September 2015 Review prepared by Morningstar Investment Management Europe 1 Oliver s Yard, 55-71 City Road, London EC1Y 1HQ Elevate Overview Risk-Profiled Portfolios
Contents 2 Introduction to Morningstar Investment Management Europe and the Risk-Profiled Portfolios... 3 Portfolios Update Third Quarter... 4 Low Risk Portfolio... 5 Low Risk Portfolio Overview... 6 Low/Medium Risk Portfolio... 7 Low/Medium Portfolio Overview... 8 Medium Risk Portfolio... 9 Medium Risk Portfolio Overview... 10 Medium/High Risk Portfolio... 11 Medium/High Risk Portfolio Overview... 12 High Risk Portfolio... 13 High Risk Portfolio Overview... 14 Highest Risk Portfolio... 15 Highest Risk Portfolio Overview... 16 Appendix Fund Descriptions and Morningstar Opinions... 17
Introduction to Morningstar Investment Management Europe and the Risk-Profiled Portfolios 3 Introduction The Elevate Risk-Profiled Portfolios are featured on the Elevate platform and provide advisers with an actively monitored and advised range of six Portfolios. evalue provides the asset allocations and Morningstar Investment Management Europe advises upon the fund selection for the Risk-Profiled Portfolios, drawing from the Elevate platform, and taking into consideration the overall cost to an investor. Funds are chosen on the basis of their primary objective, which will mean that some divergence can occur between the evalue asset allocations and the final look-through weightings of the Portfolios. In practice some funds have the flexibility within their mandates to invest a portion outside of their primary market(s). While the Risk-Profiled Portfolios are continuously monitored, a formal quarterly review takes place which determines any changes to the fund selection and their weighting within each Portfolio. This document has been designed to provide an introduction and overview to the Elevate Risk-Profiled Portfolios. It features information on each of the Risk-Profiled Portfolios and also an appendix which provides more detailed fund descriptions and opinions. Further fund specific information can be found at http://www.morningstar.co.uk/uk/research/funds.aspx. About Morningstar Investment Management Europe Limited Morningstar Investment Management Europe Limited provides comprehensive investment advisory, and portfolio management services for financial institutions, plans sponsors, and financial advisors. Morningstar Investment Management Europe draws upon the whole of the funds market for its investment strategy analysis to deliver in-depth views on approximately 500 funds and provides asset allocation and portfolio construction consultancy services to life, pension, and fund-of-funds providers. The investment research approach has been in place since 1994 and is forward-looking in nature, which leads to a strong emphasis on the qualitative aspects of research. The aim is to recommend a relatively small number of funds that are of the highest quality and deliver risk and return outcomes that are commensurate with investment objectives. For more information about Morningstar Investment Management Europe, its people, philosophy and research approach, please visit www.global.morningstar.com/mimeurope. For more information about Morningstar Inc s Fund Ratings Services, please visit http://www.morningstar.co.uk. Any suggestions for fund changes are accompanied by a separate document explaining the reasons for the decision and quarterly reports are available explaining the performance of the Portfolios and providing market context.
Portfolios Update Third Quarter 4 In this section we comment on issues that we believe are relevant to users of the Elevate Risk-Profiled Portfolios. In this update we use the opportunity to explain the change of branding of the Portfolios from Morningstar OBSR to Morningstar: Earlier this year we began transitioning our offerings from the Morningstar OBSR brand to Morningstar and we are pleased to confirm that September marked the completion of this initiative with all of our research and investment management offerings now transitioned to use the Morningstar brand. The most visible outcome of this transition is the branding we use for our Analyst Ratings, Model Portfolios, and Discretionary Managed Portfolios. These are now called the Morningstar Analyst Ratings, Morningstar Model Portfolios, and Morningstar Managed Portfolios, respectively. The OBSR and Morningstar business integration has been successfully completed for some time and we have carefully integrated the shared values, expertise and purpose of OBSR and Morningstar into our UK offerings. In 2012 we moved to the dual brand Morningstar OBSR, and as one team we expanded our adviser services in 2013 to include Discretionary Managed Portfolios. We have also united our Global Investment Management teams under one single operating structure and set of investment principles. This enables us to produce greater specialisation for clients and devote more resources to the management of portfolios and the research that supports them. Under the Morningstar brand our Model Portfolios and Discretionary Managed Portfolios continue to be run by the same UK-based team of 20 experienced investment professionals, backed by the resources of a Global Investment Management group which advises on $180 billion of assets worldwide. In the UK, Dan Kemp, Chief Investment Officer for EMEA, leads our investment management team. This experience is further supported by our worldwide team of more than 100 manager research analysts including 26 in Europe who underpin our portfolio management services through independent, in-depth, qualitative funds research on some 900 funds available for UK investors and approximately 4,000 funds globally. In the UK, Jeremy Beckwith leads our manager research team. Moving our research and consulting solutions to the Morningstar name unites our investment information and investment management capabilities under one single brand that represents three decades of serving investors. We expect this change will make it easier for you to support your clients through solutions backed by a globally recognised brand.
