None of the information provided is investment or tax advice. You should always read the associated risks before deciding whether to invest. These can be found on the product pages as well as in our risks overview. Please confirm you have read the information above.
Downing launches new actively managed liquid alternatives fund aiming to deliver 7% to 10%+ per annum and positive returns in most markets. The new MGTS Downing Active Defined Return Assets Fund (‘Active Defined Returns’, the ‘Fund’), is the first fund from its new Liquid Alternatives team.
The Fund is aimed at institutional investors, Discretionary Fund Managers, IFAs and advised sophisticated individual investors, and will primarily consist of UK Government bonds and large-cap equity index options, which provide significant scalability and strong liquidity. It aims to deliver 7% to 10%+ per annum and positive returns in all markets except for a sustained equity market fall (generally more than 35%), over a period of at least six years.
The Fund is the first to be launched by the new Liquid Alternatives Team established by Downing. Collectively, the team has over 125 years of experience and sector knowledge, and includes Tony Stenning, who held senior roles at BlackRock and most recently was CEO of Atlantic House Group; Russell Catley, founder and also a former CEO of Atlantic House Group; Huw Price, a former Executive Director at Santander Asset Management, and Paul Adams, former Head of Cash Equities and Derivatives Sales, Royal Bank of Canada.
The Fund offers investors a compelling building block for multi-asset portfolios, aiming to add consistent and predictable returns, typically secured with a portfolio of UK Government bonds. The unique proposition includes a hybrid approach of using systematic derivative strategies and active management, combining liquid investments with predictable returns, and an equity like risk profile.
Investment strategy: Maximising the probability of delivering predictable defined returns across the economic cycle.
Systematic Liquid Derivatives: Systematic, derivative strategies optimise the equity risk-return profile. The Fund uses rules-based derivative strategies linked to the most liquid, large-cap global equity indices (i.e. FTSE100, S&P500) with the aim of harvesting well-proven consistent returns across a wide corridor of market conditions.
Strong security: The Fund will hold a high-quality portfolio of assets as secure collateral – typically UK Government bonds.
Active benefits: At times, rules-based, passive derivative strategies can underperform when markets move strongly – this is when specialist active management can add incremental gains by monitoring and monetising positions and applying active risk management.
Key benefits
Increased consistency and predictability of returns: Positive returns in all markets except for a sustained equity market fall of more than 35% over at least six years.
Diversification of risk: The Fund’s risk components are diversified across large, liquid equity indices, observation levels and counterparties. Secured with high-quality assets – typically UK Government bonds.
Active management: Our experienced team will actively manage the Fund and its investments to optimise risk and reward for investors.
Russell Catley, Head of Retail, Liquid Alternatives at Downing, said: “Put simply, we focus your investment risk on the probability of receiving the returns you need, not those you don’t. We target the highest probability of delivering 7% to 10%+ per annum with active management adding material incremental gains. We believe that we are building the next evolution of the proven success of Defined Returns funds
The Downing team isseeing strong demand from clients looking for alternatives to large-cap equity funds which are becoming concentrated in technology stocks, or alternatives to UK equity income funds and illiquid alternatives.”
Tony Stenning, Head of Liquid Alternatives at Downing, said: “The launch of our Active Defined Return Assets Fund is a significant milestone in the ambitious build-out of our new Liquid Alternatives strategies. It is a solution-focused fund that should deliver stable high single or low double-digit returns across a wide spectrum of equity market conditions, except for a persistent multi-year bear market. The Fund is designed to enhance balanced portfolios by providing consistent, predictable returns and is suitable for accumulation or drawdown.
“We aim to deliver a unique combination of proven systematic derivative strategies and specialist active management, and we are doing so at a very compelling fee level, below our closest competitors and in line with active ETFs.”
How the Fund is expected to perform in different markets
In bullish markets: UK Government bonds secure the capital, and the equity index options deliver a predictable 7-10%+ return per annum – giving up some less likely upside.
In neutral markets and normal market corrections: UK Government bonds secure the capital, and the index options deliver a predictable 7-10%+ return per annum.
In a sustained sell-off: if markets fall more than the cover to capital loss and do not recover for six years. Then capital is eroded 1:1 in line with the worst performing index.
The average Cover to Capital Loss is targeted at 35%: the average cover to capital loss represents the average level the Global indices within the Fund could fall before capital is at risk.
Fund key risks
Performance: Capital is at risk. Investors may not get back the full amount invested.
Liquidity: Access to capital is always subject to liquidity.
Counterparty risk: Other parties could default on the contractual obligations.
Fund Structure
UK regulated OEIC fund structure, fully UCITS compliant
Daily dealing, at published NAV
Minimum investment: £100,000
SRRI: 6 out of 7
Depositary: Bank of New York
Authorised corporate Director (‘ACD’): Margetts Fund Management Ltd.
