Consultancy Report
May 2016:
Standard Life MyFolio
Managed Funds
Square Mile Categorisation
Outcome: Capital Accumulation
Risk Based Approach: Risk Targeted
Asset Class Breadth: Diversified
Asset Allocation: Strategic & Tactical
Investment Implementation: Active
Fund Selection Approach: Fettered Fund
of Funds (FofF)
Overview
The Standard Life Investments (SLI) MyFolio Managed
fund range is one of five risk targeted ranges offered by
the group. The family of 25 funds consists of both growth
and income focused varieties as well as a choice of active
and passive investment styles. The Managed range consists
of five growth orientated, actively managed fettered fund
of funds. The range carries an ongoing charge which
is in between the other two growth orientated ranges,
MyFolio Market and MyFolio Multi Manager, due to the
predominant use of actively managed Standard Life funds.
a 10 year time horizon. SLI engage with Barrie & Hibbert (B&H),
a Moody’s Analytics Company, when determining the optimum
strategic asset allocation for each fund. The Standard Life
Multi Asset Investing (MAI) team, which is responsible for the
successful GARS product, provide the tactical asset allocation.
Fund selection is the responsibility of the Fund Solutions Team.
Each fund in the range will aim, in addition to delivering to its
risk targets, to provide performance over the medium term
that is commensurate with the level of risk being taken, and
that is in excess of its equivalent fund in the Market range.
Head of Fund of Funds at SLI is Bambos Hambi, and he is
also named manager for the entire MyFolio range. All funds
in the range have been designed such that each has different
expected risk and reward characteristics, and that they fall
at broadly equal intervals along the efficient frontier. Each
fund’s expected volatility target is constructed based on
Investors should note that between 10% and 20% of
the funds will be invested in absolute return strategies,
and that this is a structural constraint imposed by the
longer term allocation. The aim of the absolute return
strategies is to dampen the overall level of fund volatility.
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Consultancy Report - Standard Life MyFolio Managed Funds
Figure 1: Summary Information
Standard Life
Investments
MyFolio Managed I
Standard Life
Investments
MyFolio Managed II
Standard Life
Investments MyFolio
Managed III
Standard Life
Investments
MyFolio
Managed IV
Standard Life
Investments
MyFolio
Managed V
22/09/10
22/09/10
22/09/10
22/09/10
22/09/10
242
962
2127
810
300
IA Unclassified
IA Unclassified
IA Unclassified
IA Unclassified
IA Unclassified
0.91%
0.98%
1.05%
1.10%
1.12%
3.0% - 5.5%
5.5% - 8.5%
8.5% - 12.0%
12.0% - 15.5%
15.5% - 18.5%
10 Years
10 Years
10 Years
10 Years
10 Years
n/a
n/a
n/a
n/a
n/a
Strategic Asset
Allocation
Barrie & Hibbert
Barrie & Hibbert
Barrie & Hibbert
Barrie & Hibbert
Barrie & Hibbert
Tactical Asset
Allocation
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Fund Selection
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Standard Life
Investments
Fund Name
Launch Date
Fund Size (£ m)
IA Sector
OCF*
Risk Targets
Forecast Risk
Targeted Horizon
Risk Profile
Source: FE Analytics and Standard Life Investments
Data as at: 31/03/2016
* The Ongoing Charge Fee (OCF) above relates to the Retail Platform share class
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Consultancy Report - Standard Life MyFolio Managed Funds
Contents
Opinion1.1
Parent 1.2
Objectives and Investment Policy
1.3
Forecasted Risk and Reward 1.4
Asset Allocation
1.5
Implementation 1.6
Risk Controls1.7
Resources 1.8
Performance and Risk Data
1.9
Glossary1.10
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Standard Life MyFolio Managed Funds
1.1Opinion
1.3 Objectives and Investment Policy
This fund is part of a strong overall risk targeted proposition
offered by Standard Life Investments. The three main facets
to the fund’s strategy, strategic asset allocation, tactical asset
allocation and fund selection, are all well resourced and contain
suitably experienced individuals. This includes the SLI Multi
Asset Investment team, responsible for the successful Global
Absolute Return Strategy (GARS) product, who provide the
tactical asset allocation overlay. The whole process is overseen
and controlled by a committee of senior executives within SLI.
MyFolio Managed I
The fund aims to provide a total return from a combination of
income and capital appreciation over the longer term.
The structure of the fund, whereby it will invest predominantly
in Standard Life funds, could mean that at times the manager
may lack the flexibility to diversify across investment styles
meaning the portfolio could have a bias to a smaller number
of themes and ideas than if he were able to select funds
from the whole of the market. On the other-hand the lower
costs associated with this approach should be less of a
drag on returns than investing outside of the group. Over
the longer term and given the breadth of talent and range
of strategies from within the group which the team has to
select from we believe the fund can deliver an outcome
for clients which should meet their expectations.