Low Risk Portfolio 5 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver attractive relative performance in each of the asset classes featured in the Portfolio over the long term, whilst being cognisant of relative risks. Elevate s description of a Low Risk investor is: You re prepared to move away from investing in cash and to accept some investment risk in return for potential growth. You re prepared to invest in non-cash assets which will include limited exposure to shares. You accept that growth prospects are limited and understand your investment value will fluctuate, which could mean you may get back less than you invested. Equity International Developed 25.0% UK All Companies 11.0% UK Property 10.0% Fixed Interest 54.0% Model Portfolio - Q4 2015 Asset Classes % Asset Allocation UK Property 10 Fixed Interest 54 UK All Companies 11 Equity International Developed 25 Fund Suggested Fund Weight (%) Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a Fidelity Moneybuilder Income 11.0 Gold Invesco Perpetual Corporate Bond 11.0 Gold Kames Investment Grade Bond 11.0 Silver M&G Corporate Bond 10.0 Gold Royal London Corporate Bond 11.0 Under Review Artemis Income 7.0 Gold Old Mutual UK Alpha 4.0 Silver Aberdeen Word Equity 9.0 Silver BNY Mellon Long-Term Global Equity 8.0 Silver Investec Global Equity 8.0 Bronze 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)
Low Risk Portfolio Overview 6 Property For the property portion of the Portfolio, we have selected the M&G Feeder of Property Portfolio and Threadneedle UK Property. Both funds provide exposure primarily to the UK commercial property market. M&G Property Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. Threadneedle UK Property is also managed by experienced property practitioners. The fund was launched in February 2007 and is differentiated in that the managers are more yield focused than others, with the result that they look to identify higher yielding assets that fall just outside the prime real estate category. *In January 2013, the M&G Property Portfolio was reconstructed into the M&G Property Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Property Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms including Elevate are unable to support PAIF. Fixed Interest For the Fixed Interest exposure, we have suggested five funds, namely Fidelity Moneybuilder Income, Invesco Perpetual Corporate Bond, Kames Investment Grade Bond, M&G Corporate Bond, and Royal London Corporate Bond. These five funds have differing mandates and are managed with a range of styles. All the suggested funds are featured in the IMA Corporate Bond sector. Fidelity Moneybuilder Income and M&G Corporate Bond are typically the most conservatively managed of these funds. The manager of Fidelity Moneybuilder Income is extremely experienced and seeks to deliver consistent, above-average returns in a risk-controlled manner, which he believes will lead to competitive returns over the longer term. The M&G Corporate Bond fund combines macroeconomic assessment, which determines the portfolio s duration and broad asset allocation, with market judgment, which takes into account default risk, liquidity and supply. The Invesco Perpetual Corporate Bond fund is managed by very experienced fixed income practitioners. They tend to reflect greater conviction views in this fund, with more willingness to invest in higher yielding bonds within the constraints of the IMA Corporate Bond sector and this has proven relatively rewarding over time. Kames Investment Grade Bond is also managed with greater flexibility than some other funds in the sector, seeking to add value through bond selection and other strategies such as duration and yield curve positioning and currency exposures. Royal London Corporate Bond benefits from an experienced manager who relies primarily upon bottom-up credit analysis and also the identification of opportunities in more specialist areas such as asset-backed securities. Equities UK In the UK portion of the Portfolio, we have suggested two funds, Artemis Income and Old Mutual UK Alpha. The blend combines a large-cap focused income fund, in Artemis Income, with Old Mutual UK Alpha, which currently has a similar large-cap focus but provides diversification from Artemis Income in part because it is more concentrated and does not have the income mandate. UK Equity Income funds typically offer a lower risk way of accessing the equity market and with the managers focus on the importance of company cash flow, Artemis Income is no exception. Old Mutual UK Alpha is a largecap biased fund that is very actively managed with the fund manager having an absolute return approach to investing in the sense of wishing to generate positive returns over the long-term by investing in stocks that he believes will rise in value by at least 10-20% in the ensuing three years. Equity International Developed In the International Developed portion of the Portfolio, we have selected Aberdeen World Equity, BNY Mellon Global Long-Term Equity and Investec Global Equity. Aberdeen World Equity comprises 40-60 holdings that are selected from the stocks held in the regional equity portfolios. The Global equity team chooses the holdings having considered valuation differentials in a global context. The rigorous bottom-up analysis produces a portfolio with a strong focus on quality in terms of the management and the balance sheet. Investors have been rewarded with solid returns in different market conditions, producing both a strong and fairly consistent return profile. The managers of the BNY Mellon Long-Term Global Equity fund adopt a long-term, fundamental, stock picking approach, which aims to identify real growth opportunities within companies and invest in them at a reasonable price. The team has consistently demonstrated an in-depth knowledge of the companies in which they have invested and have a strong long-term track record. Investec Global Equity provides investors with access to a well-diversified global equity portfolio managed by an experienced team using a quantitative screening process. The fund is managed by James Hand, who is head of Investec s proprietary 4Factor quantitative model. He is assisted by the global equity team led by the Head of Global Equities Mark Breedon. The fund is managed with a disciplined process that combines a quantitative screen with qualitative analysis to construct a portfolio in a benchmark-aware manner.
