With-Profits Investment information

All-In-1 Investment Bond and Guaranteed Capital Bond 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.
  • This report provides information on the performance of your bond, for the period 1 January 2018 to 31 December 2018.

Market and Economic Review

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

Investment returns from higher risk investments were weak and volatile during 2018. Returns from global equities (as measured by the MSCI All-Country World index) were -7.2% in local currency terms; this was dampened as the pound weakened against overseas currencies resulting in a slightly improved return of -3.3%.

UK corporate bonds generally held up better, whilst core government bonds had mixed fortunes: US Treasury and UK Gilt yields rose while German Bund yields fell.

With the persistent political uncertainty throughout most of 2018, investors tended to prefer to focus on the still-robust corporate and macro (where capital is spread over various assets, markets and countries) investments. This was especially prominent in the US, where tax cuts boosted an already-strong economy.

From the autumn onwards, however, markets were increasingly rattled by a range of factors. In addition to an overarching concern about tightening monetary conditions, these included rising political uncertainty in Europe and in the US, President Trump’s tariff war against China and other US trading partners, and, related to the latter, evidence of economic deceleration in the eurozone and China. Higher risk investments suffered in this environment and had a very weak final quarter.

The US Federal Reserve raised rates four times over the year but further rate rises in 2019 are unlikely. In December the European Central Bank finally ended its quantitative easing bond-buying programme, though any interest rate hikes still appear some way off. Despite ongoing Brexit uncertainty, the Bank of England raised rates once, in August, as the economy picked up after a weather-hit first quarter.

Equities in Europe, Asia and Japan all suffered double-digit losses in local terms, and the UK and emerging markets were not far behind. US equities fell less heavily over the year, due in part to earlier optimism about the tax cuts and very strong US corporate earnings.

The UK commercial property market slowed whilst Brexit-related uncertainty continued. The IPD (Investment Property Databank) Monthly index returned 7.3% for 2018, compared with 11.0% the previous year.

Unit price and performance of each fund option available

Your individual statement will show you the number of units, the unit price, the value of your bond and the fund option in which you are invested at your bond’s last anniversary. Find the current unit price of your bond. This information should be read alongside your Policy Conditions and Key Features document. You need to be aware that in each fund option your investment can go down as well as up. The higher the amount invested in equities, the more frequently this will happen and the more significant the changes in value are likely to be.

Please note, the Guaranteed Capital Bond is invested in the Growth fund option.

Cautious fund

This fund option is designed to provide modest growth with a lower chance of losing money than the Balanced and Growth fund options. It invests mostly in fixed interest investments with the balance in property and equities. This is the lowest risk fund option under this bond and therefore offers the lowest growth potential.

Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 248.7p  1.9% 100.3%
31 December 2017 196.5p  1.5%
31 December 2016 193.6p 9.4%
31 December 2015 176.9p  7.3%
31 December 2014 164.9p  7.4%
31 December 2013 153.6p  1.5%
Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 248.7p  1.9% 100.3%
31 December 2017 196.5p  1.5%
31 December 2016 193.6p 9.4%
31 December 2015 176.9p  7.3%
31 December 2014 164.9p  7.4%
31 December 2013 153.6p  1.5%

Balanced fund

This fund option is designed to provide the potential for modest growth without exposure to undue risk. It invests broadly in equal amounts of equities, fixed interest investments and property. This is the middle risk fund option and is higher risk than the Cautious fund option and lower risk than the Growth fund option.

Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 199.9p  3.9% 152.5%
31 December 2017 243.1p  6.9%
31 December 2016 227.4p 9.3%
31 December 2015 208.1p  13.7%
31 December 2014 183.0p  12.8%
31 December 2013 162.3p  11.0%
Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 199.9p  3.9% 152.5%
31 December 2017 243.1p  6.9%
31 December 2016 227.4p 9.3%
31 December 2015 208.1p  13.7%
31 December 2014 183.0p  12.8%
31 December 2013 162.3p  11.0%

Growth fund

This fund option is designed to provide the potential for the highest level of capital growth of the three fund options but with an increased risk to capital. This fund option invests mostly in equities with the balance invested in property and fixed interest investments. This is the highest risk fund option and offers the highest growth potential.

Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 263.1p  3.7% 168.7%
31 December 2017 259.0p  12.4%
31 December 2016 230.4p 12.4%
31 December 2015 205.0p  8.0%
31 December 2014 189.9p  8.3%
31 December 2013 175.3p  18.8%
Unit Price Date Unit Price*  Growth (%) for the 12 months to the date shown  Total percentage growth from 4 November 2005 (launch) to 31 December 2018
31 December 2018 263.1p  3.7% 168.7%
31 December 2017 259.0p  12.4%
31 December 2016 230.4p 12.4%
31 December 2015 205.0p  8.0%
31 December 2014 189.9p  8.3%
31 December 2013 175.3p  18.8%

Performance Review

During 2018 the funds produced investment returns which were below benchmark. The main driver of this was poor stock selection. Generally, asset allocation had little impact on performance over the year.

Despite performing well against global equities, the multi-asset portfolio was responsible for a large proportion of the underperformance. This is because the benchmark for this portfolio is 4% above inflation, (6.2% for 2018). Given the turbulent economic conditions, a strong positive return of 6.2% was unachievable and therefore masked the relatively good performance.

Property returns also contributed to the underperformance. As a result of more money being taken out of the underlying property fund than invested into it, the way shares were valued was temporarily changed in December from an offer-price to a bid-price basis. This ensures that investors who leave the fund pay their fair share of the additional expenses incurred, should sales be required to meet those redemptions. This effectively protects the remaining investors such as LV=. The impact to the share price (and therefore performance) was around -6.5%. When the funds revert to an offer basis there should be a corresponding positive performance impact, as was seen in 2017.

The strategy of the asset manager to purchase shares in high quality companies that were expected to grow faltered in the last quarter. The value of these shares fell whilst the shares of lower risk companies fared much better. This impacted all the overseas equity asset classes.

UK equities outperformed the FTSE All Share. Relative gains were driven by favourable stock selection, with investments in communication services, technology and consumer staples (such as food and household goods) adding the most value.

Within the US equity portfolio, positive stock selection in industrials, IT and financials was outweighed by negative selection in healthcare, materials and communication services.

Stock selection within emerging markets had mixed results. Negative investment performance in the materials, technology, communication services and consumer staples sectors partially offset by positive selections in the consumer discretionary and real estate sectors. On a country basis, investments in Russia, China, Brazil and India all had a negative impact on returns.

In Japan, a trend towards lower risk investments and falling bond yields lead to an outperformance of cheaper, defensive stocks (those providing more stable returns). The reduced investment in real estate and zero investment in utilities detracted from the performance over the year.

Market and Economic Outlook

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

Recent years have seen prices consistently rising, this is often known as a ‘bull market’. Although this cycle won’t continue indefinitely it does not appear that the end is imminent. The warning signs which would suggest a sharp turnaround are not all flashing red. Instead it looks as though this market will continue to extend and redefine, with low interest rates, low inflation and ongoing moderate growth.

Over 2019 US growth should slow as the impact of fiscal stimulus reduces. Inflation should remain under control and equity valuations continue to be fair, leaving a generally reasonable environment for investors.

The expectation is that global equity markets will make gentle positive progress, corporate profits will continue growing, companies will behave in an equity-friendly way with their valuations remaining supportive.

While 2018 was not a great year for bonds, 2019 looks set to produce more attractive outcomes for those who can navigate highly divergent monetary policy and credit cycles.

We are watchful of the amount of debt among US companies, compared to European. However, there should be opportunities for returns within specific industries and regions. The energy, telecoms, and food and beverage industries have previously increased borrowing but now have a number of companies reducing their debt levels.

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 £338bn of assets (as at 31 December 2018), 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.