1. Verbatim - due diligence forums Risk before pleasure
Managing risk in Multi-asset and Multi-Strategy funds
September – November 2015

2. Learning outcomes
How risk targeting manifests itself within the management of a multi–asset fund
How risk is managed in a multi-asset or multi-strategy fund, including counterparty risk
Assessing risk for different asset classes and investment strategies
Understanding the impact of risk across the portfolio over time

3. What do we mean by risk? Advisers Clients Fund Managers Advice Risk
Business & Regulatory risk
Clients attitude to risk
Advisers
Investment Risk
Inflation and Interest Rate risk
Savings Gap risk
Clients
Investment Risk
Missing performance targets
Regulatory Risk
Fund
Managers

4. How do savers & investors think about risk?
Is it all about one standard deviation of volatility of monthly returns..?? It’s possible…but it’s more likely to be:
Savings Risk: (shortfall risk)
Inflation risk:
Erosion of purchasing power
Loss aversion:
Regardless of volatility, UK savers seem to be very risk averse
These attitudes are often in conflict with desired savings goals
Source; How do savers think about and respond to risk? D. Blake & A Haig, Cass Business School, City University London February 2014 4

5. Multi-asset and Multi-Strategy funds
A broad range of risks
Duration risk
Volatility
Currency risk
Credit risk
Equity risk
Inflation risk

6. Applied risk-metrics Absolute Relative Risk – relative or absolute..?
Annual Volatility
Alpha
Tracking Error
Sharpe Ratio
Information Ratio
Beta
Absolute
Relative

7. Evolution Multi-asset framework Multi-Strategy framework Past Present
Balanced portfolios
Flexible portfolios
Past
Present
Asset class
Investment opportunity
Past
Present
Asset class diversification
Risk factor diversification
Past
Present
Lower correlation
Higher correlation

8. Strategic asset allocation optimisation tools
Long-term sustainable return and risk assumptions
Looking into the risk-return expectations sourced from our in-house strategy team, one can observe that return expectations across the asset class spectrum are lower than their levels a few years ago. Fixed income in particular offers a lower return vs. the risk undertaken.
Equities offer the highest returns but with the highest volatility
Source: Thomson Reuters Lipper and Aviva Investors, data as at 30 June Past performance is not a guide to the future.

9. Differing approaches, differing characteristics
MAF (Cautious Managed)
MAF – Volatility Targeted
Multi Strategy – Cash +
Peer group benchmarks
Risk scored
Tactical overlay
Long only
Maximum/ Minimum volatility
Strategic and tactical
Unconstrained
Return target + Minimise volatility
Risk scored?
Positions
Long and short

10. Navigating market volatility
20-60 shares v Multi-Strategy Target Return Fund
% performance
Source: Lipper as at 8 September Performance is shown net of all fees, in GBP. Inception date 1 July Past performance is not a guide to the future. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested
Past performance is not a guide to the future. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested

11. Value at Risk: Mixed Investment 20-60% Shares
1 month VaR break down at 99% confidence level
Value at Risk: 4.8% over 1 month at 99% certainty
Source: Aviva Investors, as at 31 August The data shown are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  Potential returns are based on a number of assumptions, may not be realised and are subject to risk.

12. Value at Risk – Multi-asset Fund II
1 month VaR break down at 99% confidence level
Value at Risk: 4.5% over 1 month at 99% certainty
Source: Aviva Investors, as at 31 August The data shown are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  Potential returns are based on a number of assumptions, may not be realised and are subject to risk.
Source: Aviva Investors, as at 31 August The data shown are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  Potential returns are based on a number of assumptions, may not be realised and are subject to risk.

13. Value at Risk - Multi-Strategy Target Return Fund
1 month VaR break down at 99% confidence level
Value at Risk: 2.8% over 1 month at 99% certainty
Source: Aviva Investors, as at 31 August The data shown are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  Potential returns are based on a number of assumptions, may not be realised and are subject to risk.