1.2Parent
Standard Life Investments is a leading asset manager with an
expanding global reach. They offer a wide range of investment
solutions which are backed by their distinctive ‘Focus on Change’
investment philosophy, disciplined risk management and shared
commitment to a culture of investment excellence.
As active managers, a significant amount of emphasis is placed on
rigorous research and a strong collaborative ethos. They continually
attempt to think ahead and anticipate change before it happens,
rather than simply following the general investment crowd.
Standard Life Investments managed circa £250 billion, as at the end
of Q2 2015, on behalf of clients worldwide. The group’s investment
capabilities span equities, bonds, real estate, private equity, multiasset solutions, fund-of-funds and absolute return strategies.
In July 2014, Standard Life Investments acquired Ignis Asset
Management, a UK asset manager with assets around £60
billion. The acquisition of Ignis was seen to complement the
group’s strong organic growth and enhance their strategic
position through deepened investment capabilities in key
areas, including government bonds and liquidity. The combined
business now offers a full range of investment solutions, ensuring
they continue to meet the evolving needs of investors.
4
The fund will invest mainly in a range of collective investment
schemes managed or operated within the Standard Life group
of companies to achieve a broad exposure to diversified
investments, including equities, fixed and variable rate
interest bearing securities and immoveable property. The
fund may also invest in transferable securities, money-market
instruments, deposits, cash and near cash. Typically, the fund
will have a high exposure to lower risk assets, such as fixed
interest.
MyFolio Managed II
The fund aims to provide a total return from a combination
of income and capital appreciation over the longer term.
The fund will invest mainly in a range of collective investment
schemes managed or operated within the Standard Life group
of companies to achieve a broad exposure to diversified
investments, including equities, fixed and variable rate
interest bearing securities and immoveable property. The
fund may also invest in transferable securities, money-market
instruments, deposits, cash and near cash. Typically, the fund
will have a preference towards lower risk assets, such as fixed
interest.
MyFolio Managed III
The fund aims to provide a total return from a combination
of income and capital appreciation over the longer term.
The fund will invest mainly in a range of collective investment
schemes managed or operated within the Standard
Life group of companies to achieve a broad exposure
to diversified investments, including equities, fixed and
variable rate interest bearing securities and immoveable
property. The fund may also invest in transferable securities,
money-market instruments, deposits, cash and near cash.
Typically, the fund will have a balance to those assets
providing the potential for growth, such as equities and
those with defensive qualities, such as fixed interest.
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MyFolio Managed IV
The fund aims to provide a total return from a combination
of income and capital appreciation over the longer term.
The fund will invest mainly in a range of collective investment
schemes managed or operated within the Standard
Life group of companies to achieve a broad exposure
to diversified investments, including equities, fixed and
variable rate interest bearing securities and immoveable
property. The fund may also invest in transferable securities,
money-market instruments, deposits, cash and near
cash. Typically, the fund will have a preference to those
assets providing potential for growth, such as equities.
MyFolio Managed V
The fund aims to provide a total return from a combination
of income and capital appreciation over the longer term.
The fund will invest mainly in a range of collective investment
schemes managed or operated within the Standard Life
group of companies to achieve exposure to diversified
investments, of primarily equities, but which may include
fixed and variable rate interest bearing securities and
immoveable property. The fund may also invest in transferable
securities, money-market instruments, deposits, cash and
near cash. Typically, the fund will have a high exposure to
assets providing the potential for growth, such as equities.
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1.4 Forecasted Risk and Reward
Figure 2: The chart below shows the historical 10 year annualised risk and reward
figures for a number of asset classes along with the expected volatility bands of the
MyFolio Managed funds over the same time horizon.
9%
8%
UK Index - Linked Gilts
North America
7%
Asia Pacific Excluding Japan
Annualised Return
6%
Global Bonds
5%
Europe Excluding UK
UK Gilts
UK All Companies
Global Emerging Markets
4%
Sterling Corporate Bond
3%
Property
2%
Japan
1%
Money Market
0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Volatility annualised
Standard Life
Investments
MyFolio Managed I
Standard Life
Investments
MyFolio Managed II
Standard Life
Investments
MyFolio Managed III
Standard Life
Investments
MyFolio Managed IV
Standard Life
Investments
MyFolio Managed V
All price in pence sterling (GBX) unless otherwise specified. Price total return performance figures are calculated on a bid price to bid
price basis (mid to mid for OEICs) with net income (dividends) reinvested.
