Refreshed strategic asset allocation shields LV= Smoothed Managed Funds from stock market volatility

  • Shift into US Treasuries in 2019 and smoothing mechanism reduces stock market volatility for investors
  • LV= Smoothed Managed Funds are invested in a diversified portfolio including fixed interest securities, equities, property and cash

A refreshed investment strategy is helping LV=’s smoothed managed funds reduce the effects of stock market volatility caused by coronavirus.

The LV= Investment Management Group adjusted its investment approach in 2019 as part of a Strategic Asset Allocation Review to rebalance the funds.

Four new asset classes - US Treasuries, Overseas Corporate Bonds, High Yield Bonds and Dynamic Real Return - were introduced while the amount invested in UK equities was reduced.

After large falls in global equity markets caused by the COVID-19 crisis, US Treasuries and Overseas Corporate Bonds outperformed other assets while US, UK and European stock markets have fallen 19.6%, 25.1% and 20.9% percent since the beginning of the year1.

Comparison of LV= Smoothed Managed Funds and ABI benchmarks: April 2017- April 2020

The performance of the LV= funds are based on returns before annual management charges, which are taken by unit-deduction. The calculation of the sector average figures may take the effects of annual charges into account.

LV’s smoothed managed funds are managed by the global asset manager Columbia Threadneedle Investments to a mandate set by LV=. These funds incorporate a smoothing mechanism that works by simply averaging daily unit prices over the previous 26 weeks to reduce short-term market volatility.

The funds, available in pensions, bonds and ISAs, are most suitable for investors:

  • With a ‘very low’ to ‘low medium’ risk profile
  • Looking for a lower risk home for all or part of their overall portfolio
  • Nearing or in retirement with a decreasing capacity for loss
  • Looking to consolidate assets, balancing growth potential with reducing risk
  • Comfortable investing for the long term, at least five years plus

Clive Bolton, Managing Director of Savings and Retirement at LV=, said: “The dramatic falls in global stock markets were unexpected. However,  the robust performance of LV=’s smoothed managed funds shows that the decisions we made in our Strategic Asset Allocation Review helped limit exposure to market crashes, and that our smoothing mechanism will provide some protection from short-term market volatility.

“The funds will appeal to cautious investors who are either approaching retirement or already retired. Financial advisers are increasingly looking to smoothed managed funds to reduce stock market volatility for cautious clients. Advisers surveyed by LV= indicated that the majority were more likely to use them as part of their advice process because of the resilience of these funds2.”

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 won’t 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 market conditions (when the underlying price is 80% of the averaged or ‘smoothed’ price) the fund will be valued on the underlying price. We also reserve the right to do this at other times.

The LV= Strategic Asset Allocation Review received many investment industry accolades, including the 2019 Insurance Asset Management Investment Strategy of the Year Award.


[1] Market figures correct as at 31 March 2020

[2] In a survey of 706 advisers, the average ranking of the statement “How likely are you to use Smoothed Managed Funds in your future advice process?” was 8.1/10.

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About the LV= smoothing mechanism:

The LV= smoothing mechanism is unique in the market, and is based on a 26-week rolling averaging of the underlying fund price. It is easy to understand and simple for advisers to explain to their clients.

Investors start on the underlying price and then move to the averaged price after 6 months.
Whilst the smoothing doesn’t completely remove the full impact of volatility, it removes the day to day volatility of investing – and helps create a low volatility/low anxiety investor experience.

About LV=:

LV= is a leading financial mutual. When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

LV= and Liverpool Victoria are registered trademarks of Liverpool Victoria Financial Services Limited (LVFS) and trading styles of the LV= Group of Companies.Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237 is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, register number 110035. Registered address: County Gates, Bournemouth, BH1 2NF.

About Columbia Threadneedle Investments:

Columbia Threadneedle Investments is a leading global asset manager that provides a broad range of actively managed investment strategies and solutions for individual, institutional and corporate clients around the world.

With more than 2000 people including over 450 investment professionals based in North America, Europe and Asia, we manage £344bn of assets across developed and emerging market equities, fixed income, asset allocation solutions and alternatives. 
Our priority is the investment success of our clients. We know investors want strong and repeatable risk-adjusted returns and we aim to deliver this through an active and consistent investment approach that is team-based, risk-aware and performance-driven. Our investment teams around the world work together to uncover investment insights. By sharing knowledge across asset classes and geographies we generate richer perspectives on global, regional and local investment landscapes.

The ability to exchange and debate investment ideas in a collaborative environment enriches our teams' investment processes to ensure the best insights are applied to portfolios. More importantly it results in better informed decisions for our clients.

Columbia Threadneedle Investments is the global asset management group of Ameriprise Financial, Inc. (NYSE:AMP), a leading US-based financial services provider. As part of Ameriprise, we are supported by a large and well-capitalised diversified financial services firm.