Alternative Investments Fund
Alternative Investments Fund annual short report for the period 1 January 2010 to 31 December 2010 Terms in italics are explained in the glossary at the end of this document.
fund objective The Fund aims to provide investors with long term capital growth by investing in a diversified range of assets.
investment policy The Fund will primarily invest in collective investment schemes in order to gain exposure to a diversified portfolio of investments including, but not limited to, cash, fixed interest, commodities (indirectly), currency, equities and derivatives. The Fund may invest in collective investment schemes that are managed or operated by the Authorised Corporate Director (ACD) or an associate of the ACD. The Fund may also invest in transferable securities. Derivatives (including, but not limited to, contracts for difference and swaps) may be used with the aim of creating positions which increase in value as the price of the underlying investment falls, or alternatively positions which increase in value as the price of the underlying investment rises. The Fund may also use derivatives (including, but not limited to, contracts for difference and exchange traded futures) with the aim of reducing the market exposure of the Fund. Forward transactions may also be used with the aim of reducing currency risk for currency hedged share classes.
risk profile The Fund invests in a diversified range of non-traditional investments. These investments are blended with the aim of keeping the variability of returns comparatively low and the performance is expected to be very different from that of traditional investments such as equities (shares) and fixed interest securities. This means that the Fund is likely to underperform traditional investments when stock markets are rising strongly. Some of the investments are accessed indirectly through companies operating in the relevant area. To reduce the resultant exposure to the normal ups and downs of the stock market, the Fund has the ability to take ‘short’ positions in market indices. This should enhance returns when stock markets are falling but is likely to reduce them when stock markets are rising. The Fund aims to achieve positive returns over any twelve month period, but this cannot be guaranteed
as it depends on investment performance. The Fund holds investments from the UK and overseas. The Fund offers Sterling hedged, USD hedged and Swedish Krona hedged share classes to protect investors against the risk of adverse currency movements. However, where the currency exposure is not fully hedged, the value may rise or fall purely as a result of exchange rate fluctuations.
fund mana¯er’s report Global financial markets generally performed well over 2010, but experienced several setbacks along the way, as investors’ confidence in the global economic recovery faltered intermittently and worries about government debt problems in Europe took precedence. Global equity markets recorded strong gains, with the MSCI World Index rising 15.3% in Sterling terms. Bond markets were more mixed, but nonetheless both government and corporate bonds ended the year in positive territory. After a mixed start, commodity markets rallied very strongly during the second half of the period, buoyed by growing demand from emerging markets. The Alternative Investments Fund recorded a small positive return in 2010, as weakness earlier in the year largely offset gains during the second half of the period. Many of the holdings struggled in May, when market volatility rose sharply and most asset classes fell as investors became more risk-averse. Performance later improved, helped by strong returns from the TG RARE Infrastructure and BlackRock Gold & General funds. The latter was added to the Alternative Investments Fund in July and later sold after benefiting from a sharp rise in the price of gold and other precious metals. A number of changes were made to the underlying holdings over the year, with the aim of improving the fund’s risk/return profile. The Macquarie Global Infrastructure Securities Fund, the timber portfolio and the KBC Institutional Water Fund were sold following strong performance. Some of the proceeds were reinvested in the JP Morgan Income Opportunity Fund, which invests across a broad spectrum of global fixed interest securities, and the Nomura S&P DTI Fund, which seeks to profit from trends in global financial markets. During the second half of the year, corporate restructuring at Morgan Stanley led to the sale of their FX Alpha Plus RC400 and Commodities Alpha Plus funds. These were later replaced with the Fulcrum Commodity,
A
fund mana¯er’s report continued Threadneedle Enhanced Commodities and Henderson Horizon Global Currency funds. New positions were also taken in the Majedie Tortoise and Liontrust Credit Absolute Return funds, which aim to generate positive returns through taking long and short positions in UK equities and European corporate bond markets, respectively. In addition, the fund invested in the M&G
Macro Episode Fund, which invests across a broad range of assets, and the Investec Emerging Markets Local Currency Debt Fund. Finally, the Aviva Absolute Tactical Asset Allocation Fund was removed due to the departure of one its managers. The mention of any particular stock should not be taken as a recommendation to buy or sell investments.
