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Downing launches new actively managed liquid alternatives fund aiming to deliver 7% to 10%+ per annum and positive returns in most markets. The new MGTS Downing Active Defined Return Assets Fund (‘Active Defined Returns’, the ‘Fund’), is the first fund from its new Liquid Alternatives team.
The Fund is aimed at institutional investors, Discretionary Fund Managers, IFAs and advised sophisticated individual investors, and will primarily consist of UK Government bonds and large-cap equity index options, which provide significant scalability and strong liquidity. It aims to deliver 7% to 10%+ per annum and positive returns in all markets except for a sustained equity market fall (generally more than 35%), over a period of at least six years.
The Fund is the first to be launched by the new Liquid Alternatives Team established by Downing. Collectively, the team has over 125 years of experience and sector knowledge, and includes Tony Stenning, who held senior roles at BlackRock and most recently was CEO of Atlantic House Group; Russell Catley, founder and also a former CEO of Atlantic House Group; Huw Price, a former Executive Director at Santander Asset Management, and Paul Adams, former Head of Cash Equities and Derivatives Sales, Royal Bank of Canada.
The Fund offers investors a compelling building block for multi-asset portfolios, aiming to add consistent and predictable returns, typically secured with a portfolio of UK Government bonds. The unique proposition includes a hybrid approach of using systematic derivative strategies and active management, combining liquid investments with predictable returns, and an equity like risk profile.
Investment strategy: Maximising the probability of delivering predictable defined returns across the economic cycle.
Systematic Liquid Derivatives: Systematic, derivative strategies optimise the equity risk-return profile. The Fund uses rules-based derivative strategies linked to the most liquid, large-cap global equity indices (i.e. FTSE100, S&P500) with the aim of harvesting well-proven consistent returns across a wide corridor of market conditions.
Strong security: The Fund will hold a high-quality portfolio of assets as secure collateral – typically UK Government bonds.
Active benefits: At times, rules-based, passive derivative strategies can underperform when markets move strongly – this is when specialist active management can add incremental gains by monitoring and monetising positions and applying active risk management.
Key benefits
Increased consistency and predictability of returns: Positive returns in all markets except for a sustained equity market fall of more than 35% over at least six years.
Diversification of risk: The Fund’s risk components are diversified across large, liquid equity indices, observation levels and counterparties. Secured with high-quality assets – typically UK Government bonds.
Active management: Our experienced team will actively manage the Fund and its investments to optimise risk and reward for investors.
Russell Catley, Head of Retail, Liquid Alternatives at Downing, said: “Put simply, we focus your investment risk on the probability of receiving the returns you need, not those you don’t. We target the highest probability of delivering 7% to 10%+ per annum with active management adding material incremental gains. We believe that we are building the next evolution of the proven success of Defined Returns funds
The Downing team isseeing strong demand from clients looking for alternatives to large-cap equity funds which are becoming concentrated in technology stocks, or alternatives to UK equity income funds and illiquid alternatives.”
Tony Stenning, Head of Liquid Alternatives at Downing, said: “The launch of our Active Defined Return Assets Fund is a significant milestone in the ambitious build-out of our new Liquid Alternatives strategies. It is a solution-focused fund that should deliver stable high single or low double-digit returns across a wide spectrum of equity market conditions, except for a persistent multi-year bear market. The Fund is designed to enhance balanced portfolios by providing consistent, predictable returns and is suitable for accumulation or drawdown.
“We aim to deliver a unique combination of proven systematic derivative strategies and specialist active management, and we are doing so at a very compelling fee level, below our closest competitors and in line with active ETFs.”
How the Fund is expected to perform in different markets
In bullish markets: UK Government bonds secure the capital, and the equity index options deliver a predictable 7-10%+ return per annum – giving up some less likely upside.
In neutral markets and normal market corrections: UK Government bonds secure the capital, and the index options deliver a predictable 7-10%+ return per annum.
In a sustained sell-off: if markets fall more than the cover to capital loss and do not recover for six years. Then capital is eroded 1:1 in line with the worst performing index.
