diversification - architas · diversification across investment managers. past performance is not a...

diversificationLevels of

Multi-Asset (MA) Blended Funds

1Levels of diversification

LEVELS OF DIVERSIFICATIONAt Architas we believe that diversification is central to any investment portfolio. Being too concentrated in any one investment can possibly lead to higher risk and greater ups and downs in investment returns.

Diversification means spreading the portfolio across different types of investment. Put simply, it’s not ‘putting all your eggs in one basket’.

We spread investments by:

Why is diversification important?While there are no guarantees, this approach may reduce the combined risk of the overall portfolio and means that you are not relying on the performance of a narrow selection of investments. It may help to achieve more consistent investment returns than if you just invested in one asset class or with any one fund manager.

Using different asset classes

Investing in different geographic regions

Using several different investment managers

Past performance is not a guide to future performance. The value of investments and any income from them can go down as well as up and is not guaranteed, and you could get back less than you invest.

HOW DO WEDIVERSIFY?Diversification across asset classesThere are five main asset classes – money markets, bonds, property, alternatives and shares (also referred to as ‘equities’). By spreading investments across different classes, you could possibly benefit from more consistent returns than a fund which invests in only one.

It may help to reduce the ups and downs of investment returns, as the potential losses in one asset class could possibly be softened by gains in another.

Diversification within asset classesWithin each asset class it is possible to diversify further. Each one offers a range of investment options – for example across countries, industries, types of properties and bonds.

Spreading investment across countries, industries, types of properties and types of bonds helps to balance the overall portfolio.

Spreading it out even further within asset classes means that the portfolio is not concentrated in any one area and may help to reduce the effect of a downturn in a specific asset class or geographic region.

Diversification across investment managersOur funds invest in funds managed by other investment managers. This technique is commonly referred to as a ‘fund of funds’ structure.

Investment managers with different investment styles tend to perform better at different times under different economic and market conditions. We combine a range of investment managers with complementary styles using sophisticated techniques to make sure we achieve a spread of investments.

This means that the portfolio is not overly exposed to any one style and, as a result, when one investment style is out of favour, the overall portfolio is not affected in a significant way.

We use a selection of investment managers from a range of well-known firms including:

ARCHITAS INVESTMENT PROCESS

EValue, an external financial modelling company, provide asset allocation recommendations for each risk profile.

This gives, what we believe to be, the most efficient diversification across asset classes to achieve a level of return for a given amount of risk taken.

Here we need to choose underlying funds to fill the Architas funds across the asset allocation model.

We start by screening the investments available and come to a list of funds that could be suitable. We also aim to exclude managers that have been lucky with their performance rather than skilful.

1. DESIGNING INVESTMENTS AND ASSET ALLOCATION

2. FINDING FUNDS

• Investment aims and policies

• Asset allocation

• Finding skilful managers – not lucky ones

We have a dedicated and talented team of in-house professionals from across the financial industry. They constantly research, monitor and manage a combination of specialist investment managers across different asset classes to provide effective and diversified portfolios.

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Architas investment process

What are the benefits of our investment process?We constantly monitor and review our investments. We do this by carrying out thorough research, constantly reviewing the investments and regular rebalancing (buying and selling funds to maintain the correct levels of each asset class). We monitor our underlying funds with the aim of making sure they perform as expected and do not take on risk we cannot justify.

We research the quality of funds that make it to this stage in the process by using methods such as questionnaires or face-to-face meetings.

Funds that make it through the qualitative research are scored and sent to a fund approval forum for approval.

The approved funds are available for our fund managers to use to make up the Architas portfolios.

These funds (also known as the underlying managers) are monitored to make sure they are performing in line with our expectations.

If they are not, we may remove the fund from the buy list and replace it with a more suitable fund.

3. FUND SELECTION

4. BUILDING A PORTFOLIO

5. MONITORING AND RISK MANAGEMENT

• We carry out research focusing on the quality of investments

• We make a recommendation

• The fund approval forum approve the relevant funds

• Funds are selected making sure they complement each other within the portfolio

• We monitor funds and managers

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ARCHITAS MULTI-ASSET (MA) BLENDED RESERVE FUNDThe Fund seeks to achieve capital growth and income with a low level of volatility (risk), having a risk profile of 2, in a range from 1 to 7 where 1 is the lowest risk and 7 the highest.