Source: FE Analytics and Standard Life Investments
Data as at: 31/03/2016
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1.5 Asset Allocation
When SLI designed the MyFolio solution, the starting point for
portfolio construction for each fund was the selection of longer
term risk targets. Following consideration, it was decided that
at the very lowest end of the range they wanted to provide
a fund which would utilise enough volatility in order to derive
a return that was above that of cash and, at the highest end
of the range, a fund which would provide a level of return that
was similar to that which could be expected from investing
in the FTSE All Share, a widely used barometer for returns for
UK IFA’s. Based on these requirements and using empirical data
of asset class returns, the upper and lower risk boundaries for
MyFolio I and MyFolio V were set at 3.0%-5.5% and 15.5%-18.5%
respectively. The other 3 funds in the range are positioned
broadly equidistant along the efficient frontier between these
upper and lower boundaries. It should be noted that the
volatility bands could be adjusted if the expectation for longer
term volatility was to move significantly from current levels.
However this would not be expected to be a meaningful move.
In order to create efficient portfolios that fall within each of
the risk bands, SLI work in conjunction with Moody’s Analytics.
SLI specifically work with B&H, which is part of the Risk
Management Software segment of the Moody’s Corporation,
that acquired the business in 2011. SLI’s relationship with
B&H extends beyond their acquisition, and they have worked
with them since the funds were launched, back in 2010.
B&H is a leading provider of financial risk
modelling, which includes building stochastic models and
calibrations. It has one of the largest teams in the world
committed to the commercial development and delivery of these
disciplines. This team includes financial experts and academics,
economists, mathematicians and actuaries, all working together
to bridge the gap between financial market theory and practice.
One of the key reasons SLI chose to work with Barrie
& Hibbert was that, in their view, they employ one of the
most sophisticated economic and stochastic models in the
market place. Generally it is perceived that there are two types
of asset class modelling approaches prominent in the market.
A deterministic approach, that is generally backward looking
and non-timeframe specific and stochastic modelling that
is forward looking and term centric. Broadly, stochastic
modelling is a sophisticated system of predicting outcomes
that takes into account a certain degree of randomness
or unpredictability. Over the last few years, where
volatility has been relatively low, manufacturers using the
deterministic approach have tended to create portfolios
that reflect this lower level of market risk, and could be seen
as potentially underestimating risk. This contrasts with the
stochastic approach, which is more forward looking.
7
SLI consults with B&H to set the strategic asset allocation.
B&H has created its Economic Scenario Generator (ESG) that
provides Monte-Carlo simulation paths for the joint behaviour
of financial market risk factors and economic variables. The ESG
takes into account numerous data, including equity returns,
yield curves, credit spreads, ratings transitions and defaults,
option-implied volatilities, real estate returns, alternative
assets, inflation and exchange rates. The process begins with
a detailed understanding of how each selected asset class
is expected to behave over the longer term, its volatility and
how its performance correlates with other asset classes.
The interaction between SLI and B&H is a collaborative
one. B&H provide information on asset class returns and
volatility and consult with SLI regarding trends and changes
to expectations. However, responsibility for decisions around
which asset classes are included firmly lies with SLI.
Additionally, SLI sets out the broad framework that Barrie
& Hibbert work to when undertaking its optimisation process.
The aim of this framework is to ensure that a highly diversified
range of model portfolios are created that are not overly
exposed to any one particular area. A sterling bias is enforced
as the funds are predominantly targeted at UK based investors.
A cap on the overall exposure to property is also in place. This
currently stands at 15% and was decided due to the general
illiquidity associated with property investment. The constrained
optimisation process is set based on a 10 year time horizon.
The models are then assessed by the SLI Strategic Asset
Allocation Committee to make sure they are appropriate
and in line with the overall philosophy of the proposition.
This committee comprises senior SLI investment professionals
from across the business including Mr Hambi. The current
granular breakdown of assets include; cash and money
market, UK Gilts, UK index linked Gilts, sterling corporate
bonds, equities from the UK, US, Europe, Japan, Asia
Pacific and emerging markets, sterling hedged global high
yield and UK property. The strategic asset allocation is
formally reviewed on a quarterly basis by the committee,
following completion of B&H’s most recent analysis.
The funds will also have a structural exposure
to absolute return vehicles. This has been imposed
on the final portfolio weightings by SLI in order to provide
a further source of diversification and to attempt to
dampen the overall level of volatility of each portfolio.
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As discussed, the strategic asset allocation sets the broad
framework for the funds. SLI’s approach allows flexibility
around this framework based on the acknowledgement
that, short term market conditions can cause deviations
away from the longer term expectations. Therefore,
tactical positions, relative to the longer term positions,
are taken according to prevailing market conditions.
The group responsible for deciding on the short term positions
taken within the funds is the MAI team. This team respond
to changes in the house view, which are set through two key
forums; the Global Investment Group (GIG) and the Multi-Asset
Investing Global Investment Group (MAI GIG). These forums
draw on the insights from the wider SLI investment analysis
capabilities and research from the Global Strategy Team.
The GIG consists of senior investment managers at SLI,
who provide the overall strategic clarity for the investment
process, through a mix of weekly and quarterly meetings.
