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New funds launched on the Scottish Widows fund range: 14 November 2016

Welcome and thank you for coming to our webpage to find out more about the new funds available from Scottish Widows.

Scottish Widows is committed to maintaining a broad range of high quality, innovative and cost-effective investment solutions for customers and advisers.  From 14th November 2016 we have introduced 21 new funds to our Scottish Widows fund ranges for most of our pension and life products. This is a notable development of our fund ranges, and we believe these new funds significantly improve the quality and choice available to our customers.

After thorough research and consultation with advisers, we are expanding our fund ranges to offer some exciting new options from leading fund managers. The new funds include more multi-asset and absolute return funds, and innovative ‘smart beta strategies’ as stand-alone funds for the first time. In addition, within more traditional asset classes we are adding award-winning funds from some of the most respected managers in the industry.

We see our own fund research expertise as a major strength: it allows us to rigorously monitor and review our fund ranges, and make changes to meet customers’ evolving needs and keep up with significant new developments. The new funds have been chosen following a market review, extensive due diligence and many face to face fund manager meetings by our experienced Fund Manager Assessment team, using their innovative P6 fund governance model throughout the selection process.

Following on from changes to our core Pension Investment Approaches and Governed Investment Strategies lifestyling options and the launch of our Premier fund range, these launches are part of a wider initiative and long term commitment to provide what we see as the very best investment solutions for our customers. Further developments are planned to improve the all-round strength and quality of our investment propositions, allowing our customers to benefit from new investment ideas and opportunities.

Click on each fund to find out more information on them.

SW Allianz European Equity Dividend Fund

Fund aims

Allianz logoAllianz describe their fund's aim as follows: To generate capital growth in the long term. The fund invests at least 75% of the fund's assets directly or using derivatives in equities and equivalent securities of companies which the fund manager believes achieve an adequate dividend return and which are located in an EU-member state, Norway or Iceland. Up to 20% of the fund's assets may be invested in companies located in an emerging market. The fund may also invest in other equities and equivalent securities.

Why we chose this fund

The fund looks to generate capital growth by investing in the equity markets of EU-member states, Norway or Iceland. It is managed by an experienced team, headed up by Joerg de Vries-Hippen, Allianz’s CIO of European Equities. We are attracted by the team’s straightforward yet effective process, whereby stocks are bought if their yield exceeds 125% of the index’s yield and sold if they drop below it, or if the dividend is cut. Analysis is supported by Allianz’s unique ‘Grassroots Research’, a network of on-the-ground experts, including industry specialists, economists and academics. The result is a high-conviction portfolio of 30-50 stocks, which has a disciplined focus on yield, and which is a useful diversifier within our existing European equity offering and for investors looking for non-UK yielding funds.

Fund Manager information

Allianz Global Investors is a diversified active investment manager with a strong parent company and a culture of risk management. With 25 offices worldwide, they provide global investment and research capabilities with consultative local delivery. Allianz Global Investors have more than EUR 469 billion in AUM for individuals, families and institutions worldwide and employ over 540* investment professionals. At Allianz Global Investors, they follow a two-word philosophy: Understand. Act. It describes how they look at the world and how they behave. Allianz Global Investors aim to stand out as an investment partner that clients trust, by listening closely to understand their challenges, then acting decisively to provide them with solutions that meet their needs.

Source: Allianz as at 30 June 2016 (*Data as at 31 March 2016)

Investment approach

Adventurous

Risk factors

EQ, OS, EM, DV

SW Artemis US Select Equity Fund

Fund aims

Artemis logoArtemis describe their fund's aim as follows: To achieve long-term capital growth. The Fund invests principally in companies listed, quoted and/or traded in the United States of America and in companies which are headquartered or have a significant part of their activities in the USA which are quoted on a regulated market outside the USA.

Why we chose this fund

The team managing this fund, which aims to achieve long-term capital growth by investing principally in the shares of US companies, are one of the largest and most successful in the UK. Originally at Threadneedle, they moved to Artemis in 2014. The investment philosophy underpinning the fund is ‘style agnostic’ - that is the aim is to combine macroeconomic and market views with fundamental stock selection to identify individual holdings with the best risk/reward characteristics. A distinct investment process results in a relatively concentrated portfolio of the team’s best ideas.

Fund Manager information

Artemis is a leading UK-based fund manager, offering a range of funds which invest in the UK, Europe, the US and around the world. As a dedicated, active investment house, they specialise in investment management for both retail and institutional investors across Europe.

