Fund Value Assessment Report

What is this?

Every year, we assess whether each of our investment funds provides good value for our customers. And if not, how we plan to improve them.

We look at how each fund performs, what it costs, and the quality of service among other metrics. We then have our conclusions rigorously checked and challenged by our Board and independent directors.

Are we offering good value across our fund range?

Yes, we continue to deliver good value through the Defensive, Growth 1, 2 & 3, UK Tracker, and Global Share Funds. We believe that the Bond Fund also offers good value, though its longer-term performance has been affected by market conditions. The Climate Change Fund hasn’t delivered good value to investors, and we’re working on ways to improve its performance both financially and environmentally.

Defensive, Growth (1, 2 & 3), UK Tracker, and Global Share funds: We’re happy with their investment returns based on their individual strategies and investment objectives. We believe that charges are appropriate and continue to compare well against similar competitor funds.

Bond Fund: We believe it offers good value, especially given the positive returns we have seen over the last 3 years. That said, the decline in bond markets during 2021 and 2022 (which affected all bond funds) means that investors have experienced a loss over the last five years – the minimum recommended holding period. This means we rate its investment performance as Amber.

Climate Change Fund: We added more information to the website on the environmental benefits of the fund, but the financial performance has remained disappointing when compared against global equity markets. The fund (and other climate / environmental funds) has faced a number of headwinds such as (i) elevated energy prices (benefiting oil & gas companies, but negative for almost all others), (ii) higher interest rates (benefiting banks, but negative for companies trying to invest and grow), and (iii) higher commodity prices such as metals (good for mining companies, but adds to cost of most other businesses). These factors have dampened the fund’s returns whilst driving higher valuations for sectors that the fund does not invest in (such as banks, oil and mining) and resulted in a significant gap in performance compared to global equity markets.

What are our plans to improve value going forward?

We believe we’re offering good value through our Bond Fund, though we recognise that longer term performance remains disappointing and the fund has not yet risen to levels seen before 2021. By its nature, the fund only invests in bonds. This means it is not diversified, and if held in isolation (i.e. not part of a diversified portfolio) it may not be suitable for investors’ needs. We will contact customers to remind them of the benefits of our more diversified funds, and encourage them to consider whether continuing to invest in the fund is right for them.

Following review, we’ve decided to make changes to the Climate Change Fund which include appointing a new investment advisor to pick which companies to invest in. The changes we are working on are expected to make the fund eligible for a Sustainability Impact label, a new labelling initiative introduced by our regulator, the Financial Conduct Authority (FCA). These changes are aimed at improving financial returns as well as our ability to quantify and report to investors of the environmental benefits and impact of the fund. We plan to complete the strategy redesign and appoint the new advisor early 2027. We’ll write to customers invested in the fund ahead of the changes.