RNPFN Managed Growth Fund

RNPFN Managed Growth Fund management and performance report

Report overview

Before we get started...

  • This information does not constitute investment advice and we recommend that you speak to a suitably qualified financial adviser before making any investment decision based upon this, or any other information.
  • The information below gives an overview of the assets held in the RNPFN Managed Growth Fund, for the period 1 January 2020 to 31 December 2020. Investment Bonds and Maximum Investment Plans taken out by customers of RNPFN (prior to its acquisition by LV=) invest in this fund.

Market and economic review

This review is based on information and commentary provided by Columbia Threadneedle Investments.

Despite steep volatility through the first half of the year, 2020 ended much like it began; an equity bull market, touching all-time highs. The year was defined by the pandemic, with market performance being driven by government and consumer responses. Emerging markets, particularly Asia and especially China, where the impact of the virus was constrained, outperformed developed markets struggling to contain a second wave of infections. 

The stimulus provided by governments drove a faster than anticipated recovery in equity markets where most regions notched gains over 2020. However this was a far from equal recovery. Consumer demand, changed by ‘stay-at-home’ policies, accelerated demand for certain technologies and an almost exclusive use of online retail. Demand for a vaccine drove the outperformance in the healthcare sector. Other sectors and regions have not yet recovered, and for some, such a recovery is uncertain to materialise. 

Vaccines were first approved for use during December. The big breakthrough for markets came on 9 November 2020, when Pfizer and BioNTech reported they had achieved over 90% effectiveness in large-scale human trials. The news sparked a surge in oil prices and equity markets saw investors switch out of year-to-date winners into beaten-down stocks that had most to gain from a resumption of normal economic activity. 

Aside from the virus and the vaccine, markets were focused on the US elections and Brexit. Investors welcomed a clear Biden victory and the avoidance of a no-deal Brexit. 

During Q4, the equity rally lost pace slightly from the second half of November onwards, with gains capped by concerns about the new virus strains and slower-than-hoped vaccine distribution. Energy and financials led the rally, while consumer staples (such as food and household goods) and healthcare were weakest. 

Also during Q4, core fixed income markets had mixed fortunes. The 10-year US Treasury yield increased (meaning prices fell), driven upwards by rising expectations for US fiscal stimulus and inflation. The yield for German and UK equivalents both edged downwards linked to lockdown worries and increased central-bank purchases. The yield from US and European corporate bonds also fell.

RNPFN Managed Growth Fund performance review

Whilst strong performance was generated across all regions, two in particular stood out: the Japan equity asset class outperformed the benchmark by 15.2% whilst the Emerging Markets equity assets also outperformed by 15.1%, (both in Sterling terms). Within the Global Emerging Markets portfolio, almost half the outperformance was due to Chinese stock selection where technology and healthcare were the dominant success stories. 

In Japan, Technology and Industrials stocks drove the outperformance. The fund also benefitted from opportunities after the March 2020 lows to purchase quality stocks at attractive valuations that were previously considered too expensive.

US equities returned 29.3% for the year against the benchmark return of 25.9% with Technology stocks a dominant success story during 2020. Profits in several stocks were taken to allow investment in assets that subsequently benefitted from the buoyant vaccine news. These changes were designed to take advantage of the reflation/recovery stage now being entered.

The European equity portfolio delivered strong outperformance against its benchmark (the assets returned 11.4% whereas the benchmark returned 10.3%) during the year. Stock selection accounted for all the outperformance led by Technology and Industrials. 

UK equity assets (-9.7%) just outperformed the FTSE All Share (-9.8%) over the year helped by stock selection within Industrials. Overall, the UK equity market lagged behind all major equity markets during 2020. Fears of a no-deal Brexit hampered the market throughout the year. The market also suffered for its relatively high exposure to energy-related stocks.

The UK corporate-bond portfolio returned 10.2% for the year, outperforming its benchmark, which returned 8.6%. The good performance came from the majority holding in medium and long-dated bonds, which outperformed short-dated bonds during 2020. Stock selection was the main driver for the funds outperformance. 

The diversification into Developed Markets bonds during 2020 also proved positive with returns outperforming the benchmark by 0.5%.

The benefit of the funds exposure to UK Gilts was most noticeable during quarter 1, where the assets offset equity weakness within the fund. Their resilient characteristics resulted in stable performance throughout the year. The return of 9.0% was slightly above the benchmark of 8.6%.

Change to the strategic asset allocation

LV= regularly reviews the investment strategy (also called the Strategic Asset Allocation or SAA) of the fund. Drawing on the strong expertise of Columbia Threadneedle Investments, as well as various economists and investment banks, changes to the SAA were proposed. Following extensive review and challenge to ensure the strategy was fit for purpose, the new SAA was approved by the LV= Investment Committee.

The aim of this SAA review was to improve the expected annual return of the funds whilst keeping broadly the same overall level of investment risk. The new investment strategy is to spread assets more globally to ensure the funds are not severely impacted by volatility in any one country. To help with this new investments have been introduced:

  • US Treasuries (also called US Government Bonds). To diversify Sovereign Bond holdings.
  • Overseas Corporate Bonds. Primarily US and European Corporate Bonds which give strong returns and diversify exposure to credit risk.
  • High Yield Bonds. An increase in the exposure to such assets.
  • Dynamic Real Return (a fund which invests in a variety of asset types aiming to deliver consistent performance, even in times of market volatility).  An increase in the exposure to such assets.

The changes were completed during June of 2020. The fund objectives and the level of investment risk of the fund remain broadly unchanged.  

Unit Prices and Performance

Unit Prices and Performance

Details of the current unit prices and growth rates, along with the unit price history can be found on the RNPFN Managed Growth Fund unit prices page.

Columbia Threadneedle Investments

Columbia Threadneedle Investments

  • Since 1 November 2011 the asset management of our funds has been undertaken on our behalf by Columbia Threadneedle Investments. Columbia Threadneedle is responsible for the day to day management of the assets within investment guidelines set by LV=.
  • Columbia Threadneedle is a leading international investment manager that manages £400bn of assets (as at 31 December 2020), investing on behalf of individuals, pension funds, insurers and corporations. Columbia Threadneedle is the global asset management group of Ameriprise Financial, a leading US-based financial services provider. Columbia Threadneedle's website address is columbiathreadneedle.co.uk