Additionally, the GIG decides on the broad asset
allocation issues based on the prevailing market drivers
and on forecasts of future economic indicators.
The MAI GIG is a separate sub-committee responsible for
global tactical asset allocation decisions and the more granular
asset class outlook. The committee meets on a weekly basis
and consists of senior members of the MAI team. It is chaired
by either Guy Stern, Head of Multi-Asset and Macro Investment,
or Andrew Milligan, Head of the Global Strategy team, to
ensure liaison with the main GIG, as both are members of this
group too. The external communication of the SLI house view
is primarily achieved through the Global Series publications,
which includes Global Outlook and Global Perspective.
There are a number of controls around the level of deviation
which may be taken from the longer term allocation. The
funds generally allow up to +/-5% at the granular asset class
level provided other restrictions are met. For example, SLI
think broadly about the structure of the portfolios in terms
of growth and defensive assets, with the weighting to growth
assets increasing as you move up the risk scale. Defensive
assets are defined as cash, conventional & index linked Gilts,
sterling corporate bonds and absolute return bond strategies.
All other investments are defined as growth assets. A +/-5%
limit, with regard to changes in the overall growth and defensive
weightings, must also be adhered to. Growth assets, are further
categorised into developed market equities and alternatives,
which includes property, emerging market equity, emerging
market debt and sterling high yield bonds. This same +/-5% limit
applies to investments within the growth portion too. These
limits seek to ensure that there is always both a high level of
diversification within the funds, and that changes to the longer
term asset allocation do not compromise the risk targets.
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Figure 3: Asset Allocation as at 11/03/2016
MyFolio Managed Funds
I
II
III
IV
V
Cash & Money Markets
8.60%
1.00%
1.00%
1.00%
1.00%
UK Gilts
4.70%
0.00%
0.00%
0.00%
0.00%
Short dated UK Gilts
4.70%
0.00%
0.00%
0.00%
0.00%
Global Index Linked Bonds
5.40%
6.20%
3.40%
0.40%
0.00%
Short Dated Global Index Linked Bonds
4.15%
4.45%
1.65%
0.00%
0.00%
Sterling Corporate Bonds
17.50%
15.60%
8.95%
3.10%
0.00%
Short Dated Sterling Corporate Bonds
17.50%
15.60%
8.95%
2.70%
0.00%
Absolute Returns Bonds
7.10%
5.00%
2.90%
1.00%
0.00%
Defensive Assets
69.65%
47.85%
26.85%
8.20%
1.00%
UK Equities
6.70%
12.30%
17.90%
22.80%
25.20%
US Equities
3.60%
9.20%
13.90%
19.30%
23.75%
European Equities
3.35%
5.20%
6.40%
7.60%
8.70%
Japan Equities
1.80%
2.70%
3.50%
4.50%
5.90%
Asia Pacific Equities
0.00%
0.00%
0.00%
0.85%
1.45%
Emerging Market Equities
0.00%
0.70%
2.70%
4.05%
5.55%
Sterling Hedged Global High Yield
2.80%
4.00%
4.00%
4.65%
3.90%
Emerging Market Debt
1.30%
0.35%
0.35%
0.35%
0.35%
UK Property
5.00%
7.60%
10.10%
9.70%
4.40%
Absolute Returns
5.80%
10.10%
14.30%
18.00%
19.80%
Growth Assets
30.35%
52.15%
73.15%
91.80%
99.00%
Source: Standard Life Investments
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1.6Implementation
Once the various committees and groups have decided
on the asset classes and their weightings it is the responsibility
of the SLI Fund Solutions Team to populate these with
appropriate funds and to ensure risk at the portfolio
level is in line with the stated targets. Their role is to
act as a centre of excellence for fund selection within
the SLI Group. The team, headed by Bambos Hambi,
is currently 9 strong and based in London.
The use of predominantly Standard Life Investment funds
within the MyFolio Managed range means the universe of
potential investments is limited however the team still seek
to select what they perceive to be the highest quality funds
and identify the environment within which they would expect
them to provide the greatest level of risk adjusted return.
They team apply a consistent and tried and tested manager
selection process, undertaking both quantitative and qualitative
research in order to produce a list of ‘best of breed’ funds. The
first stage in the process is quantitative and the time frame over
which the team concentrate its quantitative screens is five years.
A qualitative approach is then applied to a reduced universe.
Index tracker funds can be used should the team be unable
to find opportunities within a particular asset class or
region. For example, historically the funds have held passive
investments in order to gain exposure to US equities and UK
government bonds. Active external funds have also been used
on occasion but this is only for more specialist exposure, for
example, to gain exposure to sterling short dated credit.
As a rule, the funds do not hedge currency exposure, but the
manager may buy investments that have share classes that
are hedged back to sterling. For the fixed income portion of
the funds, sterling hedged share classes will be purchased if
the investment is not in UK fixed interest assets. The outlier to
this is emerging market debt which will remained unhedged.
