Risk Targeting

The Santander Atlas Portfolios are risk-targeted and managed to meet a particular level of volatility over the long term. These levels are shown below, expressed as annualised amounts.

The Growth Portfolios

The Income Portfolio

Source: Santander Asset Management UK, January 2017

The portfolios aim to meet a target level of risk that is in the centre of the lower and higher bandings shown above*. While volatility is a core measure of market risk, the portfolios are managed in a holistic way taking into account their overall risk exposure.

* While we are committed to maintaining these target bands, they may be modified if market conditions weaken the effectiveness of long-term volatility as a core measure of risk, to preserve the best outcomes for clients.

A Focus on Risk
Each Santander Atlas Portfolio is managed with the same focus on targeting risk before returns. The funds are continuously monitored by the fund managers and our independent Risk and Control team, and are managed to ensure that they remain in line with your clients’ agreed risk appetite.

As a result, Santander Atlas Portfolios offer the potential for smoother risk-adjusted returns over the medium to long-term.

Portfolio Risks
The Santander Atlas Portfolios are risk managed, not risk free. These risks apply when investing in the portfolios:

  • Capital Risk
    Your investments can go down in value and you may not get back what you invested. Investing in the stock market is normally through shares (equities) either directly or via a fund. The stock market will fluctuate in value every day, sometimes by large amounts. You could lose some or all of your money depending on the company or companies you have bought. Other assets such as property and bonds can also fall in value.
  • Inflation Risk
    The purchasing power of your savings declines. Even if your investment increases in value, you may not be making money in ‘real’ terms if the things that you want to buy with the money have increased in price faster than your investment. Cash deposits with low returns expose you to inflation risk.
  • Credit Risk
    Credit risk is the risk of not achieving a financial reward due to a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.
  • Liquidity Risk
    You are unable to access your money when you want to. Liquidity can be a real risk if the Fund holds assets such as property directly and also in the ‘bond’ market, where the pool of people who want to buy and sell bonds can ‘dry up’.
  • Manager risk
    The risk that you choose an ineffective manager. While some of the best fund managers may consistently beat the benchmark and deliver the kind of returns you hope for, past performance is not a reliable indication of the future, so it can be extremely difficult to pick them.
  • Currency Risk
    Currency exchange rate movements (either upward or downward) can affect how investments perform, so this will affect you if your money is in funds which invest in foreign countries. Santander Asset Management may decide to remove currency risk by making appropriate investments to reduce or eliminate exposure.
  • Interest rate risk
    Changes to interest rates affect your returns on savings and investments. Even with a fixed rate, the interest rates in the market may fall below or rise above the fixed rate, affecting your returns relative to rates available elsewhere. Interest rate risk is a particular risk for bondholders.
  • Counterparty risk
    The funds may hold, from time to time, assets where there is a risk of loss if certain companies (counterparties) default on their obligations to the funds.
  • Derivative risk
    A derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties; the value of the contract is determined by fluctuations in the value of the underlying asset. The underlying asset is commonly an equity, a bond, an index, a currency, an interest rate or a commodity but is not limited to those types of assets. Derivatives may be used in the Atlas Portfolios to hedge risks (such as foreign currency risk), to access markets efficiently by reducing transaction costs, or to enhance the income of a fund.