I share-class: SEDOL: BM8J604 / ISIN: GB00BM8J6044
F share-class: SEDOL: BM8J615 / ISIN: GB00BM8J6150
Risk warning: Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Please refer to the latest full Prospectus and KIID before investing; your attention is drawn to the risk, fees and taxation factors contained therein. Please note that past performance is not a reliable indicator of future results. Capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in this fund should be held for the long term.
Important notice: This document is intended for professional investors and has been approved as a financial promotion in line with Section 21 of the FSMA by Downing LLP (“Downing”). This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Downing does not offer investment or tax advice or make recommendations regarding investments. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street, London EC3R 6AF.
The cost of finance has dominated the lending markets over the last year but the last six months, in particular, have changed the outlook for residential development in 2025. Parik Chandra, Partner and Head of Specialist Lending looks back at 2024’s key moments for lending markets and their likely impact on the coming year.
"Get Britain building again": headwinds and opportunities
2024 saw significant change in the prospects for the UK housing market. A new government has promised to get ‘Britain building again’ and on October 30th published more of the investment detail that stands behind this promise. But the housing market is not an island and the election of Donald Trump as well as views here on the government’s tax, spending and investment commitments mean there will be headwinds as well as opportunities ahead for the new build sector.
In her inaugural budget, Rachel Reeves reinforced the government’s commitment to the new homes market with a £5 billion investment by 2026 to push Britain towards its 1.5m[1] new homes target. She also announced funding to the tune of £3 billion of additional support for SMEs and the build to rent sector in the form of housing guarantee schemes. This should be of particular benefit to smaller house builders. In addition, the government pledged £46 million of additional funding to support the recruitment and training of 300 new planning staff, to accelerate work on large sites that are stuck in the system, and increase local planning capacity. Whether this is significant remains to be seen given the backlogs already in place.
Aside from direct interventions, the budget will also have an indirect impact on the new homes and housing sector. The headline grabbing increase in employer National Insurance payments, as well as the rise in minimum wage, will impact on business in the housing sector as much as anywhere elsewhere, which could have an impact on the recruitment of the skills needed to get homes built. Smaller businesses may take heart that the employment allowance will be increased from £5,000 to £10,500, and the £100,000 cap removed so some small companies will be paying less. But in most respects the cost of doing business will have risen for many.
Rising borrowing costs and their implications
As a consequence of the budget, gilt yields rose as markets absorbed the sharp rises in investment, taxes and borrowing to the point where on November 8th, Bloomberg reported that the Chancellor is already at risk of breaking Labour’s manifesto pledge to hold just one fiscal event a year[2]. Rising borrowing costs and weaker growth both threaten to wipe out the £9.9 billion of headroom the Chancellor had decreed as part of her “stability rule”.
Clearly, bond investors are concerned that the Chancellor’s plans to run up borrowing to boost investments will fuel inflation, probably limiting the Bank of England’s ability to cut interest rates much further than November’s quarter of one percent. The cut is useful for mortgage affordability but had little impact on swap rates which rose. The prospect of higher interest rates for longer is a very real one. As SONIA swaps rise so does mortgage pricing. The indirect consequences of the government’s plan and the reality of a Trump presidency continue to fuel the expectation of rising inflation and subsequent decisions in central banks to keep it under control by raising rates.
Update to Stamp Duty Land Tax
The housing market will have direct impacts of the budget to deal with like the second homeowners and landlords 2% increase in Stamp Duty Land Tax and existing and first-time buyers also seeing no extension granted to current relief thresholds which are due to expire from March of next year. There are numerous reports that chains involving landlords are already collapsing[3].
Greenbelt and 'grey belt'
For the year ahead, the issues of note beyond finance are readily visible. The Biodiversity Net Gain legislation introduced in February of 2024 is driving some landowners to set aside farmland and greenbelt to support developers having to offset the impacts on nature of their new build. This was not necessarily what the government had planned and may impact certain land prices. The Future Homes Standards are due to come into effect this year too but are still the subject of much lobbying as builders seek to water down the additional cost of construction.
The arguments about ‘grey belt’ are far from over. There is no legal definition of this term and many in the green lobby worry that a privately owned green belt will be left to ruin in order to reclassify and sell the land for development. Finally, there is inflation and its impact on the cost of materials and labour as well as how many developers will want to build vast numbers of affordable homes where the margins are so much less attractive than open market homes.
Private market opportunity
What we do know is that the government in its budget and legislative action is effectively asking the private sector to provide the cash support for developers and buyers of new homes and that brings opportunity. With so much impetus and focus, there is a real chance that the new homes sector will be the key player in the broader UK housing market over the coming five years and we should all be ready to support it.
.jpeg)
