Dec 2014 Global Absolute Return Strategies Fund 31 December 2014 Unit Trust The Standard Life Investments Global Absolute Return Strategies Fund aims to provide positive investment returns in all market conditions over the medium to long term. The fund is actively managed, with a wide investment remit to target a level of return over rolling three-year periods equivalent to cash plus five percent a year, gross of fees. It exploits market inefficiencies through active allocation to a diverse range of market positions. The fund uses a combination of traditional assets (such as equities and bonds) and investment strategies based on advanced derivative techniques, resulting in a highly diversified portfolio. The fund can take long and short positions in markets, securities and groups of securities through derivative contracts. Absolute Return Fund The value of investments within the fund can fall as well as rise and is not guaranteed - you may get back less than you pay in. The fund may use derivatives for the purpose of efficient portfolio management and to meet its investment objective. The sterling value of overseas assets held in the fund may rise and fall as a result of exchange rate fluctuations. Fund Manager Fund Manager Start Launch Date Current Fund Size Base Currency IMA Sector Multi Asset Investing Team 29 Jan 2008 29 Jan 2008 £23,188.8m GBP Targeted Absolute Return Benchmark Monthly 6 Month GBP LIBOR This document is intended for use by individuals who are familiar with investment terminology. Please contact your financial adviser if you need an explanation of the terms used. Please note that the Portfolio Risk and Return Analysis table is only updated on a quarterly basis. Fund Information * Quarterly Portfolio Risk and Return Analysis Strategy Market Returns European equity Strategies Global equity Global equity oil majors US equity High yield credit Chinese equity UK equity FX hedging UK corporate bonds EU corporate bonds Global REITs Directional Long USD v CAD Strategies Short US duration Long USD v EUR Australian forward-start interest rates Long MXN v AUD Long INR v EUR Mexican rates v EUR Brazilian government bonds US butterfly Long equity variance Long USD v JPY Short UK real yields Long European payer swaptions Long USD v NZD Relative Value US equity tech v small cap Strategies European equity banks Japanese v Korean equity German v French equity Global miners v Swiss equity European v US and Japanese duration Asian v S&P variance HSCEI v FTSE variance Cash Cash Residual Stock selection Total Diversification Expected Volatility Stand-alone Risk Exposure % 1.1 0.6 0.4 0.4 0.4 0.3 0.2 0.1 0.1 0.1 Closed 1.0 1.0 0.8 0.7 0.6 0.5 0.5 0.4 0.3 0.3 0.3 0.2 0.2 Closed 1.2 0.7 0.6 0.6 0.5 0.4 0.3 0.3 0.0 0.5 15.5 11.6 3.8 Weighting (risk based %) Contribution to Returns % Q4 7.3 3.9 2.5 2.4 2.3 1.8 1.2 0.9 0.9 0.8 6.7 6.1 4.9 4.8 4.0 3.1 3.0 2.5 2.2 2.1 2.0 1.6 1.2 7.5 4.2 3.9 3.8 3.0 2.5 2.2 1.9 0.0 2.9 Should you require more information regarding the Physical Allocation please use contact numbers shown. Individual strategy contributions are based on gross returns. 0.0 0.3 -0.2 0.2 0.0 0.1 0.0 -0.1 0.0 0.0 0.1 0.5 -0.7 0.4 0.6 -0.2 0.1 0.1 0.1 0.0 0.2 0.4 -0.5 0.1 0.0 -0.3 -0.3 0.4 0.3 -0.5 0.1 0.0 0.0 0.1 0.0 0.1 1.4 1 Yr 0.3 0.6 0.0 0.3 0.2 -0.2 0.1 -0.1 0.1 0.3 0.6 1.1 -0.9 1.2 1.2 -0.3 0.3 0.5 0.1 0.0 -0.4 0.7 -0.9 0.0 0.2 1.1 -0.3 0.5 0.0 -1.0 0.8 -0.1 0.0 0.2 -0.3 -0.2 Fund Performance * Price Indexed 140 The performance of the fund has been calculated over the stated period using bid to bid basis for a UK basic rate tax payer. The performance shown is based on an Annual Management Charge (AMC) of 0.75%. You may be investing in another shareclass with a higher AMC. The charges for different share classes are shown later. For details of your actual charges please contact your financial adviser or refer to the product documentation. 