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 performance of the assets held in the Liverpool Victoria Financial Services Limited main with-profits fund, for the period 1 January 2022 to 31 December 2022. This fund backs most of the with-profits policies sold by LV=.
- Different investment information pages are available for the LV= All-In-1 Investment Bond, Guaranteed Capital Bond, Flexi Guarantee Plan, Flexible Guarantee products, Smoothed Managed Funds products and the LV=ISA.
2022 performance review
This review is based on information and commentary provided by Columbia Threadneedle Investments.
2022 was a difficult year for the fund as returns on both equities and bonds were negative. In investment markets, global equities were down 15.6% whilst global bonds fell 16.3%.
Performance over the year was driven by inflationary fears. Interest rates rose significantly over the year with the ten year Gilt Yield rising (meaning prices fell). Rising interest rates negatively impacts bond performance. Through this period whilst we held a reduced investment in government and corporate bonds we retained an allocation to provide resilience if a deep recessionary environment started to appear.
Within equities, energy was the only sector that was generally positive whilst the others were negative. Whilst we have some energy sector investments, they are limited. This has hampered performance over the year. We believe holding limited energy sector investments is appropriate given the Environmental, Social and Governance (ESG) risks over the medium term where oil and energy companies will face rising costs of capital compared to greener industries.
It has been a buoyant year for the US dollar which, at one point, was up 26.6% since the start of 2022. Within our investments, we intentionally hedge (a way of reducing the risk of loss due to currency value fluctuations) away some of our overseas currency investments including the US dollar. This has meant that we have missed out on the strong performance of the US Dollar over 2022. However, our strategic positioning is based on the medium term (three to five years) and longer (circa ten years) and over that period, even with the strong US Dollar in 2022, the US Dollar was broadly stable from 2016 to 2022.
A final source of underperformance was our reliance on quality growth stocks (like those in the technology sector), over value stocks (such as oil companies and banks). This appeared a poor decision over 2022 where value stocks have significantly outperformed growth stocks. However, as our time horizon is the medium and longer term, we believe that growth companies are likely to be more resilient as we move through a recessionary environment in 2023. These companies have strong products with good price control (where prices can increase without reducing volumes) and are likely to deliver performance that is more stable over the medium to long-term.
Standardised performance for the main with-profits fund
These figures show the investment return (before tax and charges) on the with-profits fund each calendar year for the last five years
| Year | Investment return |
|---|---|
| Year to 31 December 2018 | -4.2% |
| Year to 31 December 2019 | 14.3% |
| Year to 31 December 2020 | 8.2% |
| Year to 31 December 2021 | 7.0% |
| Year to 31 December 2022 | -14.2% |
| Year | Investment return |
|---|---|
| Year to 31 December 2018 | -4.2% |
| Year to 31 December 2019 | 14.3% |
| Year to 31 December 2020 | 8.2% |
| Year to 31 December 2021 | 7.0% |
| Year to 31 December 2022 | -14.2% |
Responsible investing
Responsible investment encompasses all Environmental, Social and Governance (ESG) considerations.
ESG considerations are firmly embedded in the management of our investments as we believe we have an obligation to our members to invest their money responsibly. By doing so, we aim to achieve strong investment returns and contribute to the sustainable development of the world and society.
The Investment Committee and With-Profits Committee regularly monitor a range of metrics to assess climate change risk. The funds typically outperformed the benchmark with lower carbon intensities and emissions whilst holding better ESG-rated assets.
| 2022 ESG Metrics | Fund | Benchmark |
|---|---|---|
| Carbon Intensity | 127 | 174 |
| Carbon Emissions | 72 | 138 |
| CTI ESG Ratings | 2.46 | 2.59 |
| 2022 ESG Metrics | Fund | Benchmark |
|---|---|---|
| Carbon Intensity | 127 | 174 |
| Carbon Emissions | 72 | 138 |
| CTI ESG Ratings | 2.46 | 2.59 |
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 Liverpool Victoria Financial Services Limited.
- Columbia Threadneedle is a leading international investment manager that manages £584bn of assets (as at 31 December 2022), 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.