Independent and owner-managed, Artemis opened for business in 1997. Its aim was, and still is, exemplary investment performance and client service. All Artemis’ staff share these two precepts – and the same flair and enthusiasm for fund management. The firm now manages some £22.7 billion (as at 31 March 2016) across a range of funds, two investment trusts, a venture capital trust and both pooled and segregated institutional portfolios. Their managers invest in their own and their colleagues’ funds. This has been a basic tenet of the Artemis approach since the firm started. It means that interests of their fund managers are directly aligned with those of their investors. Source: Artemis, April 2016.

Investment approach

Adventurous

Risk factors

EQ, OS, SC, SP

SW Aviva Investors High Yield Bond Fund

Fund aims

Aviva logoAviva describe their fund's aim as follows: To create a high level of income and the best possible total returns from investment in a broad range of bonds. The fund may invest in global bonds issued by companies, governments and large international organisations in a variety of currencies. Typically at least 80% of the bonds in the fund will be priced in Sterling or currency hedged to Sterling. Hedging is a technique to reduce the impact of any adverse exchange rate movements.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The fund invests in a diversified mix of high-yield corporate bonds, in addition to investment-grade corporate bonds and government bonds. This means that the overall quality of its assets should generally be better than a typical high-yield fund. Manager Chris Higham aims for performance to be in the top quartile of the peer group on an annual basis. Since launch, the fund has achieved this in most years, with excellent longer-term performance. Chris Higham was named Investment Week Fund Manager of the Year in 2015 for the fund’s three-year performance. Fixed income is an area that Aviva has identified as being core to its business and we have confidence in the resources and processes underlying the fund.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Aviva Investors is a global asset manager focussed on delivering specific investor outcomes. Aviva start by really listening to their clients, to understand the client’s investment aspirations and concerns. Knowing what’s important to them enables Aviva to provide strategies and funds that focus on meeting their real needs and build relationships for the long term.

Aviva are a global business managing over £318bn in assets as at 30 June 2016. They take a collaborative approach, acting as a single team to bring together the breadth and depth of their resources around the world with their local expertise for the benefit of their clients. Aviva value creativity and empower their investment teams to find and execute great ideas. In-depth research and robust risk management underpin every investment decision Aviva make.

At Aviva Investors, their entire organisation is united behind one common goal – to deliver the specific outcomes that matter most to today’s investor.

Source: Aviva, as at 30 June 2016

Investment approach

Progressive

Risk factors

FI, FIG, HY, OS

SW Aviva Investors Multi-Strategy ('AIMS') Target Income Fund

Fund aims

Aviva logoAviva describe their fund's aim as follows: To deliver an annual income yield of 4% above the Bank of England base Rate before corporation tax payable by the fund regardless of the prevailing market environment. In addition the fund aims to preserve capital and to manage volatility to a target of less than half the volatility of the global equities over rolling three year periods.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

This fund is relatively unique in the UK market as it has been created as an alternative to an annuity, aiming to deliver a consistent monthly income of 4% over the Bank of England base rate while preserving the underlying capital. To achieve this, the managers have identified five key natural income-producing asset classes (equity dividends, government bonds, corporate bonds, real estate investment trusts, and the premiums received from selling options), in addition to a sub-portfolio of derivative-based investment strategies. The fund has been developed by Euan Munro, who was the architect of Standard Life Investments’ highly successful GARS fund, and he has put in place an experienced team, backed up by robust processes and systems. In its first year, the fund more than delivered on its objective and we believe that all the components are in place for it to continue to do well.

Fund Manager information

Aviva Investors is a global asset manager focussed on delivering specific investor outcomes. Aviva start by really listening to their clients, to understand the client’s investment aspirations and concerns. Knowing what’s important to them enables Aviva to provide strategies and funds that focus on meeting their real needs and build relationships for the long term.

Aviva are a global business managing over is £318bn in assets as at 30 June 2016. They take a collaborative approach, acting as a single team to bring together the breadth and depth of their resources around the world with their local expertise for the benefit of their clients. Aviva value creativity and empower their investment teams to find and execute great ideas. In-depth research and robust risk management underpin every investment decision Aviva make.

At Aviva Investors, their entire organisation is united behind one common goal – to deliver the specific outcomes that matter most to today’s investor.

Source: Aviva, as at 30 June 2016

Investment approach

Balanced

Risk factors

EQ, DV, FI, EM, PR, OS

SW Aviva Investors Strategic Bond Fund

Fund aims

Aviva logoAviva describe their fund's aim as follows:  To provide a high total return from a diversified portfolio of global debt securities through diversified investment in global fixed interest securities, including non-investment grade.

