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Aviva Investors has flagged three of its funds as failing to deliver value for customers on performance, though it said no changes will be made to the funds.
Aviva, which manages 15 investment funds, revealed in its latest Assessment of Value report that three funds are struggling to beat their benchmark.
Asset managers are required to publish an Assessment of Value report annually by the Financial Conduct Authority.
First, the £138m Aviva Investors Continental European Equity Fund was red-flagged for performance after its management changed to MFS International in November 2022.
Aviva said that the fund’s performance had been “hampered by a single stock,” as MFS had failed to add Danish pharmaceutical giant Novo Nordisk to the portfolio due to viewing it as “overvalued”.
However, Novo Nordisk has since grown to become the second largest company in Europe, while another European company not held in the portfolio, ASML, also achieved stellar returns over the year.
This caused the fund to grow 12.9 per cent over the last year, compared to a benchmark growth of 15.2 per cent.
“The fund remains under review following our standard monitoring process as returns are below the benchmark objective, however the board are aware of the specific reasons for this and remain supportive of the portfolio manager,” said Aviva.
Secondly, the £185m Aviva Investors Higher Income Plus Fund received a red flag after growing 9.8 per cent in the last year, compared to a benchmark growth of 12.5 per cent, thanks in large part to a bond holding in Thames Water.
“Thames Water is currently in the process of restructuring their debt to enable them to support future infrastructure investment commitments, and whilst this uncertainty exists it is having a detrimental impact on the value of this bond,” explained the firm, adding that no changes would be made to the fund as a result.
The final fund to receive a red flag on performance was the £144m Aviva Investors Multi-asset Income fund, which did manage to match its benchmark over the last year, but has provided less than half of the benchmark’s gains over the last five years.
In September last year, after an unsatisfactory 2024 Assessment of Value, the fund underwent a wide range of changes, including removing geographical restrictions and allowing it to invest in a wider range of assets.
“Whilst the returns over the last year are positive, the board are mindful that the fund has not delivered value to investors over the longer term and are pleased that the programme to modernise the fund is now complete, positioning the fund to deliver value to investors going forward,” said Aviva.
The three funds’ poor performance led to their receiving an ‘amber’ rating for their overall score on providing value.
Several of Aviva’s other funds, such as its Sterling Corporate Bond fund, received an amber rating for their quality of service or performance.