fund facts The Fund offers accumulation shares only, whereby any income is automatically reinvested to increase the capital value of your investment. Fund accounting dates (ex-dividend dates)
Fund payment/ accumulation dates
31 December
28 February
30 June
31 August
distribution The Alternative Investments Fund was launched on 23 June 2008 at which date both GBP and USD shares were first offered for sale. SEK shares were first offered for sale on 28 October 2008. There has been no distribution since launch.
total expense ratio (TER) The Total Expense Ratio represents all operating charges and expenses as a percentage of a fund’s value. It includes the Annual Management Charge as well as all the regular administrative costs incurred by a fund. Share class
TER as at 31 December 2010
TER as at 31 December 2009
Accumulation - GBP
2.47%*
2.63%
Accumulation - SEK
2.64%*
2.64%
Accumulation - USD
2.59%*
2.57%
*The above TER includes performance fees totalling 0.06%. These have been charged by certain of the underlying funds in which this Fund is invested.
share price performance The table below shows the highest and lowest price in pence/öre/cents per share for the calendar years indicated. Calendar year
Highest price
Lowest price
2008 Accumulation GBP*
50.25 pence
41.61 pence
2008 Accumulation SEK**
11.04 öre
2008 Accumulation USD*
52.77 cents
41.02 cents
2009 Accumulation GBP
48.45 pence
43.52 pence
2009 Accumulation SEK
11.69 öre
10.51 öre
2009 Accumulation USD
47.02 cents
42.30 cents
2010 Accumulation GBP
49.32 pence
46.74 pence
2010 Accumulation SEK
11.87 öre
11.24 öre
2010 Accumulation USD
47.76 cents
45.24 cents
*from 23 June **from 28 October
9.93 öre
fund performance Share class
Net asset value per share as at 31 December 2010
Net asset value per share as at 31 December 2009
% change
Accumulation GBP
49.08 pence
48.21 pence
1.80%
Accumulation SEK
112.25 pence
100.85 pence
11.30%
Accumulation USD
30.31 pence
28.97 pence
4.63%
Date
Net asset value of Fund
31 December 2008 Accumulation GBP Accumulation SEK Accumulation USD
£30,459,429 £17,676,228 £4,486,586 £8,296,615
Shares in issue – 38,450,398 4,601,482 26,607,148
Net asset value per share – 45.97 pence 97.50 pence 31.18 pence
31 December 2009 Accumulation GBP Accumulation SEK Accumulation USD
£73,350,953 £59,737,681 £5,953,461 £7,659,811
– 123,899,046 5,903,069 26,435,932
– 48.21 pence 100.85 pence 28.97 pence
31 December 2010 Accumulation GBP Accumulation SEK Accumulation USD
£73,044,484 £59,823,711 £5,276,128 £7,944,645
– 121,899,390 4,700,481 26,215,148
– 49.08 pence 112.25 pence 30.31 pence
Since launch*
Percentage change to 31 December 2010
Share class
1 year
Fund performance GBP
1.20%
-1.94%
*from 23 June 2008 Source: Financial Express. Figures are calculated on a total return and single price basis, with net income reinvested into the Fund.
You should not view past performance as an indication of future performance. The value of investments and any income from them may fall as well as rise and you may not get back the amount you invested. Where a fund invests in securities designated in a different currency to the Fund, the value of the Fund may rise and fall purely as a result of exchange rate fluctuations.