Why we chose this fund

The fund is completely unconstrained - i.e. it isn’t constructed with reference to an index - and therefore represents the best of Aviva’s ideas for investing in the fixed income market, both within the government and corporate bond sectors. Manager Chris Higham aims for performance to be in the top quartile of the peer group on an annual basis. Since launch, the fund has achieved this in most years, with excellent longer-term performance, and the fund won the Investment Adviser Strategic Bond Fund of the Year Award in 2014. Fixed Income is an area that Aviva has identified as being core to its business and we have confidence in the resources and processes underlying this fund.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Aviva Investors is a global asset manager focussed on delivering specific investor outcomes.  Aviva start by really listening to their clients, to understand the client’s investment aspirations and concerns. Knowing what’s important to them enables Aviva to provide strategies and funds that focus on meeting their real needs and build relationships for the long term.

Aviva are a global business managing over is £318bn in assets as at 30 June 2016. They take a collaborative approach, acting as a single team to bring together the breadth and depth of  their resources around the world with their local expertise for the benefit of their clients. Aviva value creativity and empower their investment teams to find and execute great ideas. In-depth research and robust risk management underpin every investment decision Aviva make.

At Aviva Investors, their entire organisation is united behind one common goal – to deliver the specific outcomes that matter most to today’s investor.

Source: Aviva, as at 30 June 2016

Investment approach

Balanced

Risk factors

FI, FIG, HY, OS, DV

SW Baillie Gifford Multi Asset Growth Fund

Fund aims

Baillie Gifford logoBaillie Gifford describe their fund's aim as follows:  To achieve attractive returns over the long term at lower risk than equity markets by investing in a multi asset portfolio. The fund may gain exposure to a broad range of traditional and alternative asset classes which may include but is not limited to equities, investment grade and high yield bonds, property, infrastructure, commodities and currencies.

Why we chose this fund

Like many of its peers, the Fund aims to deliver attractive returns over the long term, but with lower volatility than investors experience in equity markets. In order to do this, it invests in a diversified portfolio of assets, including equities, bonds, commodities and infrastructure. Although not identical, the fund is a lower-cost version of Baillie Gifford’s highly successful Diversified Growth Fund. The team behind it is experienced and diverse, led by Baillie Gifford partner Patrick Edwardson. Staff turnover at Baillie Gifford benefits from its partnership structure and senior team turnover in particular has historically been lower than at other firms. We believe the process used within the fund is sensible, with the last part - ‘peer review and challenge’ - being an area where we think Baillie Gifford offers a genuine advantage over its rivals. This process, coupled with a relatively low-cost means of investing in a diversified, multi-asset strategy, could be attractive to cost-conscious investors.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Baillie Gifford is a global, independent investment management firm with £123 billion under management and advice (as at 31 December 2015). It manages investments globally for pension funds, institutions, charities and retail investors. Baillie Gifford is wholly owned by its 40 working partners (as at 1 May 2015). The partnership structure enables it to recruit and retain some of the best people in the industry and to focus entirely on investment management as its core business. Baillie Gifford is an active fund manager. The firm has a highly analytical, research-driven approach and it builds portfolios from the bottom up. At the individual company level Baillie Gifford seeks to invest in companies with strong prospects for growth.

Source: Baillie Gifford, March 2016.

Investment approach

Balanced

Risk factors

EM, EQ, FI, HY, DV, OS

Scottish Widows Fundamental Index Emerging Markets Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of emerging markets equities by tracking the FTSE RAFI Emerging Index. The Fund will invest primarily in Emerging Market equities.

Why we chose this fund

Fundamental indices rank their components according to real-world economic values - for example, companies’ sales, cash flows or dividends. A fundamental index can use one of these real-world values or a combination of several. So, when the fundamental index rebalances, it will give prominence to undervalued companies with good operating performance rather than good share price performance.

Crucially, fundamental indices can help avoid the impacts of share price bubbles - i.e. when a stock’s market capitalisation rises to levels unjustified by its economic fundamentals. Rather than rebalancing into overvalued stocks, as traditional indices tend to do, fundamental indices rebalance out of overvalued stocks and into those that have fallen from favour.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Specialist

Risk factors

EM, EQ, DV, OS

Scottish Widows Fundamental Index Global Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of the Global Equity Market by tracking the FTSE RAFI Developed 1000 Index. The Fund will invest primarily in Global equities.

Why we chose this fund

Fundamental indices rank their components according to real-world economic values - for example, companies’ sales, cash flows or dividends. A fundamental index can use one of these real-world values or a combination of several. So, when the fundamental index rebalances, it will give prominence to undervalued companies with good operating performance rather than good share price performance.

Crucially, fundamental indices can help avoid the impacts of share price bubbles - i.e. when a stock’s market capitalisation rises to levels unjustified by its economic fundamentals. Rather than rebalancing into overvalued stocks, as traditional indices tend to do, fundamental indices rebalance out of overvalued stocks and into those that have fallen from favour.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Adventurous

Risk factors

EQ, DV, OS

Scottish Widows Fundamental Index UK Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of the UK Equity Market by tracking the FTSE RAFI UK 300 Index. The Fund will invest primarily in UK equities.