The manager will not rigorously seek to rebalance cash flows
back to the pre-determined tactical positions, as this is deemed
counterproductive from a cost perspective. Instead, he will
sensibly allocate funds in an efficient way, but one which
remains sympathetic to the shorter term views of the group.
The team’s fund manager research and selection process
is based upon a framework, which is referred to as the Five
P’s; Philosophy, Process, People, Performance and Price, and
forms the basis of all work in this area. A brief explanation of
each aspect is as follows; Philosophy - they seek to understand
what each fund is trying to achieve and why. This formulates
the basis on which the research is conducted. Process - they
seek to determine how a fund will be managed, and aim to
identify key aspects of the investment process. This is the area
where the majority of time is devoted. People -not only do they
assess the skills and experience of the fund manager or team
but also the resources available to them. Performance - here
they not only look at raw performance numbers but also the
level of consistency and the market environment in which it was
achieved. This assessment essentially helps identify whether
the funds philosophy, process and people have resulted in
an outcome which is in-line with its objectives. Price - this is
the final consideration. All things being equal, the fund that
represents the best value will be selected. However, the team
do not compromise on quality at the expense of value, and
therefore higher conviction funds are likely to prevail over less
expensive ones. The team look for longer term winners in class
and the approach generally leads to protracted holding periods.
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Figure 4: Top Ten Holdings data as at 31/03/2016
Standard Life Investments MyFolio Managed I
%
Standard Life Investments MyFolio Managed II
%
Standard Life Investments Investment Grade
Corporate Bond
13.5%
Standard Life Investments Investment Grade
Corporate Bond
11.2%
Standard Life Investments Absolute Return Global
Bond Strategies
7.0%
Standard Life Investments UK Property
Accumulation Feeder Trust
7.0%
Vanguard UK Short-term Investment Grade Bond
Index
6.3%
Standard Life TM North American
6.7%
Standard Life Investments Short Duration Credit
6.5%
Standard Life Investments Short Duration Credit
6.1%
Standard Life Investments Global Index Linked Bond
6.3%
Standard Life Investments UK Gilt
5.4%
Standard Life Investments Global Index Linked Bond
5.1%
Standard Life Investments UK Equity Income
Unconstrained
5.5%
Standard Life Investments UK Property
Accumulation Feeder Trust
4.9%
Vanguard UK Short-term Investment Grade Bond
Index
5.5%
AXA Sterling Credit Short Duration Bond
4.6%
5.2%
Standard Life Investments ShortDurationGlobal
Index Linked Bond
Standard Life Investments Absolute Return Global
Bond Strategies
4.4%
4.5%
Royal London Short Duration Gilts
4.2%
Standard Life Investments ShortDurationGlobal
Index Linked Bond
Standard Life Investments Corporate Bond
4.4%
Standard Life Investments MyFolio Managed III
%
Standard Life Investments UK Property
Accumulation Feeder Trust
8.6%
Standard Life TM North American
8.5%
Standard Life Investments Investment Grade
Corporate Bond
Standard Life Investments MyFolio Managed IV
%
Standard Life TM North American
9.0%
Standard Life Investments UK Property
8.7%
Vanguard US Equity Index
6.9%
6.8%
Standard Life Investments UK Equity Income
Unconstrained
6.8%
Standard Life Investments UK Equity Income
Unconstrained
6.0%
SLI SICAV Global High Yield
5.1%
Vanguard US Equity Index
4.5%
Standard Life Investments UK Equity High Income
4.2%
Standard Life Investments Short Duration Credit
4.4%
Standard Life Investments UK Equity Unconstrained
3.3%
SLI SICAV Global High Yield
4.3%
Standard Life Investments American Equity
Unconstrained
3.3%
Standard Life Investments Global Index Linked Bond
3.7%
Standard Life Investments UK Smaller Companies
3.1%
Standard Life Investments European Equity Income
3.2%
Standard Life Investments UK Equity High Alpha
3.0%
Standard Life Investments Absolute Return Global
Bond Strategies
2.8%
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Figure 4: Continued
Standard Life Investments MyFolio Managed V
%
Standard Life TM North American
14.2%
Standard Life Investments UK Equity
Income Unconstrained
8.4%
Standard Life Investments UK Equity
Income Unconstrained
7.6%
Standard Life Investments UK Equity Unconstrained
4.2%
SLI SICAV Global High Yield
3.9%
Standard Life Investments UK Equity High Income
3.8%
Standard Life Investments Japanese Equity Growth
3.7%
Standard Life Investments UK Property
3.6%
Standard Life Investments European Equity Income
3.4%
Standard Life Investments UK Smaller Companies
3.3%
Source: FE Analytics
Data as at: 31/03/2016
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1.7 Risk Controls
There are numerous layers of risk management which
permeate the MyFolio proposition. The Strategic Asset
Allocation Committee reviews the longer term allocations
of the fund range in conjunction with B&H quarterly, to ensure
the funds, on a forward looking basis, continue to be managed
to their stated risk targets. There are hard limits in place at
the asset allocation level, both on a broad asset class and sub
asset class basis, to ensure that tactical deviations from the
strategic asset allocation do not have a major impact on the
overall level of risk that the funds are targeting.
