegon BlackRock 75/25 Equity and Bond Tracker Lifestyle fund invests in a mix of investments designed to grow an investor’s pension. The chart below shows where the fund invested at an asset class and regional level, at 31 March 2020.

51.1%

UK equities

Property


UK Fixed Interest


Japanese equities




9.3%

3.9% 3.2%

0.2% 0.2%

6.6%

0.1%

Cash and others

1.6%


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12 months (%)

3 years (% a year)

5 years (% a year)

10 years (% a year)

Aegon BlackRock Consensus Lifestyle

-11.9 -5.3 -0.3 3.1 5.1


Aegon BlackRock Consensus Lifestyle

This fund uses a two-stage investment process called lifestyling. In the early years (the growth stage) it aims to match the performance of the ABI Mixed Investment 40-85% Shares pension sector average after charges by investing mainly in UK and overseas equities (shares), fixed interest and cash. We review our lifestyle funds from time to time and may change how they work if we believe this to be in the best interests of investors.

25.7%

6.6%

UK equities




Property

Japanese equities


UK Fixed Interest


8.8%

14.2%

14.6%

5.0% 3.7%

0.8% 0.2%

Cash and others


Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No. SC144517). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 165548. An Aegon company. www.aegon.co.uk © 2020 AEGON UK plc

INV 00375689 05/20

Workplace Target fundsWe’ve designed this range in response to changing investment patterns and pension freedoms legislation. Investors now have more choice than ever before about how and when they take an income in retirement.

We review our workplace range of funds regularly to keep up-to-date with changing legislation and customer needs. We may change them if we believe it’s in the best interests of investors.

Find out more viawww.aegon.co.uk/workplace

• Universal Balanced Collection

• Adventurous Tracker

• Growth Tracker

• Balanced Tracker

• Ethical Managed

• Universal Balanced Collection

• Adventurous Tracker

• Growth Tracker

• Balanced Tracker

Flexible Target Annuity Target

• Growth Tracker

Cash Target

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for employers and scheme trustees key lifestyle fund due ... · for employers and scheme trustees...

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