DIVERSIFICATION ACROSS ASSET CLASSES

DIVERSIFICATION ACROSS INVESTMENT MANAGERS

DIVERSIFICATION ACROSS GEOGRAPHIC REGIONS

Past performance is not a guide to future performance.For details on how to assess the performance of this fund please refer to the important information at the end of this document. Due to rounding, the figures shown in each of the fund breakdowns may not add up to 100% and the allocations may change. Information from Architas, correct as at 30 June 2020.* The fund manager uses their expertise to pick investments to achieve the fund’s objectives. ** The fund manager aims to track the performance of a stock exchange index or another investment.

Active strategy* 37.77 %Passive strategy** 62.23 %

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Architas Multi-Asset (MA) Blended Reserve Fund

Bonds 66.33 %UK gilts 38.64 %UK corporate 14.68 %Global government 6.91 %Global 3.03 %Global convertible 2.32 %High yield 0.75 %

Equities 27.31 %UK 10.12 %North America 8.83 %Japan 3.58 %Asia Pacific but not Japan 1.95 %Europe 1.68 %Global emerging markets 1.15 %

Other 6.36 %Alternatives 2.89 %Property 2.13 %Cash - money markets 1.34 %

Funds are grouped according to their benchmarks. Global includes all funds which do not have a specific regional benchmark.

UK 66.91 %Global 15.90 %US 8.83 %Japan 3.58 %

Asia Pacific but not Japan 1.95 %Europe 1.68 %Emerging markets 1.15 %

BlackRock UK Gilts All Stocks Index 16.32 %Vanguard UK Long Duration Gilt Index 12.06 %SPDR® Barclays 1-5 Year Gilt ETF 10.25 %BlackRock Corporate Bond Index 8.07 %BlackRock Overseas Government Bond Index 6.88 %TB Evenlode Income 5.82 %AXA Sterling Index Linked Bond 5.16 %Loomis Sayles U.S. Growth Equity Fund 3.26 %Jupiter Global Convertibles 3.03 %Architas Selection US Equity Institutional 2.83 %BlackRock Edge S&P 500 Minimum Volatility ETF 2.59 %

SPDR® Thomson Reuters Global Convertible Bond ETF 2.32 %

Man GLG Japan Core Alpha 1.99 %LF Lindsell Train UK Equity 1.98 %Architas Selection European Equity Institutional 1.65 %

Baillie Gifford Japan 1.57 %Majedie UK Equity 1.53 %iShares Physical Gold ETC 1.49 %Fidelity Asia Pacific Opportunities 1.47 %TwentyFour Monument Bond 1.45 %Cash 1.29 %

Vontobel Fund - MTX Sustainable Emerging Markets Leaders 0.97 %

F&C Commercial Property 0.79 %JOHCM UK Equity Income 0.79 %CVC Credit Partners European Opportunities 0.75 %International Public Partnerships 0.59 %BlackRock Global Property Securities Equity Index 0.50 %

Primary Health Properties 0.45 %Hermes Asia ex Japan Equity 0.44 %Renewables Infrastructure 0.31 %Real Estate Credit Investments 0.30 %John Laing Environmental Assets 0.27 %Amedeo Air Four Plus 0.22 %Vanguard Emerging Markets Stock Index Fund 0.18 %Vanguard US Equity Index Institutional Plus 0.15 %Starwood European Real Estate Finance 0.09 %JP Morgan Sterling Liquidity 0.05 %Vanguard Pacific ex-Japan Stock Index Fund 0.05 %BlackRock Overseas Corporate Bond Index 0.03 %BlackRock Continental European Equity Index 0.03 %BlackRock Japan Equity Index 0.02 %

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ARCHITAS MULTI-ASSET (MA) BLENDEDMODERATE FUNDThe Fund seeks to achieve capital growth and income with a below median level of volatility (risk), having a risk profile of 3, in a range from 1 to 7 where 1 is the lowest risk and 7 the highest.






