• At Vanguard, we expect return outcomes for multi-asset portfolios to be more balanced than in recent years.
• For investors who prefer an active approach to portfolio management, Vanguard ActiveLife Climate Aware funds offers a core all-in-one multi-asset solution.
• The fund range comprises a large-cap equity portfolio of around 80-110 stocks alongside an allocation to global bond markets.
   

The long-term return outlook for globally diversified multi-asset portfolios has improved, according to Vanguard’s economists.

The return of positive real interest rates is a boost to expected long-term multi-asset returns over the next decade. Though there may still be near-term volatility in equity and bond markets, we expect return outcomes for diversified investors to be more balanced than in recent years.

Vanguard’s range of multi-asset funds and model portfolios—spanning both index and active styles—provides a balanced exposure to global equity and bond markets in a way that is risk-aware through a strategic allocation to global equity and bond markets. All investors need to do is choose the most suitable mix of equities and bonds according to their goals and attitude to risk.

For investors who prefer an active approach to portfolio management, Vanguard ActiveLife Climate Aware offers a core all-in-one multi-asset solution that incorporates sustainability criteria in the investment process.

We look at some of the core characteristics to consider when choosing an active multi-asset solution.

1. Balance

Choosing a portfolio manager that provides a balanced portfolio of stocks and bonds can help to smooth performance across a variety of environments.

Vanguard ActiveLife Climate Aware funds, run by Wellington Management Company, are highly diversified multi-asset funds comprising a large-cap equity portfolio of around 80-110 stocks alongside an allocation to global bond markets.

Regardless of where we are in the economic cycle, the funds are managed according to a strict investment philosophy. They provide exposure primarily to developed market securities and holdings may be selected from across sectors and industry groups. The equity portions of the funds typically invest in a range of large and medium-sized companies chosen on the basis of fundamental company analysis and bottom-up stock picking. The fixed income portion comprises investment-grade securities to help dampen the effects of market volatility.

2. Resilience

The equity portions of the ActiveLife Climate Aware funds invest in resilient franchises when they are discounted by the market for transitory reasons. The portfolio managers believe resilience is an undervalued feature of companies which can evolve and change in response to external pressures, often emerging stronger from disruptive environments.

The funds are conservatively managed in an effort to outperform the market with lower risk and a quality bias. The fixed income portion comprises investment-grade securities to help dampen the effects of equity market volatility. Overall, the portfolios are positioned to deliver returns through a combination of capital growth and income.

In terms of portfolio positioning, they favour companies with balance sheet strength to help the funds remain resilient throughout the market cycle. They focus on sustainable dividends, which is helpful in a slower growth environment, and take a very modest pro-cyclical risk position in fixed income.

3. Cost efficiency

With an ongoing charges figure of 0.48%¹, which is significantly below the 1.13% average expense ratio of the Investment Association peer group², ActiveLife Climate Aware investors keep more of their returns over the market cycle.

By investing in a low-cost, well-diversified active multi-asset solution, advisers can provide clients with a level of product diversification that would be much more expensive to achieve by investing in individual securities themselves.
 

¹ Source: Vanguard, as at 31 January 2024.

² Source: Vanguard, as at 31 January 2024.
 

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

Investments in smaller companies may be more volatile than investments in well-established blue chip companies.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.

For further information on risks please see the “Risk Factors” section of the prospectus.

Important information

This is directed at professional investors and should not be distributed to, or relied upon by retail investors.

For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website.

This is designed for use by, and is directed only at persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

The Authorised Corporate Director for Vanguard Investments Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investments Funds ICVC.

For investors in UK domiciled funds, a summary of investor rights can be obtained here.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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