major holdin¯s The table below shows the top ten holdings of the Fund. All holdings will be shown if there are less than ten holdings. As at 31 December 2010
%
As at 31 December 2009
%
JPM Highbridge Statistical Market Neutral Fund
13.46
JPM Highbridge Statistical Market Neutral Fund
13.69
Commerzbank UK Premia Fund
12.05
Morgan Stanley FX Alpha Plus RC400 Fund
12.71
Nomura Int Enovara S&P Diversified Trends Indicator Fund 11.00
Commerzbank UK Premia Fund
12.05
Fulcrum Alternative Beta Plus Fund
KBC ECO Water Fund
11.40
M&G Macro Episode Fund
10.67 9.95
Fulcrum Alternative Beta Plus Fund
10.02
JP Morgan Income Opportunity Fund
8.11
Morgan Stanley Commodities Alpha Plus Fund
8.29
Majedie-Tortoise Fund
6.97
Aviva Absolute Tactical Asset Allocation (TAA) Fund
7.19
Henderson Global Currency Fund
5.07
Macquarie Global Infrastructure Securities Fund
7.16
Investec Emerging Markets Local Currency Debt Fund
4.99
TG Rare Infrastructure Fund
4.02
Threadneedle Enhanced Commodities Fund
4.71
–
–
tar¯et asset allocation as at 31 December 2010 Market neutral, 14.2% Violatility, 12.0% Managed Futures, 11.3% Fund of hedge fund replacement, 10.2% Global Macro allocation, 10.0% Long/short fixed interest, 8.1% Long/short Equity, 7.0% Local Currency EMD, 5.0% Currency, 5.0% Commodities, 4.5% Infrastructure, 4.0% Long/short Credit, 4.0% Absolute Return, 3.0% Cash, 1.7%
tar¯et asset allocation as at 31 December 2009 Equity Market Neutral, 14.20% Currency, 13.10% Volatility, 12.00% Infrastructure, 11.20% Water, 10.40% Fund of Hedge Fund Replacement, 10.20% Commodities, 7.90% Global Macroeconomic Allocation, 7.90% Timber, 7.20% Equity Hedge, 5.90%
¯lossary Bonds – a type of fixed income investment. Can be issued by corporations (known as Corporate bonds) and governments (known as Gilts). Collective investment schemes – are investments, such as OEICS or Unit Trusts, in which money from investors is pooled into a professionally managed fund. Commodities – a tradable item that can generally be further processed and sold (eg metals, wheat, sugar, coal). Contracts for difference – are types of derivative (see below) that can be used with the aim of making money out of assets that either rise in value or those that fall in value. Derivatives – derivatives are contracts between two or more parties whose value is derived from a related asset. The most common related assets include shares, fixed interest securities, commodities, currencies, interest rates and market indices. Derivatives can be used for speculative purposes but in investment funds they are generally used to reduce risk. Fixed interest securities – a fixed-term investment that pays interest at a rate that does not change with any external variable, known as the coupon. Coupons are known in advance and are almost always all for the same amount and paid at regular intervals. Forward transactions – forward transactions are also known as futures, are agreements to buy or sell assets for delivery at a certain time in the future for a certain price. Hedge – making an investment to reduce the risk of adverse price movements in an asset. Although hedging can reduce potential losses, it can also tend to reduce potential profits. Long/short position – the purchase of a contract against a security, commodity or currency, with the expectation that the asset will rise/fall in value. Swaps – An exchange of securities between two investors. Transferable securities – a security whose ownership can be transferred between parties.
the asset classes held: Absolute return – Absolute return funds look to make positive returns whether the overall market is up or down. Commodities – Gives you access not to commodity companies but to real commodities, such as wheat, sugar, oil and cotton, and therefore has a low correlation to shares. Currency – The ease of buying and selling currencies allows skilled investment managers the opportunity to profit through a disciplined, risk-controlled approach, exploiting the tendency for higher interest rate currencies to outperform lower rate currencies. Equity market neutral – Based on mathematical modelling, this strategy seeks to exploit opportunities arising from the fact that share (equity) prices do not always reflect all information flows. Markets are not perfect so pricing ‘inefficiencies’ can be exploited. By having a roughly equal exposure to shares expected to rise and those expected to fall (via derivatives) it aims to generate positive returns regardless of the direction of the stockmarket. Fund of hedge fund replacement – Hedge funds have a low correlation to traditional assets and hold the potential for attractive returns with lower risk, which makes them beneficial within balanced portfolios. However, they are often thought unsuitable for retail investors due to high fees and a lack of transparency or regulation. Fund of hedge fund replacement is a strategy which seeks to harness the benefits of funds of hedge funds in a transparent, accessible and regulated form, and at significantly lower cost than funds of hedge funds themselves. Global macro-economic allocation – Global macro-economic allocation seeks to evaluate the attractiveness of a range of asset classes across all regions and countries, and to position a portfolio to benefit from pricing inefficiencies. Analysis of global economic conditions determines which assets are expected to perform best and the portfolio is weighted accordingly. The strategy looks to make consistent returns regardless of stock market direction. Infrastructure – Infrastructure is a defensive asset class which is likely to produce less variable performance than