Low/Medium Risk Portfolio 7 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver outperformance in each of the asset classes of the Portfolio over the long term. Elevate s description of a Low/Medium Risk investor is: You re prepared to accept investment risk in return for potential growth. You re prepared to invest in a wide variety of assets, including exposure to shares. You re aware this will increase the amount your investment will fluctuate in value. You could get back less than you invested. Equity International Developed 31.0% UK All Companies 14.0% UK Property 10.0% Fixed Interest 45.0% Model Portfolio - Q4 2015 Asset Classes % Asset Allocation UK Property 10 Fixed Interest 45 UK All Companies 14 Equity International Developed 31 Fund Suggested Fund Weight (%) Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a Fidelity Moneybuilder Income 9.5 Gold Invesco Perpetual Corporate Bond 9.5 Gold Kames Investment Grade Bond 9.0 Silver M&G Corporate Bond 8.0 Gold Royal London Corporate Bond 9.0 Under Review Artemis Income 7.5 Gold Old Mutual UK Alpha 6.5 Silver Aberdeen World Equity 11.0 Silver BNY Mellon Long Term Global Equity 10.0 Silver Investec Global Equity 10.0 Bronze 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)
Low/Medium Portfolio Overview 8 Property For the property portion of the Portfolio, we have selected the M&G Feeder of Property Portfolio and Threadneedle UK Property. Both funds provide exposure primarily to the UK commercial property market. M&G Property Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. Threadneedle UK Property is also managed by experienced property practitioners. The fund was launched in February 2007 and is differentiated in that the managers are more yield focused than others, with the result that they look to identify higher yielding assets that fall just outside the prime real estate category. *In January 2013, the M&G Property Portfolio was reconstructed into the M&G Property Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Property Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms including Elevate are unable to support PAIF. Fixed Interest For the Fixed Interest exposure, we have suggested five funds, namely Fidelity Moneybuilder Income, Invesco Perpetual Corporate Bond, Kames Investment Grade Bond, M&G Corporate Bond, and Royal London Corporate Bond. These five funds have differing mandates and are managed with a range of styles. All the suggested funds are featured in the IMA Corporate Bond sector. Fidelity Moneybuilder Income and M&G Corporate Bond are typically the most conservatively managed of these funds. The manager of Fidelity Moneybuilder Income is extremely experienced and seeks to deliver consistent, above-average returns in a risk-controlled manner, which he believes will lead to competitive returns over the longer term. The M&G Corporate Bond fund combines macroeconomic assessment, which determines the portfolio s duration and broad asset allocation, with market judgment, which takes into account default risk, liquidity and supply. The Invesco Perpetual Corporate Bond fund is managed by very experienced fixed income practitioners. They tend to reflect greater conviction views in this fund, with more willingness to invest in higher yielding bonds within the constraints of the IMA Corporate Bond sector and this has proven relatively rewarding over time. Kames Investment Grade Bond is also managed with greater flexibility than some other funds in the sector, seeking to add value through bond selection and other strategies such as duration and yield curve positioning and currency exposures. Royal London Corporate Bond benefits from an experienced manager who relies primarily upon bottom-up credit analysis and also the identification of opportunities in more specialist areas such as asset-backed securities. Equities UK In the UK portion of the Portfolio, we have suggested two funds, Artemis Income and Old Mutual UK Alpha. The blend combines a large-cap focused income fund, in Artemis Income, with Old Mutual UK Alpha, which currently has a similar large-cap focus but provides diversification from Artemis Income in part because it is more concentrated and does not have the income mandate. UK Equity Income funds typically offer a lower risk way of accessing the equity market and with the managers focus on the importance of company cash flow, Artemis Income is no exception. Old Mutual UK Alpha is a largecap biased fund that is very actively managed with the fund manager having an absolute return approach to investing in the sense of wishing to generate positive returns over the long-term by investing in stocks that he believes will rise in value by at least 10-20% in the ensuing three years. Equity International Developed In the International Developed portion of the Portfolio, we have selected Aberdeen World Equity, BNY Mellon Global Long-Term Equity and Investec Global Equity. Aberdeen World Equity comprises 40-60 holdings that are selected from the stocks held in the regional equity portfolios. The Global equity team chooses the holdings having considered valuation differentials in a global context. The rigorous bottom-up analysis produces a portfolio with a strong focus on quality in terms of the management and the balance sheet. Investors have been rewarded with solid returns in different market conditions, producing both a strong and fairly