The fund was designed to bridge the gap between savings accounts and a cautious fund but this does not mean it will contain only lower-risk funds. Instead, it contains a range of funds across asset classes that are complimentary and as uncorrelated as possible to bring the risk profile down.
Portfolio construction tools are used to asses the volatility of the overall portfolio and model how it will be affected if funds are added or removed.
Head of multi-manager Tony Lanning says the fund has been protected from sharp falls in global equities due to its bias towards absolute return funds, a low weighting of under 10 per cent in traditional equity funds and around 25 per cent in fixed interest.
Holdings in global convertibles and emerging market debt have performed well since launch, while consistent and uncorrelated returns have been provided by life settlements and gold.
Lanning says: “We spent a long time back-testing the portfolio and understanding the correlation between different asset classes.
“It has been useful to be able to demonstrate how we can add value despite equity markets in particular continuing to be very volatile.”