The Fund Solutions team spend a lot of their time trying
to understand the funds they invest in, and in particular
the level of risk which each is expected to contribute to the
portfolio. In addition to historical risk measures, they also
consider forward looking indicators. In order to do this the
team have to have up to date holdings information for each
fund. SLI insist on monthly portfolio holdings data as at the
15th day of every month, and for all investment groups that
they deal with, non-disclosure agreements are in place. Data
from this exercise is run through Style Research, and this
highlights the risk characteristic of each fund, in terms of
tracking error, growth or value characteristics, market cap
biases etc. Funds are also modelled within Style Research prior
to being purchased, and therefore it allows the team to see
how any changes will affect the overall portfolio risk.
The group’s Investment Risk team adds another layer
of assessment to the process. This team work independently
of the investment team and are responsible for monitoring
the performance and risk characteristics of the MyFolio
funds, as well as the wider SLI group. The team utilise industry
standard systems which include RiskMetrics, SunGard APT
and UBS Delta, to measure and monitor risk. Additionally, the
Investment Governance team, which also work independently,
is responsible for ensuring operationally that the investment
process is managed to its specification and mandate.
Another function is the SLI Investment Restrictions and
Control teams. They have as their sole responsibility, the role
of monitoring positions within funds on a daily basis to ensure
compliance with regulatory and client driven investment
restrictions and guidelines. This team is independent of the
asset management divisions and reports to the Director
of Investment Governance and Risk.
The whole MyFolio process is overseen by the MyFolio
Operating Committee. The key purpose of this committee
is to establish, oversee and monitor the key strategic priorities
for the operation and development of the MyFolio proposition.
This committee currently comprises Rod Paris - CIO,
13
Stephen Acheson - Executive Director, Bill Lambert - Director
of Investment Governance, Bambos Hambi - Head of Fund
of Funds, Iain McLeod - Multi Asset Investment Specialist and
Debbie McKay - Global Strategic Partnerships.
1.8Resources
Bambos Hambi – Head of Fund of Funds
Mr Hambi joined SLI in 2011 and has 35 years of investment
experience. Prior to this, and following a period where he
worked as an independent consultant, he spent 5 years at
Gartmore Investment Management, where he was a Partner
and Head of Multi Manager. He has also held a number of
senior fund management positions, including roles with Insight
Investment Management, Rothchild Asset Management and
Friends Ivory & Sime.
The Fund Solutions Team, headed by Mr Hambi, is 10
strong and each member of the group has specific areas
of specialisation and responsibility, which are detailed below.
Member Name
Role
Responsibilities
James Millard
Investment
Director
Supports Head of Fund
of Funds
Fund Manager
Fund Management,
Lead Analyst European
Equity and UK Equity
Income
Senior Analyst
Lead Analyst Global
and US Equity, UK
All Companies and
Strategic Bonds
Senior Analyst
Lead Analyst
Investment Grade
Bonds, Absolute
Return, Asia Pacific and
China Equity, Property
and Money Market
Analyst
Lead Analyst Global
and High Yield Bonds,
Emerging Market Debt
and Equity, Absolute
Return Fixed Income
Katie Trowsdale
Matthew
Webber
Joe Wiggins
Rickey
Thevakarrunai
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Member Name
Role
Responsibilities
Daniel Reynolds
Analyst
Lead Analyst ETFs and
Passives
Mark Lane
Analyst
Lead Analyst UK Gilts
and Index Linked
securities, Japanese, UK
Mid-Cap and Small Cap
Equity, Commodities
Feryal Bensalah
Quantitative
Analyst
Quantitative Research
Dee Jones
Trainee
Quantitative
Analyst
Quantitative Research
The Multi Asset Investing team is responsible for the
tactical asset allocation facet of the funds. This team consists
of over 40 individuals from a mixture of backgrounds.
The team incorporates three key areas, namely Multi Asset/
Macro Portfolio Management, Global Strategy and Risk and
Structuring. These areas are headed by Guy Stern, Andrew
Milligan and Brian Fleming respectively, and all are seen
as an important part of the decision making process.
Board, an executive non-departmental public body established
by the government to stimulate innovation in the UK. He is
also a Fellow and Council Member of the Society of Business
Economists, the leading organisation serving business
economists in the UK.