Why we chose this fund

Fundamental indices rank their components according to real-world economic values - for example, companies’ sales, cashflows or dividends. A fundamental index can use one of these real-world values or a combination of several. So, when the fundamental index rebalances, it will give prominence to undervalued companies with good operating performance rather than good share price performance.

Crucially, fundamental indices can avoid the impacts of share price bubbles - i.e. when a stock’s market capitalisation rises to levels unjustified by its economic fundamentals. Rather than rebalancing into overvalued stocks, as traditional indices tend to do, fundamental indices rebalance out of overvalued stocks and into those that have fallen from favour.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Adventurous

Risk factors

EQ, DV

Scottish Widows Fundamental Low Volatility Index Emerging Markets Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of low volatility emerging market equities by tracking the FTSE RAFI Emerging Low Volatility Index. The Fund will invest primarily in low volatility emerging market equities.

Why we chose this fund

Low volatility equity investing seeks to deliver strong returns from equity markets with a potentially significant reduction in the associated risks. This is achieved by constructing an index of stocks with historically low levels of volatility. Low volatility indices may also take into account fundamental factors, such as book value, sales, cashflow and dividends.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Specialist

Risk factors

EM, EQ, DV, OS

Scottish Widows Fundamental Low Volatility Index Global Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of low volatility global equities by tracking the FTSE RAFI Developed Low Volatility Index. The Fund will invest primarily in low volatility global equities.

Why we chose this fund

Low volatility equity investing seeks to deliver strong returns from equity markets with a potentially significant reduction in the associated risks. This is achieved by constructing an index of stocks with historically low levels of volatility. Low volatility indices may also take into account fundamental factors, such as book value, sales, cashflow and dividends.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Adventurous

Risk factors

EQ, DV, OS

Scottish Widows Fundamental Low Volatility Index UK Equity Fund

Fund aims

The fund aims to provide long term capital growth based on the performance of low volatility UK equities by tracking the FTSE RAFI UK Low Volatility Index. The Fund will invest primarily in low volatility UK equities.

Why we chose this fund

Low volatility equity investing seeks to deliver strong returns from equity markets with a potentially significant reduction in the associated risks. This is achieved by constructing an index of stocks with historically low levels of volatility. Low volatility indices may also take into account fundamental factors, such as book value, sales, cashflow and dividends.

Fund Manager information

Scottish Widows funds are all managed by a subsidiary of Aberdeen Asset Management plc (‘Aberdeen’). Aberdeen Asset Management is a global asset manager. Based in 25 countries, Aberdeen manages assets for both institutional and retail clients from 37 offices around the world. As at 31 March 2016, Aberdeen managed assets of over £292.8 billion.

For the majority of the funds, Scottish Widows is responsible for defining the fund objectives and determining how the funds should be run. In some cases, Aberdeen defines the fund objectives and determines how the funds should be run.

Source: Aberdeen, June 2016.

Investment approach

Adventurous

Risk factors

EQ, DV

SW Insight Global Absolute Return Fund

Fund aims

Insight logoInsight describe their fund's aim as follows: To deliver positive returns on an annual basis with the prospect of attractive long-term capital growth. The sub-fund aims to deliver cash 3 month LIBOR +4% on a rolling annualised 5 year basis before fees. However, a positive return is not guaranteed and a capital loss may occur.

The policy of the fund is to gain exposure through a dynamic allocation to a range of asset classes including: fixed income, cash, near cash and deposits, equities, property, commodities and infrastructure.

Why we chose this fund

The fund aims to deliver an annualised return of cash plus 4% over rolling five-year periods. Unlike many of its peers, it also targets positive total returns on an annual basis. In order to achieve its objectives, the fund invests in a diversified range of asset classes, with the principal ones being fixed income, equities, total return strategies and real assets. The use of a ‘stop-loss’ facility, whereby investments are sold when their volatility reaches a certain threshold, is reassuring. Insight’s managers have earned a strong reputation and are backed by a robust risk management process. Insight remains one of the foremost fund management houses among institutional investors and we believe that this is an attractively priced proposition.

Fund Manager information

Insight Investment is a specialist asset manager at the forefront of designing investment solutions to meet their clients’ needs. Launched in 2002, Insight is responsible for assets under management of over £400 bn1 across a number of strategies.  It manages money for the most sophisticated institutional investors in the world including leading pension funds, sovereign wealth funds, insurance groups, local government, charities, other financial institutions and private investors.