135 130 125 120 115 Source: Standard Life Investments (Fund) and Thomson Datastream (Benchmark) 110 105 Global Absolute Return Strategies Dec-14 Jun-14 Dec-13 Jun-13 Dec-12 Jun-12 Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 100 6 Month GBP LIBOR Year on Year Performance Source: Standard Life Investments (Fund) and Thomson Datastream (Benchmark) Year to 31/12/2014 (%) Year to 31/12/2013 (%) Year to 31/12/2012 (%) Year to 31/12/2011 (%) Year to 31/12/2010 (%) Retail Fund Performance 4.8 6.2 6.9 2.1 9.8 Institutional Fund Performance 5.5 6.8 7.6 2.8 10.5 Platform One 5.5 6.8 n/a n/a n/a 6 Month GBP LIBOR 0.7 0.6 1.1 1.2 1.0 Cumulative Performance Source: Standard Life Investments (Fund) and Thomson Datastream (Benchmark) 6 Months (%) 1 Year (%) 3 Years (%) 5 Years (%) Retail Fund Performance 3.7 4.8 19.0 33.5 Institutional Fund Performance 4.0 5.5 21.2 37.7 Platform One 4.0 5.5 n/a n/a 6 Month GBP LIBOR 0.4 0.7 2.4 4.6 Note: Past Performance is not a guide to future performance. The price of shares and the income from them may go down as well as up and cannot be guaranteed; an investor may receive back less than their original investment. For full details of the fund's objective, policy, investment and borrowing powers and details of the risks investors need to be aware of, please refer to the prospectus. For a full description of those eligible to invest in each share class please refer to the relevant prospectus. Monthly Investment Review and Outlook Market review Markets were turbulent in December, owing to heightened concerns over global growth, geopolitics and US interest rates. The uncertainty served to accentuate the rise in volatility that typically occurs at year-end when market liquidity falls, an effect especially pronounced in emerging markets. Further upbeat economic data from the US provided only sporadic bursts of relief and most equity markets ended the month lower. Emerging markets and Europe were notably weak Most worrisome was the continued collapse in the price of oil, which by end-December had fallen by over 50% from its June level. Specifically, the rapidity of the decline threw global growth forecasts into question, prompting a sell-off in risk assets. In particular, demand from China, a heavy consumer of oil and vital powerhouse for the world economy, is slackening. At the same time, US shale gas production is on the rise – this is a major structural shift that is adding significantly to the supply side and is likely to have serious long-term ramifications for energy investment. Growth in Europe – or lack thereof – attracted particular scrutiny, given the series of poor economic data that have emerged in recent months. Moreover, the falling price of oil makes Europe’s battle against deflation that much tougher, and leaves the ECB’s 2% inflation target far adrift of revised expectations. The slump in the Russian rouble and the central bank’s unsuccessful efforts to prop it up added another note of fear to some European markets, as did political upset in Greece. By the end of December, European equities had lost all the year’s earlier gains. Europe’s plight does, however, raise the probability that the ECB will start buying government-backed bonds to help revive growth, a long-anticipated move that would be well-received by investors. Government bond markets delivered positive returns in December, a consequence of both reduced inflation expectations and investors’ preference for lower-risk assets. Credit underperformed government issues although returns here were mixed, with investment grade making small gains while high yield posted losses. A large proportion of high yield issuers are energy companies, which exacerbated the extent of the decline in this asset class. Activity We made no significant strategy changes in December. Performance The Global Absolute Return Strategies Fund returned -0.29% (net of retail fees) during the month, compared to the benchmark 6-month GBP LIBOR return of 0.06 % (gross of fees). Among our market returns strategies, our exposure to Brazilian government bonds was the largest detractor from performance. Turning to our directional strategies, the continued slide in oil prices caused inflation expectations to fall, which in turn led to lower government bond yields. This was positive for our Australian forward-start interest rate strategy but negative for our short US duration and short UK real yields strategies. A number of our directional currency pairs made worthy gains in