shares as a whole. It provides exposure to global listed infrastructure companies in areas such as gas/electricity distribution and toll roads. Local currency emerging market debt – This strategy provides exposure to potential appreciation in emerging market currencies as well as higher interest rates (yields) compared to developed bond markets. Local currency bond markets are growing and improving in quality, as emerging countries develop both economically and financially, presenting significant investment opportunities. Long/short equity – This strategy aims to deliver positive returns over the long term through investment in equities. Its flexibility to take both long and short positions enables it to benefit from both rising and falling share prices. Long/short fixed interest – This strategy seeks to deliver positive returns over the medium term regardless of market conditions by investing in a broad range of fixed income and currency markets worldwide. The manager may take short positions, giving the strategy the potential to benefit from falling as well as rising markets. The strategy is flexible and not constrained by a benchmark, allowing the manager to adjust the allocations to different markets depending on where the best opportunities lie. Managed Futures – This strategy involves investing in a range of future markets worldwide in order to profit from trends in those markets. Such funds can go long or short and usually employ a systematic approach to trading the momentum in the price of the futures. Typically this strategy is lowly correlated with equities and provides good diversification benefits alongside other asset classes. Volatility – This strategy is designed to capture the systematic mis-pricing of options in the UK equity market (an option is a kind of agreement that gives the buyer the right, but not the obligation, to buy or sell an investment at an agreed price by a specified date). It is based on the premise that actual variability of returns, or ‘volatility’, of shares is almost always lower than expected volatility. The strategy aims to deliver a return with low volatility, and low correlation to the stockmarket. Water – As a staple of life, water is always in demand whatever the economic conditions and is therefore described as a ‘defensive’ asset class. In the Skandia Alternative Investments Fund it is accessed through companies involved in water activities, including: • utilities • water infrastructure and equipment • water technologies • construction and engineering • environmental control and metering
report and accounts
authorised corporate director (ACD)
Copies of the annual and half-yearly Long Form Report and Accounts are available on request, free of charge, from our Edinburgh office. To contact us please call 0844 892 0996* or write to:
The Alternative Investments Fund is managed by Skandia Investment Management Limited, which is the Authorised Corporate Director (ACD) of the Fund. Its registered address is:
Skandia Investment Management Limited PO Box 23486 12 Blenheim Place Edinburgh EH7 5YB
Skandia Investment Management Limited Skandia House Portland Terrace Southampton SO14 7EJ
depositary
Skandia Investment Management Limited is a company limited by shares, incorporated in England and Wales and authorised and regulated by the Financial Services Authority.
The independent Depositary is the Royal Bank of Scotland plc, whose registered address is: Royal Bank of Scotland plc 36 St Andrew Square Edinburgh United Kingdom EH2 2YB The Depositary is authorised and regulated by the Financial Services Authority, whose address is: Financial Services Authority 25 The North Colonnade Canary Wharf London
auditors The Fund’s independent auditors are KPMG Audit plc, whose registered address is: KPMG Audit plc 15 Canada Square London E14 5GL
how to contact us If you have any questions please contact us or call your financial adviser. Our offices are open on business days between the hours of 8.30am and 5.30pm. To contact us please call 0844 892 0996* or write to: Skandia Investment Management Limited PO Box 23486 12 Blenheim Place Edinburgh EH7 5YB If you would like general information on the funds or on Skandia Investment Management Limited, you can visit our website: www.skandiainvestmentmanagement.com *calls are charged at a rate of 3p per minute from a BT land line. Customers who have telephone services with other providers may have different call charges. Calls from the mobiles or internet services may be considerably higher.
Financial Express and Skandia Investment Management Limited have done all they reasonably can to ensure the information contained in this short report is accurate. However, neither can accept any responsibility for decisions made by investors nor for any loss investors may suffer as a result of those decisions. www.skandiainvestmentmanagement.com Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Skandia Investment Management Limited is registered in England & Wales under number 4227837. Registered Office: Skandia House, Portland Terrace, Southampton, SO14 7EJ, United Kingdom. Authorised and regulated by the Financial Services Authority. FSA Register number 208543. VAT number 386 1301 59. When printed by Skandia this item is produced on a mixed grade material, which uses a combination of recycled wood or paper fibre from controlled sources and virgin fibre sourced from well managed, sustainable forests. SK5748/AIF//April 2011
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fund objective The Fund aims to provide investors with long term capital growth by investing in a diversified range of assets.