Brian Fleming - Head of Multi-Asset Risk and Structuring
Mr Fleming manages assets for Standard Life Group and
third parties, covering numerous types of strategies including
liability-driven investment (LDI) and absolute return. He
joined SLI in 2002 as a quantitative analyst, working across
a broad range of disciplines, including fixed-interest,
equities, FX, portfolio construction and risk. Moving to the
Strategic Solutions Unit in 2004, he was responsible for the
development of SLI’s LDI offering and subsequently the
delivery of the desks multi-asset risk capabilities, to support
the launch of the GARS fund. He obtained a 1st class honours
degree in Mathematics with Physics at Heriot-Watt University
before going on to complete a PhD in nonlinear time series
analysis at the same institution. During his PhD studies, he
also supported the strategy desk at SLI, developing market
forecasting techniques.
Guy Stern - Head of Multi-Asset & Macro Investing
As Head of Multi-Asset & Macro Investing, Mr Stern provides
leadership to the multi-asset and macro investment
capabilities at SLI. He joined the group in April 2008 as Head
of Multi-Asset Management. Since this time, he has been
responsible for the day-to-day management of the MAI team
that oversees asset allocation for the range of multi-asset
portfolios. He has also been responsible for investment idea
origination, portfolio construction and implementation. He
previously worked as CIO, Multi-Asset Class Solutions, at Credit
Suisse Asset Management for its UK and US divisions. He has
over 30 years’ experience, holds a BA from Rutgers University
and is a Chartered Financial Analyst.
Andrew Milligan - Head of Global Strategy
Mr Milligan joined SLI in 2000. Prior to this he was employed
by HM Treasury, followed by Lloyds Bank, where he was an
Economic Adviser. He has also held the role of International
Economist with Smith New Court. In 1994 he was appointed
Chief Economist with New Japan Securities Europe. He then
moved to Morley Fund Management in 1996 to take up the
position of Director of Economic Research & Business Risk.
He is a Governing Board member of the Technology Strategy
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1.9 Performance and Risk Data
Figure 5: Monthly rolling 3-year returns and annualised standard deviation
for the Standard Life MyFolio Managed fund range since launch.
Standard Life Investments MyFolio Managed I,
Standard Life Investments MyFolio Managed II,
Rolling 3yr monthly Sep 10 - Mar 16
20.0%
20.0%
15.0%
15.0%
Fund Return (% p.a.)
Fund Return (% p.a.)
Rolling 3yr monthly Sep 10 - Mar 16
10.0%
5.0%
0.0%
-5.0%
-10.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
0.0%
10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
2.0%
8.0%
10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Standard Deviation (% p.a.)
Standard Life Investments MyFolio Managed III,
Standard Life Investments MyFolio Managed IV,
Rolling 3yr monthly Sep 10 - Mar 16
20.0%
20.0%
15.0%
15.0%
Fund Return (% p.a.)
Fund Return (% p.a.)
6.0%
Standard Deviation (% p.a.)
Rolling 3yr monthly Sep 10 - Mar 16
10.0%
5.0%
0.0%
-5.0%
-10.0%
0.0%
4.0%
2.0%
4.0%
6.0%
8.0%
10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
0.0%
2.0%
4.0%
Standard Deviation (% p.a.)
6.0%
8.0%
10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Standard Deviation (% p.a.)
Standard Life Investments MyFolio Managed V,
Rolling 3yr monthly Sep 10 - Mar 16
Fund Return (% p.a.)
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Standard Deviation (% p.a.)
All price in pence sterling (GBX) unless otherwise specified. Price total return performance figures are calculated on a bid price to
bid price basis (mid to mid for OEICs) with net income (dividends) reinvested.
Source: FE Analytics.
Data as at: 31/03/2016
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Figure 6: Risk and reward profile of the Standard Life MyFolio Managed fund range since launch.
SLI MyFolio Managed Range, Risk v Reward
14.0%
Standard Life Investments MyFolio Managed V
Fund Return (% p.a.)
9.0%
Standard Life Investments MyFolio Managed III
Standard Life Investments MyFolio Managed II
Standard Life Investments MyFolio Managed IV
4.0%
Standard Life Investments MyFolio Managed I
0.0%
-6.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Standard Deviation (% p.a.)
Figure 7: Rolling 3-year monthly standard deviation of the Standard Life MyFolio Managed fund range since launch.
SLI MyFolio Managed Range, Rolling 3yr Volatility
14.0%
12.0%
3 YR Volatility (% p.a.)
10.0%
8.0%
6.0%
4.0%
2.0%
Standard Life Investments
MyFolio Managed I
Standard Life Investments
MyFolio Managed II
Standard Life Investments
MyFolio Managed III
Standard Life Investments
MyFolio Managed IV
Feb 16
Mar 16
Jan 16
Dec 15
Nov 15
Oct 15
Sep 15
Aug 15
Jul 15
Jun 15
May 15
Apr 15
Mar 15
Jan 15
Feb 15
Dec 14
Oct 14
Nov 14
Sep 14
Jul 14
Aug 14
Jun 14
Apr 14
May 14
Feb 14
Mar 14
Jan 14
Dec 13
Nov 13
Oct 13
Sep 13
0.0%
Standard Life Investments
MyFolio Managed V
All price in pence sterling (GBX) unless otherwise specified. Price total return performance figures are calculated on a bid price to bid
price basis (mid to mid for OEICs) with net income (dividends) reinvested.