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Architas Multi-Asset (MA) Blended Moderate Fund

Bonds 53.14 %UK gilts 25.00 %UK corporate 17.89 %Global government 5.25 %Global convertible 2.41 %Global 1.97 %High yield 0.62 %


Other 6.83 %Property 2.37 %Cash - money markets 2.27 %Alternatives 2.19 %


UK 61.26 %US 12.70 %Global 12.44 %Japan 6.49 %


BlackRock UK Gilts All Stocks Index 16.52 %BlackRock Corporate Bond Index 12.26 %Vanguard UK Long Duration Gilt Index 7.54 %TB Evenlode Income 7.13 %BlackRock Overseas Government Bond Index 5.23 %TwentyFour Monument Bond 4.56 %BlackRock Edge S&P 500 Minimum Volatility ETF 4.26 %

Baillie Gifford Japan 3.63 %Loomis Sayles U.S. Growth Equity Fund 2.99 %Man GLG Japan Core Alpha 2.84 %AB - American Growth Portfolio 2.84 %Majedie UK Equity 2.74 %Architas Selection US Equity Institutional 2.52 %SPDR® Thomson Reuters Global Convertible Bond ETF 2.41 %

JOHCM UK Equity Income 2.31 %Fidelity Asia Pacific Opportunities 2.08 %Jupiter Global Convertibles 1.97 %Cash 1.97 %Architas Selection European Equity Institutional 1.79 %

LF Lindsell Train UK Equity 1.48 %AXA Sterling Index Linked Bond 1.08 %SPDR® Barclays 1-5 Year Gilt ETF 0.93 %


Vanguard Emerging Markets Stock Index Fund 0.79 %BlackRock Continental European Equity Index 0.74 %F&C Commercial Property 0.67 %CVC Credit Partners European Opportunities 0.62 %Ediston Property Investment Company 0.59 %International Public Partnerships 0.58 %John Laing Environmental Assets 0.53 %iShares Physical Gold ETC 0.51 %Primary Health Properties 0.50 %Vanguard Pacific ex-Japan Stock Index Fund 0.44 %Hermes Asia ex Japan Equity 0.40 %Real Estate Credit Investments 0.31 %Renewables Infrastructure 0.31 %JP Morgan Sterling Liquidity 0.30 %Amedeo Air Four Plus 0.26 %BlackRock Global Property Securities Equity Index 0.21 %

Starwood European Real Estate Finance 0.09 %BlackRock UK Equity Index 0.09 %Vanguard US Equity Index Institutional Plus 0.08 %BlackRock Overseas Corporate Bond Index 0.02 %BGF European Equity Income 0.01 %BlackRock Japan Equity Index 0.01 %

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ARCHITAS MULTI-ASSET (MA) BLENDEDINTERMEDIATE FUNDThe Fund seeks to achieve capital growth and income with a median level of volatility (risk), having a risk profile of 4, in a range from 1 to 7 where 1 is the lowest risk and 7 is the highest.






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Bonds 40.51 %UK corporate 18.15 %UK gilts 14.72 %Global government 3.79 %Global 2.55 %Global convertible 1.04 %High yield 0.55 %

Other 9.62 %Cash - money markets 4.11 %Alternatives 3.20 %Property 2.31 %


UK 54.18 %US 14.64 %Global 10.83 %Japan 8.26 %


BlackRock Corporate Bond Index 14.33 %TB Evenlode Income 8.96 %BlackRock UK Gilts All Stocks Index 7.25 %BlackRock Edge S&P 500 Minimum Volatility ETF 6.49 %

Baillie Gifford Japan 4.32 %Vanguard UK Long Duration Gilt Index 4.28 %Loomis Sayles U.S. Growth Equity Fund 3.70 %BlackRock Overseas Government Bond Index 3.48 %SPDR® Barclays 1-5 Year Gilt ETF 3.19 %Fidelity Asia Pacific Opportunities 3.04 %Man GLG Japan Core Alpha 2.90 %TwentyFour Monument Bond 2.83 %JP Morgan Sterling Liquidity 2.74 %Jupiter Global Convertibles 2.55 %AB - American Growth Portfolio 2.38 %Architas Selection European Equity Institutional 2.23 %

Architas Selection US Equity Institutional 2.02 %Vanguard Emerging Markets Stock Index Fund 2.02 %JOHCM UK Equity Income 2.02 %LF Lindsell Train UK Equity 2.00 %Majedie UK Equity 1.83 %Vanguard Pacific ex-Japan Stock Index Fund 1.67 %iShares Physical Gold ETC 1.62 %

Cash 1.37 %Hermes Asia ex Japan Equity 1.32 %BGF European Equity Income 1.10 %BlackRock Japan Equity Index 1.04 %SPDR® Thomson Reuters Global Convertible Bond ETF 1.04 %

AXA Sterling Index Linked Bond 1.00 %F&C Commercial Property 0.68 %CVC Credit Partners European Opportunities 0.55 %Vontobel Fund - MTX Sustainable Emerging Markets Leaders 0.54 %

International Public Partnerships 0.53 %Ediston Property Investment Company 0.50 %John Laing Environmental Assets 0.48 %Primary Health Properties 0.47 %Amedeo Air Four Plus 0.29 %Real Estate Credit Investments 0.29 %BlackRock Global Property Securities Equity Index 0.28 %

Renewables Infrastructure 0.28 %BlackRock Continental European Equity Index 0.16 %Starwood European Real Estate Finance 0.09 %BlackRock UK Equity Index 0.07 %Vanguard US Equity Index Institutional Plus 0.04 %BlackRock Overseas Corporate Bond Index 0.01 %

11Architas Multi-Asset (MA) Blended Intermediate Fund

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ARCHITAS MULTI-ASSET (MA) BLENDEDPROGRESSIVE FUNDThe Fund seeks to achieve capital growth and income with an above median level of volatility (risk), having a risk profile of 5, in a range from 1 to 7 where 1 is the lowest risk and 7 the highest.






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Equities 69.08 %UK 22.88 %North America 19.20 %Japan 11.14 %Europe 7.90 %Asia Pacific but not Japan 5.62 %Global emerging markets 2.35 %

Bonds 22.65%UK gilts 10.21%UK corporate 8.54%Global convertible 2.44%Global government 0.97%High yield 0.50%

Other 8.27 %Cash - money markets 3.51 %

Alternatives 2.65 %Property 2.11 %

UK 47.24 %US 19.20 %Japan 11.14 %Europe 7.90 %

Global 6.55 %Asia Pacific but not Japan 5.62 %Emerging markets 2.35 %

TB Evenlode Income 10.20 %BlackRock Corporate Bond Index 7.43 %BlackRock Edge S&P 500 Minimum Volatility ETF 6.43 %

Baillie Gifford Japan 6.24 %Architas Selection US Equity Institutional 4.49 %SPDR® Barclays 1-5 Year Gilt ETF 4.39 %AB - American Growth Portfolio 4.18 %Man GLG Japan Core Alpha 4.10 %Loomis Sayles U.S. Growth Equity Fund 4.06 %Majedie UK Equity 3.96 %BlackRock UK Gilts All Stocks Index 3.91 %Fidelity Asia Pacific Opportunities 3.80 %LF Lindsell Train UK Equity 3.45 %Architas Selection European Equity Institutional 3.08 %

JOHCM UK Equity Income 3.03 %JP Morgan Sterling Liquidity 2.50 %SPDR® Thomson Reuters Global Convertible Bond ETF 2.44 %

BlackRock Continental European Equity Index 2.43 %BGF European Equity Income 2.39 %BlackRock UK Equity Index 2.24 %Vanguard Emerging Markets Stock Index Fund 2.18 %Vanguard UK Long Duration Gilt Index 1.91 %

Hermes Asia ex Japan Equity 1.79 %TwentyFour Monument Bond 1.11 %iShares Physical Gold ETC 1.07 %Cash 1.01 %BlackRock Overseas Government Bond Index 0.95 %

BlackRock Japan Equity Index 0.79 %Ediston Property Investment Company 0.69 %International Public Partnerships 0.51 %CVC Credit Partners European Opportunities 0.50 %

John Laing Environmental Assets 0.47 %Primary Health Properties 0.43 %F&C Commercial Property 0.41 %Amedeo Air Four Plus 0.31 %Real Estate Credit Investments 0.29 %Renewables Infrastructure 0.27 %BlackRock Global Property Securities Equity Index 0.20 %


Starwood European Real Estate Finance 0.09 %Vanguard US Equity Index Institutional Plus 0.04 %Vanguard Pacific ex-Japan Stock Index Fund 0.03 %BlackRock Overseas Corporate Bond Index 0.02 %


13Architas Multi-Asset (MA) Blended Progressive Fund

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ARCHITAS MULTI-ASSET (MA) BLENDEDGROWTH FUNDThe Fund seeks to achieve capital growth and income with a moderately high level of volatility (risk), having a risk profile of 6, in a range from 1 to 7 where 1 is the lowest risk and 7 the highest.






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Architas Multi-Asset (MA) Blended Growth Fund

Equities 88.63 %UK 27.68 %North America 23.96 %Japan 14.35 %Europe 9.71 %Global emerging markets 6.80 %Asia Pacific but not Japan 6.13 %

Bonds 3.05 %Global convertible 3.05 %

Other 8.33 %Cash - money markets 4.53 %Alternatives 2.48 %Property 1.32 %


UK 33.53 %US 23.96 %Japan 14.35 %Europe 9.71 %

Emerging markets 6.80 %Asia Pacific but not Japan 6.13 %Global 5.53 %

TB Evenlode Income 12.30 %Baillie Gifford Japan 9.06 %BlackRock Edge S&P 500 Minimum Volatility ETF 8.36 %

Vanguard Emerging Markets Stock Index Fund 6.26 %

Majedie UK Equity 6.23 %Architas Selection European Equity Institutional 6.23 %

LF Lindsell Train UK Equity 5.36 %AB - American Growth Portfolio 5.26 %Man GLG Japan Core Alpha 5.22 %Loomis Sayles U.S. Growth Equity Fund 5.21 %Architas Selection US Equity Institutional 5.00 %BGF European Equity Income 3.32 %Hermes Asia ex Japan Equity 3.16 %JOHCM UK Equity Income 3.11 %SPDR® Thomson Reuters Global Convertible Bond ETF 3.05 %

Fidelity Asia Pacific Opportunities 2.94 %

JP Morgan Sterling Liquidity 2.92 %Cash 1.61 %iShares Physical Gold ETC 1.11 %BlackRock UK Equity Index 0.68 %Ediston Property Investment Company 0.63 %International Public Partnerships 0.56 %Vontobel Fund - MTX Sustainable Emerging Markets Leaders 0.54 %

John Laing Environmental Assets 0.51 %F&C Commercial Property 0.33 %Renewables Infrastructure 0.30 %Primary Health Properties 0.24 %BlackRock Continental European Equity Index 0.16 %

Vanguard US Equity Index Institutional Plus 0.13 %

Starwood European Real Estate Finance 0.09 %

BlackRock Japan Equity Index 0.08 %

Vanguard Pacific ex-Japan Stock Index Fund 0.03 %

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GLOSSARY

MONEY MARKETInvestors are usually very familiar with cash investments. These types of investments are not without risk as interest rates may be lower than inflation. However, they are usually lower risk than other asset classes and are normally very accessible (easy to cash in). Although, there is also a possible risk if the institutions go out of business.

PROPERTYWe can invest in companies which own and manage a range of properties. The value of property is a matter of the valuer’s opinion and not fact. Property will not contribute to diversifying your portfolio if you already hold a substantial percentage of your investments in property. There could be delays involved with property (disinvestments and switches) due to the fact that property can take time to sell.

SHARESShares of companies are a popular choice for long-term investors. As a shareholder you share in the value of the company’s assets through the share price and in the company’s profits by possibly receiving dividends.

ALTERNATIVESThe ‘alternatives’ asset class covers a range of investments.

The main parts are commodities (such as oil), hedge funds, absolute return funds (an absolute return fund aims to make positive returns by using investment management techniques and asset classes that differ from traditional funds), and infrastructure (such as communication and transport).

BONDSBonds are contracts that allow a number of investors to pool together to loan money to a company, government or other institution over a fixed term.

The holders of the bonds then receive interest payments over the length of the term and get their initial investment (capital) back at the end. Bonds are usually issued by banks on behalf of the borrowing institution. If the borrowing institution fails, there is a risk that you will not receive back either the interest due or your original capital.

GEOGRAPHIC REGIONIt is possible to invest in bonds, property and shares from different countries and regions across the world.

16 Glossary

Important Information

IMPORTANT INFORMATION

The Blended funds referred to in this document are all collective investment schemes authorised and regulated by the Financial Conduct Authority. AXA is a worldwide leader in financial protection and wealth management. Architas operates three legal entities in the UK; Architas Multi-Manager Limited (AMML), Architas Advisory Services Limited (AASL) and Architas Limited. Both AMML and AASL are owned by Architas Limited, which is a 100% owned subsidiary of AXA SA (a company registered in France).

Architas Multi Manager Limited (AMML) is an investment company that provides access to other investment managers’ services through a range of multi-manager solutions, including regulated collective investment schemes. AMML in the UK works with AXA Group internal fund managers. To find out more information about this please visit architas.com/inhousemanagers. AMML is a company limited by shares and authorised and regulated by the Financial Conduct Authority (Firm reference Number 477328). It is registered in England: No. 06458717. Registered Office: 5 Old Broad Street, London, EC2N 1AD.

Plain English Campaign’s Crystal Mark does not apply to the text on this page.

We will not accept any legal responsibility for any advice provided in relation to this document. We provide and manage the Architas funds and do not assess the suitability of our funds for individual investors. If any financial adviser, or network of advisers, is named on this document, it does not mean we have any knowledge of, or influence over, advice that you have received or will receive. Your financial adviser alone is responsible for any financial advice or recommendations provided in relation to your investment decisions.

Past performance is not a guide to future performance. The value of investments and any income from them can go down as well as up and is not guaranteed, and you could get back less than you invest. The value of investments can fall as well as rise purely on account of exchange rate fluctuations.

The funds can invest entirely in units of collective investment schemes.

The MA Blended Funds do not have a benchmark. Investors can assess the performance of the Funds by viewing the performance data of other funds in the Investment Association’s ‘Volatility Managed’ sector. The Investment Association is a trade body that represent UK investment managers and they group funds with broadly similar characteristics into sectors. This ‘sector’ contains funds that are managed with the aim of adhering to a set level of volatility (a measure of the size of changes in the value of an investment).

The funds in the sector will not have exactly the same characteristics (such as their objectives, level of risk, types of risk or level of volatility) and are therefore not an exact like-for-like comparison. Investors can find details of the funds in the sector and their performance at www.trustnet.com and select ‘IA Volatility Managed’ from the ‘Sector’ drop down menu. We take charges to cover the costs of managing the fund. If you are investing using a financial product, the product provider may take extra charges, and, if so, should give you details of these charges before you invest.

You can invest in these funds through a number of financial products. These funds may not be appropriate for investors who plan to withdraw their money within five years.

If you need more information on any of our funds, you can ask us for a free copy of the Key Investor Information document (KIID) and the prospectus. The KIID is designed to help you make an informed decision before investing. You can also view or download all of our funds’ KIIDs from our website at architas.com, by following the Key Investor Information documents link from the home page and in the Literature Library.

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Architas Multi-Manager Limited 5 Old Broad Street London EC2N 1AD architas.com

The Architas customer support team is on hand to answer your questions.

Call 0800 953 0197 Monday to Friday 9.00am–5.30pm; calls may be recorded. Calls are free from landlines and mobiles within the UK.

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diversification - architas · diversification across investment managers. past performance is not a...

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