Research from pensions and retirement specialist LV= highlights how rising inflation is a growing worry for savers.
The LV= Wealth and Wellbeing Monitor* - a quarterly survey of 4,000 UK adults – reveals:
As consumers’ fears about inflation and market volatility increase, LV= is launching a new Smoothed Bond designed to reduce investment volatility.
The smoothing mechanism for the new Bond has been enhanced to start protecting investors from market volatility from the second day of investment, gradually building until it fully averages daily unit prices over the previous 26 weeks to reduce short-term market fluctuations. And advisers and their clients can now select from a recently extended choice of 5 funds in the Smoothed Managed range; Extra Cautious, Cautious, Balanced, Growth and Impact Growth, which are risk rated as 2,3,4,5 and 6 respectively. It is designed for the majority of UK investors with a low to medium risk profile.
With a new simplified charging structure and fund size discounts the annual management charge (AMC) for new business applications will be discounted from 0.9% to 0.85% until 30th November 2022. The minimum investment is £5,000 and fund size discounts will apply to investments of >£100,000 with up to 0.15% discount for aggregate investments over £0.5M
LV= Smoothed Bond forms part of a suite of LV= Smoothed Managed Funds, which includes LV= Smoothed Pension, LV= Trustee Investment Plan and LV= ISA. The funds are managed by the global asset manager Columbia Threadneedle Investments working in collaboration with the Investment Management Group at LV=.
LV= added two funds to its Smoothed Managed Funds (SMF) range in May 2022 to appeal to a wider range of investors.
The new funds - Extra Cautious and Impact Growth - are risk-rated 2 and 6 respectively. Both feature LV=’s unique smoothing mechanism.
The new Extra Cautious Smoothed Managed Fund is targeted at low-risk investors who would normally prefer to hold their savings in cash but who are concerned that rising inflation and low returns on deposit accounts are eroding the value of their savings. The key objective is long term steady investment growth with a low level of investment risk. The asset mix of the fund will be about 65% bonds, 20% equities, 10% property, and 5% cash.
The new Impact Growth fund option is designed to deliver long-term steady and sustainable growth with a medium level of investment risk. The proportion invested in equities and property is usually about 70%.
“LV=’s Smoothed Managed Funds are becoming increasingly popular among financial advisers and mass affluent investors because of their strong track record on performance resilience and returns.
Last year’s figures show a doubling of inflows into the SMF range totalling £437m.
“Our research revealed that 53% of mass affluent customers are too worried about stock market volatility to move savings to a higher risk investment in order to achieve more growth. For retirees, this figure rises to 76%, showing just how cautious many savers and investors are when it comes to their finances.
It highlights a real conundrum for cautious investors on how to find a way of accessing investment returns that can defend and develop growth against the erosion of inflation, but also can deliver a smoother ride and help sooth understandable investor nerves through the short term ups and downs of the market”
“We think the performance track record of the Smoothed Managed Funds range, with its unique and improved smoothing mechanism that now starts working from day-2, addresses this dilemma and represents a value adding solution for advisers to help those investors who are uncomfortable with the short-term ups and downs of investments make more confident choices.”
LV=’s Smoothed Managed Fund range is designed to provide steady long-term growth over a period of at least five years. LV=’s smoothing process doesn’t mean investments will not drop in value. Smoothing will not prevent losses in longer term falling markets and investments may go down as well as up. The smoothing process has continued to perform as intended through the extreme volatility seen as a result of Covid-19. However, in exceptional conditions (for example, if the underlying price is 80% of the averaged or ‘smoothed’ price) the fund may be valued on the underlying price. We also reserve the right to do this at other times.