investment policy The Fund will primarily invest in collective investment schemes in order to gain exposure to a diversified portfolio of investments including, but not limited to, cash, fixed interest, commodities (indirectly), currency, equities and derivatives. The Fund may invest in collective investment schemes that are managed or operated by the Authorised Corporate Director (ACD) or an associate of the ACD. The Fund may also invest in transferable securities. Derivatives (including, but not limited to, contracts for difference and swaps) may be used with the aim of creating positions which increase in value as the price of the underlying investment falls, or alternatively positions which increase in value as the price of the underlying investment rises. The Fund may also use derivatives (including, but not limited to, contracts for difference and exchange traded futures) with the aim of reducing the market exposure of the Fund. Forward transactions may also be used with the aim of reducing currency risk for currency hedged share classes.
risk profile The Fund invests in a diversified range of non-traditional investments. These investments are blended with the aim of keeping the variability of returns comparatively low and the performance is expected to be very different from that of traditional investments such as equities (shares) and fixed interest securities. This means that the Fund is likely to underperform traditional investments when stock markets are rising strongly. Some of the investments are accessed indirectly through companies operating in the relevant area. To reduce the resultant exposure to the normal ups and downs of the stock market, the Fund has the ability to take ‘short’ positions in market indices. This should enhance returns when stock markets are falling but is likely to reduce them when stock markets are rising. The Fund aims to achieve positive returns over any twelve month period, but this cannot be guaranteed
as it depends on investment performance. The Fund holds investments from the UK and overseas. The Fund offers Sterling hedged, USD hedged and Swedish Krona hedged share classes to protect investors against the risk of adverse currency movements. However, where the currency exposure is not fully hedged, the value may rise or fall purely as a result of exchange rate fluctuations.
fund mana¯er’s report Global financial markets generally performed well over 2010, but experienced several setbacks along the way, as investors’ confidence in the global economic recovery faltered intermittently and worries about government debt problems in Europe took precedence. Global equity markets recorded strong gains, with the MSCI World Index rising 15.3% in Sterling terms. Bond markets were more mixed, but nonetheless both government and corporate bonds ended the year in positive territory. After a mixed start, commodity markets rallied very strongly during the second half of the period, buoyed by growing demand from emerging markets. The Alternative Investments Fund recorded a small positive return in 2010, as weakness earlier in the year largely offset gains during the second half of the period. Many of the holdings struggled in May, when market volatility rose sharply and most asset classes fell as investors became more risk-averse. Performance later improved, helped by strong returns from the TG RARE Infrastructure and BlackRock Gold & General funds. The latter was added to the Alternative Investments Fund in July and later sold after benefiting from a sharp rise in the price of gold and other precious metals. A number of changes were made to the underlying holdings over the year, with the aim of improving the fund’s risk/return profile. The Macquarie Global Infrastructure Securities Fund, the timber portfolio and the KBC Institutional Water Fund were sold following strong performance. Some of the proceeds were reinvested in the JP Morgan Income Opportunity Fund, which invests across a broad spectrum of global fixed interest securities, and the Nomura S&P DTI Fund, which seeks to profit from trends in global financial markets. During the second half of the year, corporate restructuring at Morgan Stanley led to the sale of their FX Alpha Plus RC400 and Commodities Alpha Plus funds. These were later replaced with the Fulcrum Commodity,
A
fund mana¯er’s report continued Threadneedle Enhanced Commodities and Henderson Horizon Global Currency funds. New positions were also taken in the Majedie Tortoise and Liontrust Credit Absolute Return funds, which aim to generate positive returns through taking long and short positions in UK equities and European corporate bond markets, respectively. In addition, the fund invested in the M&G
Macro Episode Fund, which invests across a broad range of assets, and the Investec Emerging Markets Local Currency Debt Fund. Finally, the Aviva Absolute Tactical Asset Allocation Fund was removed due to the departure of one its managers. The mention of any particular stock should not be taken as a recommendation to buy or sell investments.
