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3/12/2021
5
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Building a brighter future

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Downing
Downing

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 is seeing 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

Learn more about the Fund here.


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.

To accelerate the UK’s transition to net zero, the nation requires a mix of renewable power sources and solar energy is a key player in this mix.

As of the end of September 2021, there were 1.1 million solar installations across the UK.* Pursuing the development and operation of these solar farms has now become an intergenerational responsibility.

Green energy education 

To continue this legacy, Downing is pleased to be partnering with Earth Energy Education, a company dedicated to getting children out of the classroom and visiting renewable energy sites across the UK to educate them about green energy.  

During the 2021/22 school year, Earth Energy Education will be facilitating 10 school visits to several ground-mounted solar projects managed by Downing. During these trips, the children will learn what makes solar energy renewable and its environmental benefits. Perhaps most importantly, the children will learn and understand the relationship between climate and energy consumption - important knowledge when addressing climate change.

Additionally, Earth Energy Education will be arranging five classroom “solar toy design and make days" leading to one big inter-school solar car race day.  By constructing solar toys and sun-fuelled cars, children will get to grips with how solar technology can be used in a hands-on session. 

Finally, the group will be holding five “power your school” workshops. Working with a UK-wide network of scientists, children will have the opportunity to record energy data in their school. They will use this data to design the best location to install solar panels or wind turbines. It will be a valuable exercise for the children who will learn about the efficiencies of installing renewable energy generators.   

In all, these vital sessions will reach and hopefully inspire around 1300 children. With these children, the future of solar is looking bright.  

An intergenerational responsibility  

Downing’s Head of Asset Management, Tom Moore, underlined the importance of passing on practical knowledge of renewable energy: “We are proud to be partnering with Earth Energy Education. Dedicated time to facilitate education around solar power is  an important steppingstone in our pathway to net zero. While a lot of the responsibility for action still lies with our generation, if we can inspire children about the role of solar in tackling climate change, we can make some tangible and sustainable steps in creating a viable renewable energy mix.”  

Earth Energy Education’s Lorna Lyle also commented: “We are proud that Downing chose us to be their educational delivery partner. We cannot wait to share our real-life learning experiences with the schools near their sites. Through our partnership, we will be organising school visits to Downing-managed solar farms where children will learn more about light, electricity, renewable energy and ways to combat climate change.  

We will be able to deliver our Power Your School workshop with five schools helping to move the schools towards a net zero future. We will also be working with several schools bringing them together to develop solar toys and solar cars.  

With this partnership, we hope to break down barriers for children entering into STEM (science, technology, engineering and mathematics) careers and inspire the next generation to achieve their goals.” 

*https://www.gov.uk/government/statistics/solar-photovoltaics-deployment  

Find out more information on our Energy and Infrastructure team.

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