consistent return profile. The managers of the BNY Mellon Long-Term Global Equity fund adopt a long-term, fundamental, stock picking approach, which aims to identify real growth opportunities within companies and invest in them at a reasonable price. The team has consistently demonstrated an in-depth knowledge of the companies in which they have invested and have a strong long-term track record. Investec Global Equity provides investors with access to a well-diversified global equity portfolio managed by an experienced team using a quantitative screening process. The fund is managed by James Hand, who is head of Investec s proprietary 4Factor quantitative model. He is assisted by the global equity team led by the Head of Global Equities Mark Breedon. The fund is managed with a disciplined process that combines a quantitative screen with qualitative analysis to construct a portfolio in a benchmark-aware manner.
Medium Risk Portfolio 9 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver outperformance in each of the asset classes of the Portfolio over the long term. Elevate s description of a Medium Risk investor is: You re looking for a balance of risk and reward with the potential for higher returns in the longer term. You will invest in a wide variety of assets. You re prepared to accept that the value of your investment will fall and rise in value and you could get back less than you invested. Equity International Developed 38.0% UK Property 10.0% Fixed Interest 35.0% UK All Companies 17.0% Model Portfolio - Q4 2015 Asset Classes UK Property 10 Fixed Interest 35 UK All Companies 17 Equity International Developed 38 % Asset Allocation Fund Suggested Fund Weight % Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a Fidelity Moneybuilder Income 10.0 Gold Invesco Perpetual Corporate Bond 10.0 Gold M&G Strategic Corporate Bond 7.0 Gold Royal London Corporate Bond 8.0 Under Review Artemis Income 7.0 Gold AXA Framlington UK Select Opportunities 5.0 Gold Old Mutual UK Alpha 5.0 Silver US Artemis US Select 6.0 Bronze BlackRock North American Equity Tracker 9.0 Gold JPM US Equity Income 6.0 Silver Schroder US Mid Cap 3.0 Silver Europe BlackRock Continental European 5.5 Silver Henderson European Selected Opportunities 4.5 Silver Japan Schroder Tokyo 4.0 Gold 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)
Medium Risk Portfolio Overview 10 Property For the property portion of the Portfolio, we have selected the M&G Feeder of Property Portfolio and Threadneedle UK Property. Both funds provide exposure primarily to the UK commercial property market. M&G Property Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. Threadneedle UK Property is also managed by experienced property practitioners. The fund was launched in February 2007 and is differentiated in that the managers are more yield focused than others, with the result that they look to identify higher yielding assets that fall just outside the prime real estate category. *In January 2013, the M&G Property Portfolio was reconstructed into the M&G Property Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Property Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms including Elevate are unable to support PAIF Fixed Interest For the Fixed Interest exposure, we have suggested four funds, namely Fidelity MoneyBuilder Income, Invesco Perpetual Corporate Bond, Royal London Corporate Bond and M&G Strategic Corporate Bond. These funds have differing mandates and are managed with a range of styles. All the suggested funds are featured in the IMA Corporate Bond sector. Fidelity Moneybuilder Income is typically the most conservatively managed of these funds. The manager is extremely experienced and seeks to deliver consistent, above-average returns in a risk-controlled manner, which he believes will lead to competitive returns over the longer term. The M&G Strategic Corporate Bond fund combines macroeconomic assessment, which determines the portfolio s duration and broad asset allocation, with market judgment, which takes into account default risk, liquidity and supply. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by very experienced fixed income practitioners. They tend to reflect greater conviction views in this fund, with more willingness to invest in higher yielding bonds within the constraints of the IMA Corporate Bond sector and this has proven relatively rewarding over time. Royal London Corporate Bond benefits from an experienced manager who relies primarily upon bottom-up credit analysis and also the identification of opportunities in more specialist areas such as asset-backed securities. Equity International Developed In the International Developed portion of the Portfolio, we suggest gaining exposure through a blend of regional funds and have selected four North American equity funds, two Europe ex UK equity funds and a Japanese equity fund. The funds selected are BlackRock North American Equity Tracker, JPM US Equity Income, Artemis US Select, Schroder US Mid Cap, BlackRock Continental European, Henderson European Selected Opportunities and Schroder Tokyo. BlackRock North American Equity Tracker is an index tracker fund that seeks to track the performance of the FTSE World North America index. We believe using a tracker fund is our best option for core US equity exposure. Artemis US Select is managed by Cormac Weldon who moved to Artemis in May 2014 from