fund facts The Fund offers accumulation shares only, whereby any income is automatically reinvested to increase the capital value of your investment. Fund accounting dates (ex-dividend dates)
Fund payment/ accumulation dates
31 December
28 February
30 June
31 August
distribution The Alternative Investments Fund was launched on 23 June 2008 at which date both GBP and USD shares were first offered for sale. SEK shares were first offered for sale on 28 October 2008. There has been no distribution since launch.
total expense ratio (TER) The Total Expense Ratio represents all operating charges and expenses as a percentage of a fund’s value. It includes the Annual Management Charge as well as all the regular administrative costs incurred by a fund. Share class
TER as at 31 December 2010
TER as at 31 December 2009
Accumulation - GBP
2.47%*
2.63%
Accumulation - SEK
2.64%*
2.64%
Accumulation - USD
2.59%*
2.57%
*The above TER includes performance fees totalling 0.06%. These have been charged by certain of the underlying funds in which this Fund is invested.
share price performance The table below shows the highest and lowest price in pence/öre/cents per share for the calendar years indicated. Calendar year
Highest price
Lowest price
2008 Accumulation GBP*
50.25 pence
41.61 pence
2008 Accumulation SEK**
11.04 öre
2008 Accumulation USD*
52.77 cents
41.02 cents
2009 Accumulation GBP
48.45 pence
43.52 pence
2009 Accumulation SEK
11.69 öre
10.51 öre
2009 Accumulation USD
47.02 cents
42.30 cents
2010 Accumulation GBP
49.32 pence
46.74 pence
2010 Accumulation SEK
11.87 öre
11.24 öre
2010 Accumulation USD
47.76 cents
45.24 cents
*from 23 June **from 28 October
9.93 öre
fund performance Share class
Net asset value per share as at 31 December 2010
Net asset value per share as at 31 December 2009
% change
Accumulation GBP
49.08 pence
48.21 pence
1.80%
Accumulation SEK
112.25 pence
100.85 pence
11.30%
Accumulation USD
30.31 pence
28.97 pence
4.63%
Date
Net asset value of Fund
31 December 2008 Accumulation GBP Accumulation SEK Accumulation USD
£30,459,429 £17,676,228 £4,486,586 £8,296,615
Shares in issue – 38,450,398 4,601,482 26,607,148
Net asset value per share – 45.97 pence 97.50 pence 31.18 pence
31 December 2009 Accumulation GBP Accumulation SEK Accumulation USD
£73,350,953 £59,737,681 £5,953,461 £7,659,811
– 123,899,046 5,903,069 26,435,932
– 48.21 pence 100.85 pence 28.97 pence
31 December 2010 Accumulation GBP Accumulation SEK Accumulation USD
£73,044,484 £59,823,711 £5,276,128 £7,944,645
– 121,899,390 4,700,481 26,215,148
– 49.08 pence 112.25 pence 30.31 pence
Since launch*
Percentage change to 31 December 2010
Share class
1 year
Fund performance GBP
1.20%
-1.94%
*from 23 June 2008 Source: Financial Express. Figures are calculated on a total return and single price basis, with net income reinvested into the Fund.
You should not view past performance as an indication of future performance. The value of investments and any income from them may fall as well as rise and you may not get back the amount you invested. Where a fund invests in securities designated in a different currency to the Fund, the value of the Fund may rise and fall purely as a result of exchange rate fluctuations.