Source: FE Analytics
Data as at: 31/03/2016
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Figure 8: Maximum drawdown, peak to trough, of Standard Life MyFolio Managed fund range since launch.
SLI MyFolio Managed Range - Max drawdown weekly, Sep 10 - Mar 16
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%
-14.0%
-16.0%
-18.0%
-20.0%
Standard Life
Investments MyFolio
Managed I
Standard Life
Investments MyFolio
Managed II
Standard Life
Investments MyFolio
Managed III
Standard Life
Investments MyFolio
Managed IV
Standard Life
Investments MyFolio
Managed V
All price in pence sterling (GBX) unless otherwise specified. Price total return performance figures are calculated on a bid price to bid
price basis (mid to mid for OEICs) with net income (dividends) reinvested.
Source: FE Analytics.
Data as at: 31/03/2016
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Consultancy Report - Standard Life MyFolio Managed Funds
1.10
Glossary
Categorisation
Categorisation Type
Definition
Outcome
Capital
Accumulation
Suitable for investors who want to build up their savings and capital. Different
investors will have different time horizons, from the medium to the long term, and
suitability should be assessed on the basis of each investor’s individual objectives,
existing investments, time horizon, and tolerance for risk.
Income
Suitable for investors who seek investment income either in retirement, or perhaps
to augment salary income, or to meet specific liabilities such as school fees.
Suitability should be assessed on the basis of each investor’s individual objectives,
existing investments, time horizon, and tolerance for risk.
Capital
Preservation
Funds in this outcome grouping are not appropriate for investors seeking total
capital security. Rather, they are suitable for investors who wish to preserve their
capital but are prepared to entertain the possibility of capital loss whilst seeking an
element of capital appreciation and/or income. Many managers of the funds within
this category tend to invest with an absolute return philosophy. Suitability should be
assessed on the basis of each investor’s individual objectives, existing investments,
time horizon, and tolerance for risk.
Inflation Protection
Suitable for investors who seek to maintain the real value of their capital and income.
Suitability should be assessed on the basis of each investor’s individual objectives,
existing investments, time horizon, and tolerance for risk.
Risk Targeted
Funds mapped to a specific risk target. E.g. a standard deviation of 6-8.5% or a
maximum capital loss of 10%.
Risk Targeted/Risk
Profiled
Funds designed to map specifically to a distributor or independent risk profile, e.g.
DT risk profile 5, but which also have a defined risk target.
Strategic
Funds which generally only focus on building an asset allocation for the longer term
and do not look to tactically allocate on a short term basis.
Tactical
Funds which not only look to position asset allocation for the longer term but also to
take advantage of shorter term opportunities by implementing tactical changes.
Constrained
Funds which invest in a limited and fairly constrained number of asset classes.
Diversified
Funds which invest in a diversified number of asset classes.
Unconstrained
Funds which are highly diversified and have a relatively unconstrained asset pool.
Fund of Funds
(FofF)
Funds which invest in other investment funds rather than directly in stocks or bonds.
Hybrid FofF/MofM
Funds which partly outsource to investment managers as well as investing in
externally managed funds.
Manager of
Managers (MofM)
Funds that outsource or hire investment managers to manage certain aspects of
their portfolios.
Active
Funds which generally will have greater than 80% of their holdings in actively
managed investments.
Blend
Funds which generally will have between 80% and 20% of their holdings in actively
managed investments.
Passive
Funds which generally will have less than 20% of their holdings in actively managed
investments.
Risk Based
Approach
Asset Allocation
Asset Classes
Breadth
Fund Selection
Approach
Investment
Implementation
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Important Information
This report is for the use of professional advisers only.
It is published by, and remains the copyright of, Square Mile Investment Consulting and Research Ltd (“SM”). Unless agreed by SM, this commentary may only be used by the
permitted recipients and shall not be provided to any third parties. SM makes no warranties or representations regarding the accuracy or completeness of the information
contained herein. This information represents the views and forecasts of SM at the date of publication but may be subject to change without reference or notification to you.
SM does not offer investment advice or make recommendations regarding investments and nothing in this report shall be deemed to constitute financial or investment advice
in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. This report shall not constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any investment activity based on information contained herein, you
do so entirely at your own risk and SM shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result. The fund’s prospectus
provides a complete description of the risk factors. Unless indicated, all figures are sourced from Financial Express Ltd. The information in this report is believed to be reliable
but its completeness and accuracy is not guaranteed. SM does not accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein.