Luxembourg: Aviva adds Value to Privilege Portfolio range

Article date: 10 January 2003

In a departure from the normal GARP ('growth at a reasonableprice') style of management for its Luxembourg domiciled funds,Aviva Funds International has added a European Value Fund to itsPrivilege Portfolio range on 3 December 2002.

Authorisation for marketing of the new fund is currently beingsought in Spain, Italy, France, Belgium and the Nordic countries,amongst others.

The Privilege Portfolio-European Value Fund aims to providelong-term capital appreciation by investing primarily in theequities of continental European companies that are quoted ortraded on developed stock markets and which appear to offersignificant value. The fund is priced in euros and the initialoffer price on 3 December 2002 was five euros per share.

The Privilege Portfolio-European Value Fund is managed by RitaDhut, who joined Morley Fund Management ('Morley'), the InvestmentAdviser to Privilege Portfolio, in June 2001. Prior to joiningMorley, Rita managed both UK and European funds atPrudential/M&G. Since joining Morley, the newly created Valueteam of which Rita is a key member has achieved outperformance of6.4% compared to the benchmark for its internal Value funds for theperiod from start of April 2002 to end-November 2002.

The portfolio of the Privilege Portfolio-European Value Fundwill concentrate on around 80 holdings, with the emphasis on low-valued stocks where an historic deterioration in fundamentals orunderstatement of improvement is aggressively built into the price.The Morley value style utilises theories of behavioural finance andemploys fundamental analysis and consistent valuation techniques.It is based on a number of premises:

  • Investor overconfidence or lack of confidence can lead toextreme valuations in individual stocks;
  • Most market participants are unable to accurately forecast thefuture;
  • As a result, stocks with high ratings are often devastated bynegative earnings surprises as they price in little risk, whereasnegative surprises tend to have far less effect on low-ratedstocks in which investors already have low expectations.

Rita Dhut, manager of the Privilege Portfolio-European ValueFund said: "In my opinion, the Value style of fund managemententails selecting out of favour stocks that have low valuationcriteria. I believe that markets are currently somewhatdirectionless following the large falls of recent times and thatvaluations have compressed significantly. As a result, I think thatmarkets are quite irrational with investors lacking the usualthorough analysis of stocks due to confusion about both markets andthe global economy. This suits our value style well, as our processis based on strong disciplines of analysis and removing as muchemotion as possible from the decision-making process. We adopt abottom up process and therefore avoid making a call on the market.We aim to outperform through good stock selection."

Robert Woolf, managing director of Aviva Funds Internationalcommented: "The addition of the Privilege Portfolio-European ValueFund to the range gives our investors a further opportunity fordiversification in the style of investment management that theyhave access to. The last few years have demonstrated that there isnot one single way to outperform the markets and investing indifferent styles of management can reduce the risks of investing ina single style."

For further information:
Stephen Roberts, Head of European Retail Marketing
Aviva Funds International Ltd
Tel: +352 40.28.20.319
Fax: +352 40.83.58.319
E-mail: stephenroberts@privilege.lu
GSM: +352 021.265.611

Notes to editors:

  • The value of an investment in the Privilege Portfolio fundscan fall as well as rise. The investor may not get back theoriginal amount invested.
  • The information contained within this document should not beconstrued as a recommendation to purchase or sell stocks.
  • Aviva Funds International Limited is the marketing anddistribution agent for Privilege Portfolio. Privilege Portfolio isthe Luxembourg-domiciled investment fund of the Aviva Group with29 sub-funds ranging from lower-risk money market and bond fundsthrough international and regional equity funds to morespeculative single country and theme funds.
  • Morley Fund Management Limited is the Investment Adviser toPrivilege Portfolio and is a member of the Norwich Union MarketingGroup, members of which are regulated in the UK by the FinancialServices Authority for life assurance, pensions and investments.Morley Fund Management Limited and Aviva Funds InternationalLimited are Aviva companies.
  • Aviva is the UK's largest insurance group, one of the top-five life insurers in Europe and has substantial positions inother markets around the world. Aviva is the world's seventh-largest insurer based on worldwide gross written premiums.
  • Aviva's principal business activities are long-term savings,fund management and general insurance, with worldwide premiumincome and investment sales from ongoing business of more than £28billion, and over £200 billion in assets under management at 31December 2001.

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