Threadneedle where he was head of US equities. The investment process combines a top-down view of the overall economic environment as well as a view on each of the sectors within the US equity market with bottom-up company research. JPM US Equity Income fund which is managed by Clare Hart and Jonathan Simon who are experienced within the field of US equity income investing. The fund invests in dividend paying companies and while being managed with a more pragmatic style than many equity income funds, the portfolio has tended to have a value bias that should complement the growth bias of Artemis US Select. The Schroder US Mid Cap fund is run by a very experienced manager in mid and small cap US stocks and her team. They diversify the fund by looking for different types of stocks, namely: superior growth companies which are unattractively priced; steady growers; and, turnaround situations. BlackRock Continental European offers investors an all-cap portfolio of European equities managed by the highly experienced Vincent Devlin. The fund benefits from a rigorous stock selection process complemented by consideration of the prevailing macroeconomic and stock market environment. Henderson European Selected Opportunities fund is a large-cap biased portfolio of European stocks. The fund is managed by John Bennett who combines fundamental company analysis with an awareness of macroeconomic and sector trends. He has a long and impressive track record managing European equity funds with high conviction. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. Equities UK In the UK portion of the portfolio, we have suggested three funds, Artemis Income, Old Mutual UK Alpha and AXA Framlington UK Select Opportunities. The blend combines a large-cap focused income fund, in Artemis Income, with Old Mutual UK Alpha, which currently has a similar large-cap focus but is more concentrated, along with AXA Framlington UK Select Opportunities which takes a high degree of active risk, in particular by gaining exposure to mid-cap stocks. Old Mutual UK Alpha and AXA Framlington UK Select are located in the UK All Companies sector, while Artemis Income is in the UK Equity Income sector. UK Equity Income funds typically offer a lower risk way of accessing the equity market and Artemis Income is no exception with the managers focus on the importance of company cash flow. Old Mutual UK Alpha is a largecap biased fund that is very actively managed with the fund manager having an absolute return approach to investing in the sense of wishing to generate positive returns over the long-term by investing in stocks that he believes will rise in value by at least 10-20% in the ensuing three years. Complementing these funds, we have selected AXA Framlington UK Select Opportunities which tends to have higher risk characteristics compared to the index. The fund is managed by the very experienced Nigel Thomas and as its name suggests, it is more opportunistic in nature and provides exposure to companies from across the market cap spectrum. His thoughtful and considered approach has generated attractive relative returns for his investors over many years.
Medium/High Risk Portfolio 11 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver outperformance in each of the asset classes of the Portfolio over the long term. UK Property 10.0% Fixed Interest 17.0% Elevate s description of a Medium/High Risk investor is: You re prepared to accept a high level of risk on your investment with the potential for higher returns in the longer term. Typically, you will invest in a wide variety of assets. You re prepared to accept that this will increase the risk of large fluctuations in your investment value. You understand there s a possibility you may lose some or all of your capital. Equity International Developed 51.0% UK All Companies 22.0% Model Portfolio - Q4 2015 Asset Classes UK Property 10 Fixed Interest 17 UK All Companies 22 Equity International Developed 51 % Asset Allocation Fund Suggested Fund Weight % Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a Artemis Strategic Bond 3.0 Silver Fidelity Moneybuilder Income 5.5 Gold Invesco Perpetual Corporate Bond 5.5 Gold M&G Strategic Corporate Bond 3.0 Gold AXA Framlington UK Select Opportunities 7.0 Gold Investec UK Special Situations 7.5 Gold Old Mutual UK Alpha 7.5 Silver US Artemis US Select 8.5 Bronze BlackRock North American Equity Tracker 11.0 Gold JPM US Equity Income 8.5 Silver Schroder US Mid Cap 5.0 Silver Europe BlackRock Continental European 7.0 Silver Henderson European Selected Opportunities 6.0 Silver Japan Schroder Tokyo 5.0 Gold 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)
Medium/High Risk Portfolio Overview 12 Property For the property portion of the Portfolio, we have selected the M&G Feeder of Property Portfolio and Threadneedle UK Property. Both funds provide exposure primarily to the UK commercial property market. M&G Property Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. Threadneedle UK Property is also managed by experienced property practitioners. The fund was launched in February 2007 and is differentiated in that the managers are more yield focused than others, with the result that they look to identify higher yielding assets that fall just outside the prime real estate category. *In January 2013, the M&G Property Portfolio was reconstructed into the M&G Property Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Property Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms including Elevate are unable to support PAIF. Fixed Interest For the Fixed Interest exposure, we have suggested four funds, namely Artemis Strategic Bond, Fidelity Moneybuilder Income, Invesco Perpetual Corporate Bond and M&G Strategic Corporate Bond. These four funds have differing mandates and are managed with a range of styles. All the suggested funds, with the exception of Artemis Strategic Bond, are featured in the IMA Corporate Bond sector. Fidelity Moneybuilder Income is typically the most conservatively managed of these funds. The manager is extremely experienced and seeks to deliver consistent, above-average returns in a risk-controlled manner, which he believes will lead to competitive returns over the longer term. The M&G Strategic Corporate Bond fund combines macroeconomic assessment, which determines the portfolio s duration and broad asset allocation, with market judgment, which takes into account default risk, liquidity and supply. The Invesco Perpetual Corporate Bond fund is managed with greater flexibility by very experienced fixed income practitioners. They tend to reflect greater conviction views in this fund, with more willingness to invest in higher yielding bonds within the constraints of the IMA Corporate Bond sector and this has proven relatively rewarding over time. Artemis Strategic Bond is located in the IMA Strategic Bond sector and its mandate permits the manager to invest flexibly across the fixed income spectrum. The fund typically incorporates meaningful exposure to sub-investment grade debt. Equities UK In the UK portion of the Portfolio, we have suggested three funds, Old Mutual UK Alpha, AXA Framlington UK Select Opportunities and Investec UK Special Situations. The intention is to achieve a blend of funds that provides exposure to the UK equity market across the market cap range as well as diversification of manager style. Old Mutual UK Alpha is a large-cap biased fund that is very actively managed with the fund manager having an absolute return approach to investing in the sense of wishing to generate positive returns over the long-term by investing in stocks that he believes will rise in value by at least 10-20% in the ensuing three years. AXA Framlington UK Select Opportunities is managed by the very experienced Nigel Thomas and as its name suggests, it is more opportunistic in nature and provides exposure to companies from across the market cap spectrum. His thoughtful and considered approach has generated attractive relative returns for his investors over many years. The allocation to Investec UK Special Situations provides exposure to a contrarian investor who typically looks to buy strategically well-placed companies at a time when sentiment towards them is at or near its worst. The fund has a strong long-term track record, notwithstanding episodes of underperformance, and the contrarian nature of the fund provides style diversification within this blend of funds. Equity International Developed In the International Developed portion of the Portfolio, we suggest gaining exposure through a blend of regional funds and have selected four North American equity funds, two Europe ex UK equity funds and a Japanese equity fund. The funds selected are BlackRock North American Equity Tracker, JPM US Equity Income, Artemis US Select, Schroder US Mid Cap, BlackRock Continental European, Henderson European Selected Opportunities and Schroder Tokyo. BlackRock North American Equity Tracker is an index tracker fund that seeks to track the performance of the FTSE World North America index. We believe using a tracker fund is our best option for core US equity exposure. Artemis US Select is managed by Cormac Weldon who moved to Artemis in May 2014 from Threadneedle where he was head of US equities. The investment process combines a top-down view of the overall economic environment as well as a view on each of the sectors within the US equity market with bottom-up company research. JPM US Equity Income fund which is managed by Clare Hart and Jonathan Simon who are experienced within the field of US equity income investing. The fund invests in dividend paying companies and while being managed with a more pragmatic style than many equity income funds, the portfolio has tended to have a value bias that should complement the growth bias of Artemis US Select. The Schroder US Mid Cap fund is run by a very experienced manager in mid and small cap US stocks and her team. They diversify the fund by looking for different types of stocks, namely: superior growth companies which are unattractively priced; steady growers; and, turnaround situations. BlackRock Continental European offers investors an all-cap portfolio of European equities managed by the highly experienced Vincent Devlin. The fund benefits from a rigorous stock selection process complemented by consideration of the prevailing macroeconomic and stock market environment. Henderson European Selected Opportunities fund is a large-cap biased portfolio of European stocks. The fund is managed by John Bennett who combines fundamental company analysis with an awareness of macroeconomic and sector trends. He has a long and impressive track record managing European equity funds with high conviction. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term.