major holdin¯s The table below shows the top ten holdings of the Fund. All holdings will be shown if there are less than ten holdings. As at 31 December 2010
%
As at 31 December 2009
%
JPM Highbridge Statistical Market Neutral Fund
13.46
JPM Highbridge Statistical Market Neutral Fund
13.69
Commerzbank UK Premia Fund
12.05
Morgan Stanley FX Alpha Plus RC400 Fund
12.71
Nomura Int Enovara S&P Diversified Trends Indicator Fund 11.00
Commerzbank UK Premia Fund
12.05
Fulcrum Alternative Beta Plus Fund
KBC ECO Water Fund
11.40
M&G Macro Episode Fund
10.67 9.95
Fulcrum Alternative Beta Plus Fund
10.02
JP Morgan Income Opportunity Fund
8.11
Morgan Stanley Commodities Alpha Plus Fund
8.29
Majedie-Tortoise Fund
6.97
Aviva Absolute Tactical Asset Allocation (TAA) Fund
7.19
Henderson Global Currency Fund
5.07
Macquarie Global Infrastructure Securities Fund
7.16
Investec Emerging Markets Local Currency Debt Fund
4.99
TG Rare Infrastructure Fund
4.02
Threadneedle Enhanced Commodities Fund
4.71
–
–
tar¯et asset allocation as at 31 December 2010 Market neutral, 14.2% Violatility, 12.0% Managed Futures, 11.3% Fund of hedge fund replacement, 10.2% Global Macro allocation, 10.0% Long/short fixed interest, 8.1% Long/short Equity, 7.0% Local Currency EMD, 5.0% Currency, 5.0% Commodities, 4.5% Infrastructure, 4.0% Long/short Credit, 4.0% Absolute Return, 3.0% Cash, 1.7%
tar¯et asset allocation as at 31 December 2009 Equity Market Neutral, 14.20% Currency, 13.10% Volatility, 12.00% Infrastructure, 11.20% Water, 10.40% Fund of Hedge Fund Replacement, 10.20% Commodities, 7.90% Global Macroeconomic Allocation, 7.90% Timber, 7.20% Equity Hedge, 5.90%
¯lossary Bonds – a type of fixed income investment. Can be issued by corporations (known as Corporate bonds) and governments (known as Gilts). Collective investment schemes – are investments, such as OEICS or Unit Trusts, in which money from investors is pooled into a professionally managed fund. Commodities – a tradable item that can generally be further processed and sold (eg metals, wheat, sugar, coal). Contracts for difference – are types of derivative (see below) that can be used with the aim of making money out of assets that either rise in value or those that fall in value. Derivatives – derivatives are contracts between two or more parties whose value is derived from a related asset. The most common related assets include shares, fixed interest securities, commodities, currencies, interest rates and market indices. Derivatives can be used for speculative purposes but in investment funds they are generally used to reduce risk. Fixed interest securities – a fixed-term investment that pays interest at a rate that does not change with any external variable, known as the coupon. Coupons are known in advance and are almost always all for the same amount and paid at regular intervals. Forward transactions – forward transactions are also known as futures, are agreements to buy or sell assets for delivery at a certain time in the future for a certain price. Hedge – making an investment to reduce the risk of adverse price movements in an asset. Although hedging can reduce potential losses, it can also tend to reduce potential profits. Long/short position – the purchase of a contract against a security, commodity or currency, with the expectation that the asset will rise/fall in value. Swaps – An exchange of securities between two investors. Transferable securities – a security whose ownership can be transferred between parties.
the asset classes held: Absolute return – Absolute return funds look to make positive returns whether the overall market is up or down. Commodities – Gives you access not to commodity companies but to real commodities, such as wheat, sugar, oil and cotton, and therefore has a low correlation to shares. Currency – The ease of buying and selling currencies allows skilled investment managers the opportunity to profit through a disciplined, risk-controlled approach, exploiting the tendency for higher interest rate currencies to outperform lower rate currencies. Equity market neutral – Based on mathematical modelling, this strategy seeks to exploit opportunities arising from the fact that share (equity) prices do not always reflect all information flows. Markets are not perfect so pricing ‘inefficiencies’ can be exploited. By having a roughly equal exposure to shares expected to rise and those expected to fall (via derivatives) it aims to generate positive returns regardless of the direction of the stockmarket. Fund of hedge fund replacement – Hedge funds have a low correlation to traditional assets and hold the potential for attractive returns with lower risk, which makes them beneficial within balanced portfolios. However, they are often thought unsuitable for retail investors due to high fees and a lack of transparency or regulation. Fund of hedge fund replacement is a strategy which seeks to harness the benefits of funds of hedge funds in a transparent, accessible and regulated form, and at significantly lower cost than funds of hedge funds themselves. Global macro-economic allocation – Global macro-economic allocation seeks to evaluate the attractiveness of a range of asset classes across all regions and countries, and to position a portfolio to benefit from pricing inefficiencies. Analysis of global economic conditions determines which assets are expected to perform best and the portfolio is weighted accordingly. The strategy looks to make consistent returns regardless of stock market direction. Infrastructure – Infrastructure is a defensive asset