BNY Mellon Investment Management is the global investment management arm of BNY Mellon, one of the world’s major financial services groups with operations in 35 countries serving more than 100 markets.

At BNY Mellon Investment Management, their goal is to build and manage investment strategies that address the ever changing needs of their clients. With over US$1.6 trillion assets under management2 they are rapidly becoming a trusted investment manager of choice for investors globally.

130 September 2015. Insight investment's assets under management are represented by the value of cash securities and other economic exposure managed for clients. Services offered in the U.S., Canada and Australia by Pareto Investment Management Limited under the Insight brand.
2  As at 30 December 2015.

Investment approach

Balanced

Risk factors

EQ, FI, OS, PYS, DV

SW Investec Diversified Growth Fund

Fund aims

Investec logoInvestec describes their fund's aim as follows: To achieve long term real returns measured in Sterling through a combination of income and capital growth by investing primarily in a globally diversified portfolio of assets.

The fund invests around the world in a range of different assets. Investments include equities (e.g. shares of companies); bonds (contracts to repay borrowed money which typically pay interest at fixed times); property; commodities; cash and other eligible asset classes.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The fund looks to achieve a return through investing in a diversified range of assets. It is run by a large, 30-strong team at Investec, with two lead managers, and they pool ideas from various in-house specialist teams. The team operates a sensible process; similar to other diversified growth managers, they use a ‘bucket approach’ in order to achieve diversification, dividing investments into ‘growth’, ’defensive’ and ‘uncorrelated’. Their risk ‘waterfall’ charts and scenario analysis under different inflation conditions illustrate a team employing a broad opportunity set. It remains early days for this strategy but it has already built a strong reputation.

Fund Manager information

Investec Asset Management provides investment products and services to institutions, advisory clients and individuals.  Their clients include pension funds, central banks, sovereign wealth funds, insurers, foundations, financial advisers and individual investors.

It all began in South Africa in 1991.  They were a small start-up offering domestic strategies in an emerging market. Over two decades of growth later and they’re an international business managing approximately $101 billion (as at 29 February 2016) for clients based all over the world.

Source: Investec, April 2016.

Investment approach

Balanced

Risk factors

EQ, FI, HY, OS, PYS, EM

SW Liontrust UK Smaller Companies Fund

Fund aims

Liontrust logoLiontrust describe their fund's aim as follows: To provide long-term capital growth by investing primarily in smaller UK companies displaying a high degree of Intellectual Capital and employee motivation through equity ownership in their business model.

Why we chose this fund

The fund aims to achieve long-term capital growth through investing in UK smaller companies. The philosophy underlying it is based on Liontrust’s ‘economic advantage’, which means that the fund will only invest in companies that have distinct characteristics and which competitors would struggle to reproduce. These factors provide defensive barriers to entry and mean the companies have the potential to achieve above normal growth and returns. To ensure the alignment of interests, management must own at least 3% of the company’s equity. This is a unique fund in the industry and one which has won several awards. Anthony Cross has been the lead manager since its inception in 1998, while co-manager Julian Cosh has been involved since 2008. The long-term performance record is excellent.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Liontrust is a specialist fund management business that was launched in 1995, was listed on the London Stock Exchange in 1999 and has £5.3 billion in assets under management (as at 8 July 2016). They have six fund management teams investing in UK, Continental European, Asian and Global Equities and a seventh team managing Multi-Asset model portfolios. All their fund managers are independent thinkers, have the courage of their convictions in making investment decisions and have the freedom to manage their portfolios according to their own distinct investment processes and market views. Liontrust’s rigorous investment processes ensure the way their fund managers run money is predictable and repeatable.

Source: Liontrust September 2016

Investment approach

Adventurous

Risk factors

EQ, SC, DV

SW Nordea 1-GBP Diversified Return Fund

Fund aims

Nordea logoNordea describe their fund's aim as follows: To preserve capital and provide stable growth. Investments are made globally in equities, bonds (including bonds convertible in equity shares) and money market instruments denominated in various currencies in anticipation of up and down movements. Assets will typically consist of Equity Related Securities and Debt Securities. The fund may accessorily hold cash.

Why we chose this fund

This innovative quantitative strategy aims to produce stable returns with less than half the volatility of equity markets and with a low probability of losses over any three-year period. Its approach is quite different to many of the rivals on the market in that it does not seek to make directional market calls. New ideas are generated by bottom-up analysis, built-upon rigorous and logical quantitative modelling. At all times it invests in a diversified range of assets, called the ‘Balance’ including some that are rarely offered to UK investors, including Danish mortgage bonds. The fund was launched in 2005 and performance since then has been among the best in its peer group, particularly through periods of market volatility. Unlike most funds in its sector, there has been zero turnover of the original team, gradual expansion provides good succession planning. Most non-Sterling denominated assets are hedged back, at the portfolio level, allowing good global diversification with lower currency risk. Owned by a subsidiary of Nordea Bank, the largest financial services group in Northern Europe, the fund is only now becoming known in the UK. Scottish Widows was the first UK institution to invest in Diversified Return and we are delighted to now be able to offer it to a wider group of customers.

