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What do the experts think of Aviva’s new rival to Standard Life GARS?

02 July 2014

FE Trustnet asks a panel of industry experts whether they are considering the latest absolute return launch, which is set up very similarly to Guy Stern’s hugely popular multi-billion pound offering.

By Joshua Ausden,

Editor, FE Trustnet

Ex-head of Standard Life GARS Euan Munro has announced the launch of the Aviva Investors Multi-Strategy Target Return fund – a direct rival to the £20.2bn portfolio.

Munro surprised the fund management industry when he announced that he was leaving the GARS team to join Aviva Investors as chief executive in the summer of last year.

As one of the founders of the hugely popular strategy, it was expected a product such as this would be launched within the first year, and Munro hasn’t disappointed.

Multi-Strategy Target Return will target annual returns of cash plus 5 per cent over rolling three-year periods with half the volatility of the MSCI AC World index. It has been launched with £100m already invested, coming predominantly from Aviva’s fund of funds range. Ongoing charges are capped at 0.85 per cent.

The benchmark is exactly the same as that of Invesco Perpetual Global Targeted Returns, which is headed up by ex-GARS manager David Millar. Standard Life GARS, which has ongoing charges of 0.89 per cent and is headed up by Guy Stern, also targets cash plus 5 per cent, but doesn’t specify a volatility target. ALT_TAG

The Aviva fund will be managed by Peter Fitzgerald and Dan James, though Munro (pictured) will have extensive input. Like GARS and Invesco Targeted, the managers will use baskets of assets including those that implement market neutral, directional and long-only strategies.

Aviva has plans to launch an income focused fund in the fourth quarter of this year, and an inflation-targeting fund at a later date. The income fund will target a return between 4 and 6 per cent.

Standard Life GARS has long been a go-to product for investors looking for a low-risk product with little correlation to equities.

However, industry experts have welcomed the new launch, with some already hinting that they could commit money before long.


Chris Spear, managing director of Spear Financial


Spear remains a fan of GARS, but would contemplate using the Aviva fund as part of a more diversified portfolio.ALT_TAG

“Will I consider using the Aviva fund? Yes, but we hope like Standard Life GARS it will be included in a multi-manager range like the MyFolio one,” he said.

“We’ve all liked GARS and we’re pleased with its performance so far as it’s done exactly what we wanted. It did really well in the credit crunch – to put it simply, it worked – and it has delivered annualised returns for clients of about 5 per cent.”



Performance of fund, sector and indices since launch

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Source: FE Analytics

“Having said that, it has got big, so we welcome the entrance of Aviva and Invesco Perpetual into this area of the market – these are big groups which is good because we know they have the resources to run this type of strategy effectively.”


Chris Wise, investment director at Gemmell Financial Services

ALT_TAG With markets poised on a knife edge, Wise says he will wait to see how Aviva positions the portfolio.

However, he says the calibre of Munro and his team means he is already interested.

“Aviva will probably be a good rival to GARS as Munro was one of the first people to start up its strategy,” he said.

“There will be a lot of differences to GARS but he will be able to retain a lot of the processes and investment ideas in managing risk and generating cash-plus returns.”

“However, we would like to see how things work initially as markets seem to be reaching a tipping point. Jumping into a new fund might not best-timed.”

The high profile exit of Munro coincided with a difficult period for GARS in May and June last year. The fund fell significantly further than its peers during the taper tantrum, but has since recovered.

Performance of fund and sector since Jan 2013

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Source: FE Analytics

Wise says that this was just a short-term blip however, and doesn’t think fund size or the loss of personnel was responsible.

“Whilst they have lost some staff they have also added some, with far more analysts than they had a few years ago,” he said.

“You could argue the quality from within is actually improving and there are even more specialists in the team.”



Rob Morgan, pensions and investment analyst at Charles Stanley

The increase in competition is seen as a big positive by Morgan (pictured), but he thinks that Standard Life is still the fund to beat.

ALT_TAG “We always welcome competition. GARS is one of the few funds that have made a success of this type of product so it’s good there are other,” he said.

“Having said that, GARS has been run as a concept for a long time. The fund was launched in 2008 but it has a track record going back much further than that, as it was and still is the go-to pension product for Standard Life employees.”

“Munro obviously knows how to run a strategy like this, but it takes a long time to get a team and track record going to challenge GARS.”

“GARS has such a large team and such large resources, which is a big advantage for this kind of multi-strategy type fund,” Morgan added.

Fitzgerald and James will be supported by Aviva’s multi-asset managers in their new venture. The team responsible for Multi-Strategy Target Return therefore has a team of 12, already responsible for managing over £68bn.

Aviva points out that in addition, there is further support from a dedicated risk analysis team and an investment strategy team, which is responsible for formulating investment views and themes across the board.


Darius McDermott, managing director of Chelsea Financial Services

McDermott thinks the Standard Life, Invesco and Aviva funds are direct rivals, and will be keeping tabs on the latter two as they build up a track record.ALT_TAG

“When we bought GARS initially it was for the diversified portfolio and deep downside protection, but now there are other funds so we will need to compare and see what’s different. It’s certainly one that’s on our radar,” he said.

McDermott rates Standard Life’s Stern highly, but given the high profile departures, will think more seriously about the Invesco fund when it reaches its one year anniversary in September.

“It’s useful to have options,” he said.


Mark Dampier, head of research at Hargreaves Lansdown

Dampier stopped recommending GARS as a direct result of Munro and Millar’s departures.ALT_TAG

He says he’s always wary of big teams like the ones at Standard Life and Aviva.

“It’s not like a Woodford situation, one person making the decisions who you’ve known for 20 odd years with a style that you recognise. These funds are very hard to analyse, so we’re happy to wait and see,” he said.

Dampier thinks the loss of Munro, who practically invented GARS, has been a blow to Standard Life.

“GARS was on our system but they lost a number of people, so we took it off. We were looking to re-evaluate it, but then Euan left as well. There’s a point at which you start to think if a team loses large numbers of people it may be too many.”



John Blowers, head of Trustnet Direct

ALT_TAG Blowers (pictured) echoes Dampier’s concerns, and believes investors looking to part with their money now are taking an unnecessary risk.

“There’s an obvious psychological bias toward buying something just because it’s shiny and new, but we think investors should resist the urge to follow it.”

“The Aviva fund has a lot going for it, and the team behind it under Munro is clearly a powerful setup, but that will still be the case in a year or so, when the fund has some performance and more assets under its belt.”

“I see no reason why investors should rush into buying it right now when you have the Invesco and Standard Life funds firing on all cylinders.”

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