Disrupting the market

Back in the real world, size matters. And in business and investing, it matters a lot. From supermarket powerhouses like Walmart and Costco, to tech giants like Microsoft and Amazon, the ability to realise economies of scale – the bigger you are, the more efficient you are – helps companies offer products at a price their competitors can’t match. That doesn’t just benefit the big companies – their customers get the benefit, too.

There is plenty of competition in the multi-asset market – a good number of providers and solutions at various price points. But being able to offer a product like our MAF Core range – offering a blend of investment expertise, global asset allocation, the prospect of competitive risk-adjusted returns, ESG enhanced index building blocks – with the ongoing charges figure (OCF) capped at just 0.15 per cent?¹ Forgive our lack of modesty, but we think few – if any – of our competitors could offer such a product. After all, if it was that easy, others would have followed our lead in the three years since we launched the range.

As to the key question, how can we deliver MAF Core at 0.15 per cent? Well, it comes down to two, self-reinforcing, factors: scale and heritage.

Let’s take the heritage point first. We have been managing multi-asset portfolios for over four decades, have a dedicated team of 45 professionals and can draw on the insights and expertise of Aviva Investors’ capabilities across geographies and asset classes.

Over that time, we have developed the know-how, systems and processes to establish our credentials in the market, and drive costs down. We manage everything in house and hold securities directly wherever possible so there is no layering up of fund charges.

All of these factors have helped us achieve that all-important scale: we run over £90 billion in multi-asset portfolios for Aviva, one of the UK’s largest pension providers, and external clients. And it is the combination of scale and knowledge that allows us to offer a quality proposition like MAF Core at such a competitive price point.

Like all disruptive products, they should be good for the company providing them and good for their customers. For our part, we are unashamedly ambitious about what we want to get out of this – to take flow from the competition and clearly establish MAF Core as a leading product in the market. And, at the same time, we believe this will give our customers the potential for competitive returns at a highly competitive price.

Let’s finish off with a simple, theoretical example to bring to life that potential customer benefit.² We’ll assume two investors (investors A and B) want to invest in multi-asset products to fund their retirement. Financially, our investors are identical in every way – over a twenty-year period, they both put in an initial investment of £10,000 and a regular monthly payment of £500, for an overall investment of £130,000. The only difference is that investor A puts his money in a fund with an OCF of 0.5 per cent, while investor B puts her money in a fund which, just like MAF Core, has an OCF of 0.15 per cent. Keeping things simple, we’ll assume both funds generate an average annual return of six per cent.

Investor A’s pension pot at the end of twenty years would be worth a respectable enough £244,566, but they would have paid away £15,329 in charges. Investor B, on the other hand, would have paid only £4,712 in charges and her final pot would be worth £255,182. Yes, that’s a saving of over £10,000.

In a world of uncertainty, the one thing customers can control is the price they pay for a fund. But their outcome also hinges on the expertise and scale of the manager running that fund. With MAF Core, we believe we are giving investors the best of both worlds.