Fund Manager information

Nordea Asset Management (NAM, AuM £170bn *), is part of the Nordea Group, the largest financial services group in Northern Europe (AuM £253bn *). NAM offers European and global investors exposure to a broad set of investment funds. NAM serves a wide range of institutional clients, such as pension funds, and distributors which include banks, asset managers, independent financial advisors and insurance companies.

Nordea Asset Management has a presence in Cologne, Copenhagen, Frankfurt, Helsinki, London, Luxembourg, Madrid, Milan, New York, Oslo, Paris, Sao Paulo, Singapore, Stockholm, Vienna and Zurich. Nordea's local presence goes hand in hand with the objective of being accessible and offering the best service to its clients.

Nordea’s success is based on a sustainable and unique multi-boutique approach that combines the expertise of specialised internal boutiques with exclusive external competences allowing them to deliver alpha in a stable way for the benefit of their clients.  NAM solutions cover all asset classes from fixed income and equity to multi asset solutions, and manage local and European as well as US, global and emerging market products.

*Source: Nordea, 30 June 2016

Investment approach

Progressive

Risk factors

EQ, DV, FI, OS

SW Payden Absolute Return Bond Fund

Fund aims

Payden logoPayden describe their fund's aim as follows:  To achieve a return of LIBOR +3% over a 3-year period, while seeking preservation of capital.

The fund invests in a diversified, multi sector portfolio of government, corporate, securitised and emerging market debt.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The fund’s objective is to achieve a high level of total return while preserving capital. We like the overall approach at Payden & Rygel, who are well known in the United States as a large-scale bond manager for institutional investors, including sovereign wealth funds and pension schemes. The firm is 100% owned by its active senior partners and this fund is its flagship strategy. With 33 years’ experience, Brian Matthews is managing principal, supported by the experienced Scott Weiner and Brad Boyd. Together they manage a well-diversified, conservative portfolio with around 200 mostly investment-grade positions spread across approximately 30 countries, but with a bias towards the US. The managers use both conventional and investment-grade asset-backed securities for additional diversification from interest-rate risk. This translates into a fund with lower volatility than many of its peers, run to a disciplined risk budget. We believe that the US-bias could be attractive for customers whose overall investment portfolio may include a concentration of UK bonds.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Payden & Rygel is a wholly employee-owned global investment management firm, offering investment solutions to institutional clients around the world. They have US$100bn assets under management, covering the full range of fixed income sectors as well as income oriented global equity strategies. They expect to deliver excellent risk-adjusted returns while avoiding negative surprises and they look to achieve this through a collaborative, team based approach to investing. Individuals are incentivised to share ideas and thereby generate added value across a broad range of mandates. Top-down, thematic positioning, sector rotation and individual issue selection are all important in achieving the best outcomes. They employ state-of-the art risk measurement and management procedures, but believe that their most important risk control is the considered judgment of their experienced investment professionals.

Source: Payden & Rydel September 2016

Investment approach

Balanced

Risk factors

EM, FI, OS, EQ, DV, SP, PY

SW Royal London UK Equity Income Fund

Fund aims

Royal London logoRoyal London describe their fund's aim as follows:  To achieve a combination of income and some capital growth.  The Fund invests mainly in the shares of UK companies which pay a higher level of income.  The Fund may also invest a small portion in other UK shares.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units.  Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The objective of the Fund is to achieve a combination of income and some capital growth.  It aims to achieve this by investing in companies offering an above-market yield and with the potential to grow their dividend by more than the inflation rate.  The focus is on high-quality companies which are typically debt-free and investments are made for the long term.  This straightforward process has been applied by lead manager Martin Cholwill for over 25 years and to great success.  Since he took over the fund in 2005, performance has been consistently good.

Past performance is not a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise. Investors may not receive back the full amount originally invested.

Fund Manager information

Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions for a wide range of clients.

Their size and scale mean they can offer clients access to the major asset classes, including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, multi-asset, property and cash.  Their experienced team of investment specialists manages over £93 billion of assets (at 30/06/2016).
They have a proven track record of delivering high quality investment management services and pride themselves on the breadth and quality of their investment options.

