Smooth Managed Fund: Fund price adjustments explained

What drives the investment returns of the Smooth Managed Fund (SMF)?

Smooth Managed Fund performance is driven by the underlying assets that it invests in, therefore it is not immune to market volatility.

It is globally diversified across a range of asset classes, but the weak performance of both global equity and bond markets in 2022 saw the unsmoothed price of the fund move to a point where fund price adjustments to the smoothed price were triggered.

The table below shows the SMF Pension fund's asset allocation.

Has the value of the funds's assets risen since the last downward fund price adjustment (FPA)?

Since the last downward fund price adjustment (FPA) on 3rd October 2022, markets have improved.

Global equity markets, as represented by the MSCI ACWI* index, have risen by 7.61% in sterling terms.

Global bond markets, as represented by the ICE BofA Global Corporate Hedge ** index, have risen by 2.32% sterling terms.

The smoothed price of the Smooth Managed Pension fund has risen by 3.14% over the same period.

- Smooth Managed Fund Performance line chart - FE Fund info 

Will there be an upward fund price adjustment (FPA)?

So far, market improvements since the last downward price adjustment have yet to be to the extent needed to trigger an upwards fund price adjustment.

Fund price adjustments are non-discretionary and are based on a formula that triggers a change when the unsmoothed fund price differs by 6.5% or more from the smoothed fund price.

The Smooth Managed Funds Customer guide extract explains this with a worked example.

Each business day, we compare the Smoothed price to the Unsmoothed price (which will rise and fall with market conditions).

If the difference in price is 6.5% or more in either direction, we make a Fund Price Adjustment, to bring the Smoothed price to within 1.5% of the Unsmoothed price. 

Example 1 - what could happen when markets rise

• Say the Smoothed price was 92p and the Unsmoothed price was 100p. This is a gap of 8%.
• Because the difference is more than 6.5%, we adjust the Smoothed price to 98.5p so that the gap is reduced to 1.5%.
• If you had £20,000 in a Smooth Managed Fund before the adjustment, it would be worth £21,413 after the adjustment. 

Note - all performance data is 03/10/2022 - 08/03/2023

*Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

**Source ICE Data Indices, LLC (“ICE DATA”), is used with permission. ICE Data, its affiliates and their respective third-party suppliers disclaim any and all of merchantability or fitness for a particular purpose or use, including the indices, index data and any data included in, related to, or derived therefrom. Neither ICE DATA, its affiliates nor their respective third-party suppliers shall be subject to any damages or liability with respect to the adequacy, accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an ”as is” basis and your use is at your own risk. ICE DATA, its affiliates and their respective third-party suppliers do not sponsor, endorse, or recommend Aviva Life & Pensions UK Limited or any of its products or services.    

Important Information

Aviva Investors manage the Smooth Managed Funds on behalf of Aviva Life & Pensions Ltd. The opinions expressed are based on Aviva Investors Global Services Limited (Aviva Investors) internal forecasts and should not be relied upon as indicating any guarantee of return. The value of an investment in these funds and any income from them can go down as well as up. Investors may not get back the original amount invested.