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Risk and return ratings

Ratings for Aviva and ex-Friends Life funds

Aviva risk and return ratings

We give each fund a risk/return rating, ranging from 1 (lowest) to 7 (highest). Each rating is a measure of the approximate risk/investment return potential of that fund.

When it comes to investments, ‘risk’ refers to the possibility of losing money. ‘Return’, on the other hand, is any gain you make on top of what you had originally invested.

Higher risk investment funds have the potential for greater returns than lower risk ones. But there’s more chance you’ll lose money with them. With less risky funds, there’s typically less chance of losing money, but there's also less potential for your investments to increase significantly in value.

Please remember that whatever their risk categories, the value of an investment is not guaranteed and can go down as well as up. You could get back less than you have paid in. Some funds have particular risks associated with investing in them.


Aviva’s risk and return ratings defined

Aviva calculates its risk ratings using historical performance data. We also carry out further research using information from the underlying fund’s investment manager(s). We review each fund’s risk rating annually and it may change over time. The timing of your investment decisions is very important and you should consult a financial adviser. Past performance is not a guarantee of future performance. 

Our risk ratings go from 1 to 7, with 1 being the lowest and 7 the highest. As a point of reference, a fund with a risk rating of 4 (medium volatility) would typically experience the volatility you would expect from a fund invested in a range of different types of investment (for example shares, property and bonds) without any bias to a particular investment type.  

These investment risk ratings are based on our interpretation of investment risk and are only meant as a guide. These levels of investment risk are not guaranteed and may change in the future.

The fund centre is kept up to date with the latest risk rating.

Risk/return rating Typical fund characteristics
1. Lowest Volatility
The historical performance of funds with this risk rating has typically experienced the lowest volatility of all the funds Aviva has rated. This means that these funds have the lowest potential for substantial changes in value compared with other Aviva funds.
2. Low Volatility
The historical performance of funds with this risk rating has typically experienced low volatility compared with other funds Aviva has rated. This means that these funds have a low potential for substantial changes in value compared with other Aviva funds.
3. Low to Medium Volatility
The historical performance of funds with this risk rating has typically experienced low to medium volatility compared with other funds Aviva has rated. This means that these funds have a low to medium potential for substantial changes in value compared with other Aviva funds.
4. Medium Volatility
The historical performance of funds with this risk rating has typically experienced medium volatility compared with other funds Aviva has rated. This means that these funds have a medium potential for substantial changes in value compared with other Aviva funds.
5. Medium to High Volatility

The historical performance of funds with this risk rating has typically experienced medium to high volatility compared with other funds Aviva has rated. This means that these funds have a medium to high potential for substantial changes in value compared with other Aviva funds.

6. High Volatility The historical performance of funds with this risk rating has typically experienced high volatility compared with other funds Aviva has rated. This means that these funds have a high potential for substantial changes in value compared with other Aviva funds.
7. Highest Volatility The historical performance of funds with this risk rating has typically experienced the highest volatility of all the funds Aviva has rated. This means that these funds have the highest potential for substantial changes in value compared with other Aviva funds.

Fund risk warnings

As well as the general risk ratings there are specific risks associated with investing in some funds, or types of funds. We recommend you read through these before making your fund choice.

Not all of these warnings apply to each fund and there is no direct relationship between the number of fund risk warnings and the investment risk rating for a fund.

Risk Warning Code Risk Warning Description
A - General

Investment is not guaranteed: The value of an investment is not guaranteed and can go down as well as up. You could get back less than you have paid in.

Specialist funds: Some funds invest only in a specific or limited range of sectors and this will be set out in the fund’s aim. These funds may carry more risk than funds that can invest across a broader range or a variety of sectors.

Suspend trading: Fund managers often have the ability, in certain circumstances, to suspend trading in their funds for as long as necessary. When this occurs, we will need to delay the ‘cashing in’ or switching of units in the relevant fund. You may not be able to access your money during this period.

Derivatives: Derivatives are financial contracts whose value is based on the prices of other assets. Most funds can invest in derivatives for the purpose of managing the fund more efficiently or reducing risk.

Some funds also use derivatives to increase potential returns, known as ‘speculation’. For those funds we apply an additional risk warning (see Risk F).

B - Foreign Exchange When funds invest in overseas assets the value will go up and down in line with movements in exchange rates as well as the changes in value of the fund’s holdings.
C - Emerging Markets Where a fund invests in emerging markets, its value is likely to move up and down by large amounts and more frequently than one that invests in developed markets. These markets may not be as strictly regulated and securities may be harder to buy and sell than those in more developed markets. These markets may also be politically unstable which can result in the fund carrying more risk.
D - Smaller Companies Where a fund invests in the shares of smaller companies, its value is likely to move up and down by large amounts and more frequently than one that invests in larger company shares.  The shares can also be more difficult to buy and sell, so smaller companies funds can carry more risk.
E - Fixed Interest Where a fund invests in fixed interest securities, such as company, government, index-linked or convertible bonds, changes in interest rates or inflation can contribute to the value of the investment going up or down. For example, if interest rates rise, the value is likely to fall.
F - Derivatives

Derivatives are financial contracts whose value is based on the prices of other assets.  

The fund invests in derivatives as part of its investment strategy, over and above their use for managing the fund more efficiently.  Under certain circumstances, derivatives can result in large movements in the value of the fund and increase the risk profile, compared to a fund that only invests in, for example, equities.  The fund may also be exposed to the risk that the company issuing the derivative may not honour their obligations, which could lead to losses.

G - Cash/Money Market Funds These are different to cash deposit accounts and their value can fall. Also, in a low interest rate environment the product or fund charges may be greater than the return, so you could get back less than you have paid in.
H - Property Funds

The fund invests substantially in property funds, property shares or direct property.  You should bear in mind that 

• Properties are not always readily saleable and this can lead to times in which clients are unable to ‘cash in’ or switch part or all of their holding and you may not be able to access your money during this time

• Property valuations are made by independent valuers, but are ultimately subjective and a matter of judgement

• Property transaction costs are high due to legal costs, valuations and stamp duty, which will affect the fund’s returns

I - High Yield Bonds The fund invests in high yield (non- investment grade) bonds.Non-investment grade bonds carry a higher risk that the issuer may not be able to pay interest or return capital. In addition, economic conditions and interest rate movements will have a greater effect on their price. There may be times when these bonds are not easy to buy and sell. In exceptional circumstances, we may need to delay the ‘cashing in’ or switching of units in the fund and you may not be able to access your money during this period.
J - Reinsured Funds Where a fund invests in an underlying fund operated by another insurance company through a reinsurance agreement, if the other insurance company were to become insolvent, you could lose some or all of the value of your investment in this fund.

View our fund range

Once you’ve read all the important information above, why not visit our fund centre to view our funds?