Source: Royal London September 2016

Investment approach

Adventurous

Risk factors

EQ, DV

SW Threadneedle UK Social Bond Fund

Fund aims

Threadneedle logoThreadneedle describe their fund's aim as follows: To achieve a total return (by way of income and capital appreciation) through investments that are deemed to be supporting and funding socially beneficial activities and development, primarily in the UK. The investment policy is to maximise exposure to socially beneficial activities and development, based on assessments produced under the fund’s Social Assessment Methodology. The fund may invest in all forms of trade-able debt instrument (primarily investment grade) issued by a supranational, public, private or voluntary and/or charitable sector organisation, including without limitation, bonds, notes, bills, and loans, whether they have a fixed, floating, variable, index-linked rate or have a zero coupon.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The Fund aims to deliver both a financial and social return by investing in fixed income securities that are deemed to have a clear focus on achieving and supporting positive outcomes for individuals, communities or society as a whole. Manager Simon Bond is one of the most experienced bond investors in this fledgling sector and he is supported by one of the largest team of bond specialists in the industry. In running the fund, Simon is looking to 'bring social investment into the mainstream'. He is not aiming to outperform the mainstream sector but also does not wish to underperform it. The process underlying the fund is a combination of Threadneedle’s standard investment-grade process combined with additional social objectives. With regard to the latter, Simon seeks the advice of the experienced and independent advisory board of The Big Issue. While the individual holdings will differ to a normal corporate bond fund, in aggregate the resulting portfolio looks and feels like a conventional investment-grade fund – i.e. with similar duration, yield and credit rating. After undertaking research into a number of ethical funds, this is the bond fund that impressed us the most, utilising as it does established Threadneedle processes backed up with the guidance of The Big Issue.

Fund Manager information

Columbia Threadneedle Investments is a leading global asset management group that provides a broad range of actively managed investment strategies and solutions for individual, institutional and corporate clients around the world.

With more than 2000 people including over 4501 investment professionals based in North America, Europe and Asia, they manage £344 billion2 of assets across developed and emerging market equities, fixed income, asset allocation solutions and alternatives.

Their priority is the investment success of their clients. They aim to deliver the investment outcomes they expect through an investment approach that is team-based, performance-driven and risk-aware. Their culture is dynamic and interactive. By sharing their insights across asset classes and geographies they generate richer perspectives on global, regional and local investment landscapes.

1As at 30 June 2016.
2AUM of £344 billion: includes the combined assets under management of the Columbia and Threadneedle group of companies as at 30 June 2016. Source: Ameriprise Financial Q2 2016 earnings release.

Source: Threadneedle August 2016

Investment approach

Cautious

Risk factors

FIG, OS, DV

SW Veritas Asian Fund

Fund aims

Veritas logoVeritas describe their fund's aim as follows: To build capital for long term investors over a number of years through investment in a focused portfolio of equities and equity related securities in companies located in Asia (excluding Japan).

Why we chose this fund

Veritas is an independent investment boutique. It was born from the Real Return Group, itself created by ex-Newton managers under the lead of Stewart Newton. The objective of the Veritas Asian fund is to build capital over a number of years through investing in companies listed in Asia. It is managed by Ezra Sun, the original manager of the Newton Oriental Fund (until 2003), who is a highly respected veteran of Asian investing, supported by a small, focused team. Sun describes his style as ‘global thematic’ and draws on regional specialists to fine-tune his decisions. He implements a ‘bottom-up approach’, whereby two types of companies are identified: 1) those that stand to benefit from long-term structural growth within Asia, and 2) those that stand to benefit from more cyclical economic or industry upturns, or changing corporate or industry trends. We have known this manager for well over a decade. The Fund won its category at the 2015 Fund Manager of the Year Awards and was again shortlisted in 2016.

Fund Manager information

Veritas is a UK based boutique manager of Asian and Global Equity funds. Veritas opened for business in 2003 remaining an independent owner managed partnership ever since. Their focus is on protecting and growing the real value of clients’ capital. The partnership now manages £12bn* across pooled funds and segregated institutional accounts. They believe their partnership ownership structure coupled with partners investing their own capital in their own funds alongside those of their clients, on the same commercial terms, allows members of the partnership to align interests directly with those of their clients.

*As at 30th June 2016

Source: Veritas August 2016

Investment approach

Specialist

Risk factors

EM, EQ, OS, DV, FI

SW Woodford Equity Income Fund

Fund aims

Woodford logoWoodford describe their fund's aim as follows: To provide a reasonable level of income together with capital growth. The fund will invest primarily in UK listed companies. The Fund may also invest in unlisted companies and overseas entities. The Fund may also invest in other transferable securities, money market instruments, warrants, collective investment schemes and deposits.

Please note: the Scottish Widows unit-linked funds aim to provide long-term growth in the price of units. Any income generated will not be distributed, but added to the fund value.

