How do we come up with our Experts' shortlist of investment funds?
Learn how we come up with our Experts' shortlist of investment funds.
There are thousands of funds out there invested in all kinds of assets, from equities and bonds to property and gold. So, how do our fund experts create their shortlist of funds?
The Experts' Shortlist is designed for people who want to make their own investment decisions, but would prefer to choose from a streamlined selection of funds which has been picked by our experts.
The manager research team at Aviva Investors has handpicked actively managed funds by external fund managers across a range of sectors, which they expect to outperform in future based on their tried and tested fund selection framework.
As we explain below, the research team also need to be confident that environmental, social and governance (ESG) factors are considered by the funds that they select for the short-list. This involves looking at how this is integrated into a fund's investment process.
ESG is an umbrella term for environmental, social and governance issues, which are the factors that an investment team will look at when they are analysing and deciding whether to invest in a business.
Sustainability labels are different to ESG. They’re independently assessed and an addition to Aviva’s ESG criteria.
It's important to check sustainability label information to see that it matches your principles and goals as an investor.
Each of the funds has been robustly researched to ensure that they are well managed by quality companies and fund managers who are supported by strong governance and control processes.
However, it’s good to remember that returns aren’t guaranteed. The value of investments can go down as well as up and you may get back less than has been paid in.
What factors do the Aviva Investors' team consider when creating their short-list of funds?
For the manager of an active fund to make the shortlist, they must score highly on our list of '7Ps':
- Parent
The Parent company should have a reliable business model, be financially stable and well managed. They'll look at their overall AUM (Assets under Management) and their ownership structure, as well as their corporate overview and assessment, their product diversity and firm-wide commitment to environmental, social and governance (ESG) – plus their company policies and procedures – so we can make sure they consider ESG factors when they invest. - Product
The fund should have clear goals and offer value for money. They'll then look at the fund manager's capacity and viability, their fee structure, how their products are constructed and what they invest in. - People
The fund manager(s) should be experienced, and their wider team should be too. They'll make sure the team has the right expertise so they’re able to guide things in the right direction when it comes to ESG integration. They'll also find out who the key decision makers are, find out how stable the team is and check their remuneration and succession planning. - Philosophy
The fund manager should be able to explain how they can meet their objectives. They will look at the manager’s philosophy, how they think they can generate returns, under what circumstances and if they understand the benefits of ESG integration. - Process
They'll assess if the investment process is clear, understandable, robust and repeatable. They'll look at how the risks are managed and monitored and see if the process is consistent with the philosophy. The fund should stay true to its investment framework over the long-term. They'll need to understand how ESG is integrated at every step of the investment decision-making process, including research, portfolio construction and risk management. - Positioning
They'll look at the portfolio and make sure it is coherent with the philosophy and process. They'll also look closely at how a portfolio is constructed and make sure it fits in with what we expect around ESG integration. Finally, they'll look at the fund managers engagement activity and voting history. - Performance
They see how the fund is performing to make sure it’s meeting its objectives. They'll check if performance is consistent, and see what’s driving performance. They also look for evidence of how ESG integration has impacted fund performance and look at risk-adjusted returns.
No category is more important than another, and there aren't any right or wrong answers. Our research team scores a fund in each category and then delivers an overall rating.
As mentioned, we take a fund’s environmental, social and governance factors seriously in our due diligence, investment analysis, decision-making and monitoring activities.
Passive funds don’t get assessed against the '7P' criteria. While our Aviva Investors research team carries out due diligence on the fund provider, the funds make the shortlist primarily based on asset classes they cover and cost.
Do we change our Experts' shortlist?
Yes, the Aviva Experts' shortlist may change over time. We’re always monitoring the Experts' shortlist to make sure the funds meet our selection criteria.
If a fund no longer meets our criteria:
- It will be removed from the Experts' shortlist but may remain in our full range list
- You'll remain invested in the fund if it's removed from the Experts' shortlist and remains available on the platform
- We won't inform you directly if one of your funds is removed from the Experts' shortlist, though changes will be reflected on this site.
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