High Risk Portfolio 13 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver outperformance in each of the asset classes of the Portfolio over the long term. Elevate s description of a High Risk investor is: You re prepared to accept a very high level of risk on your investment with the potential for very high returns in the longer term. You understand there may be sharp, day to day fluctuations in your investment value. You accept there is a risk of losing some or all of your capital. Equity International Emerging 7.0% UK Property 10.0% UK All Companies 25.0% Equity International Developed 58.0% Model Portfolio - Q4 2015 Asset Classes % Asset Alloction UK Property 10 UK All Companies 25 Equity International Developed 58 Fund Suggested Fund Weight % Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a. AXA Framlington UK Select Opportunities 8.0 Gold Investec UK Special Situations 8.5 Gold Old Mutual UK Alpha 8.5 Silver US AXA Framlington American Growth 8.5 Bronze BlackRock North American Equity Tracker 13.0 Gold JPM US Equity Income 10.5 Silver Schroder US Mid Cap 6.0 Silver Europe BlackRock Continental European 7.5 Silver Henderson European Selected Opportunities 6.5 Silver Japan Schroder Tokyo 6.0 Gold Equity International Emerging 7 Asia Fidelity South East Asia 2.5 Bronze First State Asia Pacific Leaders 2.5 Silver Latin America Aberdeen Latin American 1.0 Bronze Eastern Europe JPM New Europe 1.0 Bronze 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)
High Risk Portfolio Overview 14 Property For the property portion of the Portfolio, we have selected the M&G Feeder of Property Portfolio and Threadneedle UK Property. Both funds provide exposure primarily to the UK commercial property market. M&G Property Portfolio* is managed by PruPIM, the group s well-regarded property division. The team is extremely well-resourced and we believe it is a robust offering in this asset class. Threadneedle UK Property is also managed by experienced property practitioners. The fund was launched in February 2007 and is differentiated in that the managers are more yield focused than others, with the result that they look to identify higher yielding assets that fall just outside the prime real estate category. *In January 2013, the M&G Property Portfolio was reconstructed into the M&G Property Portfolio, a property authorised investment fund (PAIF), and the M&G Feeder of Property Portfolio (Feeder), a linked feeder fund. PAIFs are a type of tax-efficient retail property fund which are beneficial for taxexempt investors. The Feeder fund is directly linked to the same portfolio of underlying direct property assets as the PAIF. Due to differences in cash in and out flows between the two funds, there are likely to be some differences in pricing. From a tax point of view, tax-exempt investors in the Feeder fund do not participate in the tax benefits of the PAIF structure but they are effectively in the same tax position as they were pre-conversion. At the present time, some platforms including Elevate are unable to support PAIF. Equities UK In the UK portion of the Portfolio, we have suggested three funds, Old Mutual UK Alpha, AXA Framlington UK Select Opportunities and Investec UK Special Situations. All three funds are located in the UK All Companies sector. The intention is to achieve a blend of funds that provides exposure to the UK equity market across the market cap range as well as diversification of manager style. Old Mutual UK Alpha is a large-cap biased fund that is very actively managed with the fund manager having an absolute return approach to investing in the sense of wishing to generate positive returns over the long-term by investing in stocks that he believes will rise in value by at least 10-20% in the ensuing three years. AXA Framlington UK Select Opportunities is managed by the very experienced Nigel Thomas and as its name suggests, it is more opportunistic in nature and provides exposure to companies from across the market cap spectrum. His thoughtful and considered approach has generated attractive relative returns for his investors over many years. The allocation to Investec UK Special Situations provides exposure to a contrarian investor who typically looks to buy strategically well-placed companies at a time when sentiment towards them is at or near its worst. The fund has a strong long-term track record, notwithstanding episodes of underperformance, and the contrarian nature of the fund provides style diversification within this blend of funds. They aim to diversify the fund by looking for different types of stocks, namely: superior growth companies which are unattractively priced; steady growers; and, turnaround situations. BlackRock Continental European offers investors an all-cap portfolio of European equities managed by the highly experienced Vincent Devlin. The fund benefits from a rigorous stock selection process complemented by consideration of the prevailing macroeconomic and stock market environment. Henderson European Selected Opportunities fund is a large-cap biased portfolio of European stocks. The fund is managed by John Bennett who combines fundamental company analysis with an awareness of macroeconomic and sector trends. He has a long and impressive track record managing European equity funds with high conviction. The team involved in running the Schroder Tokyo fund has a long heritage of investing in the Japanese stock market and is very well resourced. The manager has been involved