December, helping to counterbalance losses elsewhere in the portfolio. As in previous months, the strength of the US dollar was a major theme. Robust US economic data and expectations of a return to a more normalised interest rate environment propelled the dollar higher. By contrast, the euro weakened, amid discouraging economic data, the renewed threat of a Greek exit and increased deflationary pressures from the drop in the oil price. The slide in the euro also benefited our long Indian rupee versus euro strategy. Performance from our relative value strategies was mixed. Our position favouring European banks versus the broader European index was lossmaking, as was our US equity technology versus small caps position which gave up some of the gains it made over 2014. Meanwhile, our global miners versus Swiss equity position suffered from the sell-off in resources stocks as commodity prices continued to fall. However, our Japanese versus Korean equities strategy was supportive, as the Japanese market ended the month virtually flat while Korean equities fell. Outlook Our central expectation is still for a modest global recovery, albeit with regional variations. Ongoing tapering of quantitative easing and the gradual opening up of the Chinese economy will both be powerful forces shaping asset returns. Central bank actions continue to buffet markets and, on many metrics, asset prices appear expensive. We will navigate these waters by exploiting our broad base of investment opportunities and by seeking a rationalisation of valuations to better align with developing economic fundamentals. Other Fund Information Lipper Bloomberg ISIN SEDOL Fund Launch Date Lipper Bloomberg ISIN SEDOL Retail Acc 65111167 SLIGARA LN GB00B28S0093 B28S009 Platform One Acc 68165478 U222GAR LN GB00B7K3T226 B7K3T22 Retail Inc n/a n/a n/a n/a Institutional Acc 65111168 SLIGARS LN GB00B28S0218 B28S021 Institutional Inc n/a n/a n/a n/a 7:30 am Accumulation Yes Platform One Inc n/a n/a n/a n/a Reporting Dates XD Dates Payment Dates (Income) Interim 30 Sep n/a n/a Annual 31 Mar 31 Mar 31 Jul Valuation Point Type of Share ISA Option Initial Charge AMC Ongoing Charges Figure Retail 4.00% 1.50% 1.59% Institutional 0.00% 0.75% 0.84% Platform One 0.00% 0.75% 0.89% The Ongoing Charge Figure (OCF) is the overall cost shown as a percentage of the value of the assets of the Fund. It is made up of the Annual Management Charge (AMC) shown above and the other expenses taken from the Fund over the last annual reporting period. It does not include any initial charges or the cost of buying and selling stocks for the Fund. The OCF can help you compare the costs and expenses of different funds. *Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life**. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. **Standard Life means the relevant member of the Standard Life group, being Standard Life plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time. “FTSE®”, "FT-SE®", "Footsie®", [“FTSE4Good®” and “techMARK] are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited (“FTSE”) under licence. [“All-World®”, “All- Share®” and “All-Small®” are trade marks of FTSE.] The Fund is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”), by the London Stock Exchange Plc (the “Exchange”), Euronext N.V. (“Euronext”), The Financial Times Limited (“FT”), European Public Real Estate Association (“EPRA”) or the National Association of Real Estate Investment Trusts (“NAREIT”) (together the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE EPRA NAREIT Developed Index (the “Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, none of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. “FTSE®” is a trade mark of the Exchange and the FT, “NAREIT®” is a trade mark of the National Association of Real Estate Investment Trusts and “EPRA®” is a trade mark of EPRA and all are used by FTSE under licence.” Useful numbers Mutual Funds Servicing 0845 279 3003. Market and Fund Specific Information www.standardlifeinvestments.co.uk Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training. www.standardlifeinvestments.com © 2015 Standard Life 0845 60 60 062. 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