14. Multi-asset funds
Risk management is integral to the investment process
Asset allocation
Fund management
Investment objective
Investment selection

15. Risk management for Multi-asset funds
Range of risk tools to ensure robust management, including:
Strategic Asset Allocation optimisation tools
Aladdin Risk Management platform
Independent Investment Risk Team

16. Construction Future timeframe Sep 11th 1 day move
An alternative viewpoint independent from reliance on realised data for a different view of portfolio analysis
Hypothetical events
Historical events
Sep 11th
1 day move
MSCI World down by 30%
Source: Aviva Investors, as of 31 August Past performance is not a guide to the future. The data shown are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Potential returns are based on a number of assumptions, may not be realised and are subject to risk.

17. Multi-asset and Multi-Strategy funds
A broad range of risks
Duration risk
Volatility
Currency risk
Credit risk
Equity risk
Inflation risk

18. Portfolio implementation
Multi-asset versus Multi-Strategy
Nikkei 225 prices (%)
Nikkei 225 rolling 30 day volatility (%)
Source: Bloomberg and Aviva Investors as at 31 August 2015.
Past performance is not a guide to the future. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested

19. Evolution Multi-asset framework Multi-Strategy framework Past Present
Balanced portfolios
Flexible portfolios
Past
Present
Asset class
Investment opportunity
Past
Present
Asset class diversification
Risk factor diversification
Past
Present
Lower correlation
Higher correlation

20. Learning outcomes
How risk targeting manifests itself within the management of a multi–asset fund
How risk is managed in a multi-asset or multi-strategy fund, including counterparty risk
Assessing risk for different asset classes and investment strategies
Understanding the impact of risk across the portfolio over time

21. Important Information
This document is for investment professionals only. It is not to be distributed to or relied on by retail clients. Except where stated as otherwise, the source of all information is Aviva Investors as at 31 August Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as personalised advice or a recommendation of any nature. Past Performance is not a guide to the future. The value of assets are subject to market fluctuations and can move irrationally and be unpredictably affected by many and various factors including political and economic events and rumours and as such the value of investments may go down as well as up and your clients may receive less than the original amount invested. As the funds may invest outside of the UK or hold currencies other than sterling, any currency exchange rate movement may cause the value of an investment to fall as well as rise. FTSE International Limited (“FTSE”) © FTSE FTSE® is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE data is permitted without FTSE’s express written consent. These products are not in any way sponsored, endorsed or promoted by any relevant stock market, relevant indices, related exchange or index and they do not accept any liability in relation to its issue, operation and trading. The Aviva Investors Multi-Strategy Target Income Fund and the Aviva Investors Target Return Fund are sub-funds of the Aviva Investors Funds ICVC. For further information please read the latest Key Investor Information Document and Supplementary Information Document for the fund and share class you require. AIMS Target Income - Derivative risks: As a result of the high degree of leverage typically employed when trading financial derivatives, a relatively small price movement in the underlying asset may result in substantial losses to the fund’s assets. The attention of investors is drawn to the ‘Risk Warnings’ contained in the Prospectus. Due to the fact the strategy will make significant use of financial derivatives, the following risk factor is particularly relevant: Investment in the Mission Portfolios range of funds is provided by Aviva Investors UK Fund Services Limited, the Authorised Fund Manager. There can be no assurance that these Funds will meet their investment objectives or that they will stay within their target volatility ranges. As the Funds will be subject to short-term market fluctuations and they aim, on average, to reflect investor risk profiles, over any three year period, they should be viewed as medium to long-term investments. The Prospectuses and the annual and interim reports are also available on request. Copies in English can be obtained from Aviva Investors UK Fund Services Limited, No. 1 Poultry, London EC2R 8EJ or by contacting our Relationship Management Team on * or them on You can also download copies from our website. *Telephone calls may be recorded for training and monitoring purposes. Calls are free from landlines and mobiles. Issued by Aviva Investors UK Fund Services Limited, the Authorised Fund Manager. Registered in England No Authorised and regulated by the Financial Conduct Authority. Firm Reference No Registered address: No 1. Poultry, London EC2R 8EJ. An Aviva company. Approved for use in United Kingdom Only. CI /2015