in Japanese equities since the early 1980s, and he has a pragmatic approach which has produced consistent returns over the long term. Equity International Emerging In the International Emerging portion of the Portfolio, we suggest a blend of regional funds and have selected two Asian equity funds, a Latin American fund and an Emerging European fund. The funds selected are First State Asia Pacific Leaders, Fidelity South East Asia, Aberdeen Latin American and JPM New Europe. First State Asia Pacific Leaders fund is managed by Angus Tulloch one of the pioneers of investing in the Asian region. He has built up an outstanding track record, managing the fund since its inception in 2003 as well as other Asian funds since the mid 1980s. He has also instilled a deep commitment in the analyst team to First State s rigorous approach which focuses on quality companies trading at attractive valuations. The Fidelity South East Asia fund is managed with a flexible and active approach and the manager is prepared to back his views with conviction. This can result in greater volatility but this has been rewarded with strong relative returns over the longer-term. Aberdeen Latin American uses the investment process which was developed by Hugh Young and is strongly adhered to by the large team of analysts and portfolio managers. We believe that the fund benefits from the consistent and sensible approach undertaken by a stable and experienced team which has resulted in a strong track record since inception. Finally the JPM New Europe fund is managed by the experienced Oleg Biryulyov who has been responsible for the strategy since June 2002. Supported by a stable team he manages the fund with a process which targets stocks that can grow earnings in a relatively stable manner. Equity International Developed In the International Developed portion of the Portfolio, we suggest gaining exposure through a blend of regional funds and have selected four North American equity funds, two Europe ex UK equity fund and one Japanese equity funds. The funds selected are BlackRock North American Equity Tracker, AXA Framlington American Growth, JPM US Equity Income, Schroder US Mid Cap, BlackRock Continental European, Henderson European Selected Opportunities and Schroder Tokyo. BlackRock North American Equity Tracker is an index tracker fund that seeks to track the performance of the FTSE World North America index. We believe using a tracker fund is our best option for core US equity exposure. AXA Framlington American Growth is an all cap growth fund run by a pragmatic manager with a long tenure. The manager, Stephen Kelly, believes that over the long-term, companies that have good growth opportunities, high quality management and capital available to maximise those opportunities will provide superior returns for investors. He has run the fund since 1997, an unusually long tenure, delivering returns in a consistent manner. JPM US Equity Income fund which is managed by Clare Hart and Jonathan Simon who are experienced within the field of US equity income investing. The fund invests in dividend paying companies and while being managed with a more pragmatic style than many equity income funds, the portfolio has tended to have a value bias that should complement the growth bias of AXA Framlington American Growth. The Schroder US Mid Cap fund is run by a very experienced manager in mid and small cap US stocks and her team.
Highest Risk Portfolio 15 Key Facts Asset Allocation % (Q4 2015) The Elevate Risk-Profiled Portfolios were established in September 2009. Asset allocation is provided by Elevate and sourced from evalue. Morningstar Investment Management Europe populates the asset allocation with funds it considers appropriate and attractive as a result of its in-depth, qualitatively-driven research process. The objective is to deliver outperformance in each of the asset classes of the Portfolio over the long term. Equity International Emerging 29.0% UK Property 10.0% UK All Companies 19.0% Elevate s description of a Highest Risk investor is: You are an experienced investor with a good understanding of the risk/reward balance. You understand your investment is exposed to a significant level of risk. You know your investment is exposed to significant and very sharp day to day fluctuations and you accept there is a risk of losing some or all of your capital. Equity International Developed 42.0% Model Portfolio - Q4 2015 Asset Class UK Property 10 UK All Companies 19 Equity International Developed 42 % Asset Allocation Fund Suggested Fund Weight % Morningstar Analyst Rating M&G Feeder of Property Portfolio^ 5.0 n/a Threadneedle UK Property Trust 5.0 n/a AXA Framlington UK Select Opportunities 6.0 Gold Investec UK Special Situations 6.5 Gold Old Mutual UK Alpha 6.5 Silver US AXA Framlington American Growth 6.0 Bronze BlackRock North American Equity Tracker 9.0 Gold JPM US Equity Income 7.5 Silver Schroder US Mid Cap 4.5 Silver Europe BlackRock Continental European 6.0 Silver Henderson European Selected Opportunities 5.0 Silver Japan Man GLG Japan CoreAlpha 2.0 Gold Equity International Emerging 29 Schroder Tokyo 2.0 Gold Asia Fidelity South East Asia 7.0 Bronze First State Asia Pacific Leaders 6.0 Silver M&G Asian 7.0 Bronze Latin America Aberdeen Latin American 5.5 Bronze Eastern Europe JPM New Europe 3.5 Bronze 100 100.0 Directly invested property funds do not feature in the Morningstar Fund Ratings Service. ^Feeder fund of M&G Property Portfolio (PAIF)