Why we chose this fund

The aim of the fund is to provide a reasonable level of income together with capital growth by investing primarily in UK-listed companies. Investments in unlisted companies are also undertaken in association with specialist early-stage private equity funds. Manager Neil Woodford has been one of the most successful UK equity income fund managers of the last 20 years and his track record owes much to observing industry, valuation and macroeconomic dynamics and making significant judgments on which industries to avoid investing in. His preference is for companies with strong intellectual property and/or brands which provide barriers to entry and make future cash flows more predictable. He was previously at Invesco but left to set up his own firm in 2014. By adding this fund to our range, customers are able to access the manager that they may have originally invested with through the SW Invesco Perpetual High Income Fund.

Fund Manager information

Woodford Investment Management (Woodford) was established in 2014 - the opportunity for Neil Woodford to distil his 30 years of experience and learning into a business founded on his own principles.

In establishing their business, they have had an unrivalled opportunity to build a stable and successful business that their clients can have complete confidence in and that provides certainty in a world of uncertain outcomes. Their ambition was not to be just another fund management company but to create something different and better for investors. At its simplest, their business has been built with a complete focus on the long-term management of their clients’ money and this has resulted in a dynamic environment in which fund managers can focus solely on investing and delivering the performance their investors expect.

Simplicity, transparency and openness are at the heart of their culture, and all areas of the business – from investment and operations to distribution – are united by a shared and complete focus on client outcomes and the goal of exceptional long-term performance.

Their proposition has been well received by the market and they are delighted by the support received from all types of investor. Assets under management have grown steadily since launch to £15bn (source Northern Trust, as at 31 May 2016), and their current product range includes both open-ended and closed-ended funds and institutional mandates.

Source: Woodford September 2016

Investment approach

Adventurous

Risk factors

EQ, OS, DV

Definition of Investment approach

Find out more information regarding our investment approach.

Definitions of risk factors

DV - This fund uses derivatives and forward transactions for specific investment purposes, as well as for hedging and other efficient portfolio management purposes. Their use may lead to higher volatility.

EM - This fund invests in emerging markets so might invest in stockmarkets which are generally less well regulated than those in the UK. This may result in a greater risk that the value of the units might go down. The investments in these markets might also be bought and sold infrequently therefore resulting in large changes in their prices.

EQ - This fund invests in company shares (often referred to as ‘equities’). Investing in company shares generally has the potential for higher capital growth over the longer term than investing in say, corporate bonds and other fixed interest securities. However there might be considerable fluctuations in equity prices and there is a greater risk that the value of the investment will fall.

FI - Some of the securities in which this fund invests might default or their credit rating might fall. The value of those investments will usually fall should an issuer default or receive a reduced credit rating. Fluctuations in interest rates are likely to affect the value of the securities held by the fund. If long-term interest rates rise, the value of the units is likely to fall and vice versa.

FIG - This fund may invest more than 35% in government or public securities issued by a single issuer. There could be a risk, for example, that they can’t repay the amount borrowed. If they don’t repay, the value of the fund will fall.

HY - This fund invests in high yielding fixed interest securities, which carry an increased risk of default and, for which, there is a higher risk that the issuer’s credit rating may fall. The value of these investments will usually fall should an issuer default or receive a reduced credit rating or should the likelihood of these events increase.

OS - Exchange rate changes might cause the value of any overseas investment to go up or down.

PR - Your investment in this fund is at risk. There is no guarantee that the fund will deliver positive returns over the specific, or any, time period.

PY - This fund invests in property and land. This can be difficult to sell, so it may not be possible to cash in the investment when you want to. We may have to delay acting on your instructions to sell the investment. The value of property is generally a matter of a valuer’s opinion rather than fact and values can go up or down. Property transactions tend to be larger and more complex than for other asset classes. As a result the proportion of cash held while awaiting suitable investment opportunities could be greater than for other funds.

PYS - Property is a less liquid asset than other assets such as fixed interest securities or equities and values could be affected if properties need to be sold in a short timescale. Property valuation is generally a matter of judgement by an independent valuer rather than fact and values can go up or down.

SC - This fund invests in smaller companies whose shares tend to be bought and sold less frequently than larger companies. There may be large changes in the prices of their shares and their value could fall by large amounts. The price variations of smaller companies might be greater than those of large companies.

SP - This fund has a select portfolio, which has a limited number of stocks. By investing in a select portfolio there might be greater fluctuations in the value of the units than with a wider portfolio.

 

Further Information

Further information is provided in our fund guides.

Find out more information on our investment approaches.

Investors who wish to withdraw their funds may experience delays depending on the fund (such as property funds) and its asset mix.  Scottish Widows review the investment approach of each fund and the fund range is subject to change in the future.