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Multi-Asset Funds invest across a number of different asset types which may include equities, bonds, property, cash, and alternatives. This gives you a greater degree of diversification than investing in a single asset class. Diversifying across a broad range of asset classes, styles, sectors, and regions can help cushion against any shocks that come with investing in a single asset class. However, investors should remember that diversification cannot not fully protect you from market risk.

At Aviva we classify Alternatives as an investment that is not one of the four traditional asset classes (cash, bonds, property and equities).  Our range of alternatives include commodity, multi-strategy and alternative multi-asset funds.  Because alternatives tend to behave differently than typical investments, adding them to a portfolio may provide broader diversification and help enhance its risk-adjusted returns.

In a property fund, investors’ money is pooled to purchase a range of different properties and property-related securities. The investment return from property comes from capital valuation movements and rental income. These funds may also have holdings in property related securities such as Real Estate Investment Trusts (REITs) and cash instruments. REITs are companies the shares of which trade on a major exchange and invest in real estate directly. Investing in REITs can offer a slightly more liquid, dividend-paying means of participating in the real estate market than investing directly in property.

There are broadly three sectors in the commercial property asset class, namely:

• Offices including headquarter buildings, high rise blocks, business parks, technology centres, and science parks.
• Industrial buildings such as logistics or distribution centres, data centres, warehouses, and factories.
• Retail units including retail parks, shops, showrooms, shopping centres, supermarkets, and restaurants.

Equity funds invest across a range of different company shares. Equity funds have the potential to make money in two ways:

1. They can receive capital growth through increases in the share prices of the companies they invest in, and
2. They can receive income in the form of dividends from the companies they invest in.

They offer the greatest potential for both gains and losses. Share prices are impacted by a number of economic and company specific factors. These usually reflect the market’s perceived value of a company. Share prices rise and fall on a daily basis based on investor demand. This means that the value of your investment can go up or down, often quickly and often by significant amounts. That’s why equities are considered long-term investments and their performance is not guaranteed.

Fixed interest or bond funds invest predominately in bonds that are issued by governments and/or companies as a way of borrowing money. Effectively by investing in a fixed interest fund or bond fund, the fund is lending money to a variety of governments and/or companies. The loan is due to be repaid at a future date but in the meantime the governments and/or companies pay interest on the loans and this interest is added to the fund. Because these funds are loans to governments and/or companies they are typically less risky than investing in equities. However, the long term returns are likely to be lower and there is a risk that the value of your investment could fall.

These funds typically place money on deposit at banks or in money market securities that pay a variable rate of interest. These types of funds offer the least risk, with little volatility, but offer the least potential for investment growth. Their returns are largely influenced by the prevailing interest rate environment, the creditworthiness of the issuers of the money market instruments and inflation. In the current interest rate environment, charges may completely erode the returns these funds provide to you.