class which is likely to produce less variable performance than shares as a whole. It provides exposure to global listed infrastructure companies in areas such as gas/electricity distribution and toll roads. Local currency emerging market debt – This strategy provides exposure to potential appreciation in emerging market currencies as well as higher interest rates (yields) compared to developed bond markets. Local currency bond markets are growing and improving in quality, as emerging countries develop both economically and financially, presenting significant investment opportunities. Long/short equity – This strategy aims to deliver positive returns over the long term through investment in equities. Its flexibility to take both long and short positions enables it to benefit from both rising and falling share prices. Long/short fixed interest – This strategy seeks to deliver positive returns over the medium term regardless of market conditions by investing in a broad range of fixed income and currency markets worldwide. The manager may take short positions, giving the strategy the potential to benefit from falling as well as rising markets. The strategy is flexible and not constrained by a benchmark, allowing the manager to adjust the allocations to different markets depending on where the best opportunities lie. Managed Futures – This strategy involves investing in a range of future markets worldwide in order to profit from trends in those markets. Such funds can go long or short and usually employ a systematic approach to trading the momentum in the price of the futures. Typically this strategy is lowly correlated with equities and provides good diversification benefits alongside other asset classes. Volatility – This strategy is designed to capture the systematic mis-pricing of options in the UK equity market (an option is a kind of agreement that gives the buyer the right, but not the obligation, to buy or sell an investment at an agreed price by a specified date). It is based on the premise that actual variability of returns, or ‘volatility’, of shares is almost always lower than expected volatility. The strategy aims to deliver a return with low volatility, and low correlation to the stockmarket. Water – As a staple of life, water is always in demand whatever the economic conditions and is therefore described as a ‘defensive’ asset class. In the Skandia Alternative Investments Fund it is accessed through companies involved in water activities, including: • utilities • water infrastructure and equipment • water technologies • construction and engineering • environmental control and metering
report and accounts
authorised corporate director (ACD)
Copies of the annual and half-yearly Long Form Report and Accounts are available on request, free of charge, from our Edinburgh office. To contact us please call 0844 892 0996* or write to:
The Alternative Investments Fund is managed by Skandia Investment Management Limited, which is the Authorised Corporate Director (ACD) of the Fund. Its registered address is:
Skandia Investment Management Limited PO Box 23486 12 Blenheim Place Edinburgh EH7 5YB
Skandia Investment Management Limited Skandia House Portland Terrace Southampton SO14 7EJ
depositary
Skandia Investment Management Limited is a company limited by shares, incorporated in England and Wales and authorised and regulated by the Financial Services Authority.
The independent Depositary is the Royal Bank of Scotland plc, whose registered address is: Royal Bank of Scotland plc 36 St Andrew Square Edinburgh United Kingdom EH2 2YB The Depositary is authorised and regulated by the Financial Services Authority, whose address is: Financial Services Authority 25 The North Colonnade Canary Wharf London
auditors The Fund’s independent auditors are KPMG Audit plc, whose registered address is: KPMG Audit plc 15 Canada Square London E14 5GL
how to contact us If you have any questions please contact us or call your financial adviser. Our offices are open on business days between the hours of 8.30am and 5.30pm. To contact us please call 0844 892 0996* or write to: Skandia Investment Management Limited PO Box 23486 12 Blenheim Place Edinburgh EH7 5YB If you would like general information on the funds or on Skandia Investment Management Limited, you can visit our website: www.skandiainvestmentmanagement.com *calls are charged at a rate of 3p per minute from a BT land line. Customers who have telephone services with other providers may have different call charges. Calls from the mobiles or internet services may be considerably higher.
Financial Express and Skandia Investment Management Limited have done all they reasonably can to ensure the information contained in this short report is accurate. However, neither can accept any responsibility for decisions made by investors nor for any loss investors may suffer as a result of those decisions. www.skandiainvestmentmanagement.com Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Skandia Investment Management Limited is registered in England & Wales under number 4227837. Registered Office: Skandia House, Portland Terrace, Southampton, SO14 7EJ, United Kingdom. Authorised and regulated by the Financial Services Authority. FSA Register number 208543. VAT number 386 1301 59. When printed by Skandia this item is produced on a mixed grade material, which uses a combination of recycled wood or paper fibre from controlled sources and virgin fibre sourced from well managed, sustainable forests. SK5748/AIF//April 2011
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