However unpredictable markets might be, what investors ultimately want from their investments is likely to remain the same to grow their money.

MULTI-STRATEGY

The fund aims to provide positive annual returns of 5 per cent above the Bank of England base rate before charges over a rolling three-year period whether markets rise or fall. For our charges please refer to the Key Investor Information Document which can be found on our fund resources section.

We aim to achieve the return objective with less than half the volatility levels you would typically expect of global equities over the same rolling three-year period. Volatility is a measure of the extent that the share price of the fund moves up and down over a period of time. We use an index of global equities called the MSCI All Country World Index* as our measure of volatility. Of course, you should consider that the return and volatility aims of the fund are not guaranteed and so your capital is at risk. You may get back less than you invested.

*The product is 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 or trading.

A multi-strategy approach

Many funds seek to achieve returns by investing only in one type of asset class. For example, equity funds invest in equities and property funds invest in property. The risk of investing your money all in one basket, such as equities, is that if the market plunges it could cause your investment to suffer significant losses.

Other funds seek to spread risk by investing in a mix of asset classes, investing in say equities, bonds and property at the same time. In contrast, multi-strategy investing seeks to deliver returns by identifying investment ideas across and within asset classes.

Ideas reflect the why we invest where we do, whether in a particular equity, market, sector or something else. We believe multi-strategy investing provides many ways to reflect our ideas more precisely than is possible in traditional funds.

Our multi-strategy approach works as follows:

• First we identify ideas;
• Then we decide how to apply these ideas (investment strategies);
• Then we work out how to implement these ideas, including which types of investments to use;
• Finally we blend strategies together so they complement and balance each other.

Why we use multiple strategies

The one thing we can predict is that the markets can be unpredictable, so our aim is to develop strategies for the fund that will perform well in a variety of market conditions.

Underpinning our multi-strategy investment approach are three Cs: commitment, creativity and construction.

Commitment: Harnessing company-wide expertise

• A company-wide focus on delivering the investment outcomes we know you want.
• Bringing together the full range of global investment capabilities across a broad range of disciplines.

Creativity: A multi-strategy approach to capture returns

• An ideas-driven, multi-strategy approach free from benchmark, asset class or geographical constraints.
• Idea generation focused on delivering target returns and managing volatility in varied market environments, over a three-year investment horizon.

Construction: A portfolio built to address the fear of uncertainty

• Elevating portfolio construction and risk management to the same importance as idea generation.
• A robust investment process, incorporating the full extent of our global investment capabilities.

There are five key components to our investment process

• House View: what we believe the market outlook is and where we believe there is value to be had
• Idea generation: identifying suitable investment opportunities in the context of market conditions and the funds aims
• Idea evaluation: assessing the strength of individual ideas
• Portfolio construction: blending strategies that work well together. Controlling, monitoring and testing of the strategies to ensure that they diversify risk across the fund
• Fund management: managing the fund, monitoring and rebalancing the portfolio

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Idea generation and evaluations is at the heart of our process

Our ideas on what should be included in the fund come from several sources. We draw on expertise from across our business to generate a range of investment ideas, which we then consider in the context of our existing strategies.

We focus on how our views differ from market expectations and more importantly why. This helps us gauge the potential risk and reward offered by our various investment ideas always under a range of potential market scenarios, not just the present situation.

Our strategies look to capitalise on opportunities over three-year time periods. To help explain the types of ideas our fund aims to use, we divide them into three groups.

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Market returns. The fund managers rely on the work of our strategy team to analyse where we are in the business cycle (are we in a boom period, coming up to one or are we going into recession). Using the House View as the starting point, we look at where our view differs from what the rest of the market believes and look for opportunities offering value compared to the price set by the market.

For example: We might believe we are entering a period of economic growth earlier than many in the market expect, in this instance we may look to capitalise on this by buying equities or a particular equity index like the S&P 500. So this section of the fund aims to generate positive returns over the medium term, in this case three years, if our House View is correct.

Opportunistic returns: In this section we focus on finding opportunities or anomalies created by the actions of other market participants. These opportunities can be created by market panics or beliefs driven by external events. For instance, a particular market or sector may become very undervalued compared to others due to over-reaction to a short-term event. These returns can also be driven by interventions from non-profit seeking market participants like regulators or central banks.

For example: We might believe that the European Central Bank (ECB) is going to intervene and cut euro-zone interest rates. In this instance there are a number of strategies we might use to help us generate a return, for example we could buy bonds, equities or currencies or combine these approaches to generate a return from the movement in prices the ECBs action will generate.

So this section of the fund aims to generate positive returns over the medium term, in this case three years, irrespective of the business cycle.

Risk-reducing returns: This section of the fund aims to add returns in difficult market conditions. This is an essential component to the portfolio as we deliberately look to identify strategies that make money if our expected near-term outlook for markets doesnt play out.

For example: To offset potential losses in the market-returns section, we could buy (or take a position on) Australian bonds. Our House View might indicate that Australian bonds are valued at the right price. Under this scenario we earn a return on the bond. However, if the Australian economy enters recession, the expected bond return could increase dramatically because investors typically sell equities and buy bonds in a recession, potentially driving up the value of bonds.

In this instance, the value of the bonds increases and provides us with positive returns, helping offset any losses from equities held in the market-returns section.

So this section of the fund aims to generate positive returns over the medium term, in this case three years, if our House View plays out and even better returns if it does not.

The way our investment strategies are expected to interact with each other across a range of potential market conditions (or scenarios) is crucial to managing the fund.

Ultimately, we aim to select a combination of strategies which together seek to maximise the chance of achieving our return objective, and manage the volatility of the fund.

Risk management and control

We carefully monitor how well our strategies work together to diversify risk across the fund. This process involves testing all our investment strategies, and potential strategies, to see how well they would perform in a wide range of market conditions. The fund’s risk specialists work closely with our fund managers to ensure that we have the right blend of strategies within the fund.

Key risks for you to consider

Growing your investment