The average Cover to Capital Loss is targeted at 35%: the average cover to capital loss represents the average level the Global indices within the Fund could fall before capital is at risk.
Fund key risks
Performance: Capital is at risk. Investors may not get back the full amount invested.
Liquidity: Access to capital is always subject to liquidity.
Counterparty risk: Other parties could default on the contractual obligations.
Fund Structure
UK regulated OEIC fund structure, fully UCITS compliant
Daily dealing, at published NAV
Minimum investment: £100,000
SRRI: 6 out of 7
Depositary: Bank of New York
Authorised corporate Director (‘ACD’): Margetts Fund Management Ltd.
I share-class: SEDOL: BM8J604 / ISIN: GB00BM8J6044
F share-class: SEDOL: BM8J615 / ISIN: GB00BM8J6150
Risk warning: Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Please refer to the latest full Prospectus and KIID before investing; your attention is drawn to the risk, fees and taxation factors contained therein. Please note that past performance is not a reliable indicator of future results. Capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in this fund should be held for the long term.
Important notice: This document is intended for professional investors and has been approved as a financial promotion in line with Section 21 of the FSMA by Downing LLP (“Downing”). This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Downing does not offer investment or tax advice or make recommendations regarding investments. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street, London EC3R 6AF.
It’s hard to ignore the noise right now. Geopolitical tensions and global volatility continue to dominate the headlines. But for investors willing to look beyond the front pages, one of the most compelling long-term growth opportunities is closer to home – and hiding in plain sight.
The Alternative Investment Market (AIM) has long been overlooked by mainstream allocators. But that could be changing. With valuations at multi-year lows, government policy shifting in support of domestic growth and long-term fundamentals intact, AIM is quietly regaining its momentum.
A market in transition – and evolution
Recent reports indicate that AIM could shrink by up to 20%, with 61 companies planning to delist via M&A activity, private equity takeovers, or transitioning to private markets. Whilst this contraction might seem concerning at first glance, that reality is more nuanced. This isn’t a death knell – it's a natural phase in AIM’s evolution. As weaker businesses exit, the core of AIM is strengthening. What’s left is a more robust ecosystem of resilient, founder-led businesses with improving governance, robust balance sheets and real ambition. Investors should be focusing on what’s emerging, not what’s retreating.
This moment of change is also an opportunity for revitalisation. With AIM currently under consultation, we welcome the potential for reform - not just in regulatory simplification, but in clearer differentiation from the Main Market. A revamped AIM could mean a genuine rebrand, a wider cost differential, and proportionate regulation that reflects its unique role in backing growth businesses. If we want ambitious companies to choose AIM over going private – or bypassing London altogether – we must give them a compelling reason to list.
AIM: Mispriced, but fundamentally strong
AIM remains one of the most misunderstood corners of the market. Despite trading near historic valuation lows and at a significant discount to long-term averages, the fundamentals remain intact. We’re still seeing positive trading updates, strong cash generation and clear management alignment across many of the businesses we invest in. These aren’t speculative growth punts. These are real companies, solving real problems, and in many cases, they’re quietly delivering while their share prices languish.
We’ve been through market resets before. The best opportunities often appear when sentiment is poor, but underlying business performance is strong. That’s where we are today with AIM. Forward earnings growth across AIM is projected at over 22% annually over the next two years - significantly outpacing the longer-term historical growth rates typically seen in the FTSE 100 and FTSE 250. Yet sentiment remains weak. We’ve seen this dynamic before: when valuations are depressed but business performance is strong, opportunity knocks. Within the Downing AIM Estate Planning Service, our focused approach, grounded in rigorous stock selection, active engagement and patient capital has delivered cumulative returns of over 180% net of fees since inception.1 We believe the next leg of that journey is being built right now.
Private equity is leaning in - and so should we
If pension trustees and advisers haven’t yet recognised the value, private equity certainly has. The wave of M&A activity across UK small caps - particularly AIM - tells its own story. International buyers are taking advantage of depressed valuations to acquire quality businesses at bargain prices.
If smart capital sees an opportunity, advisers should take note.
Real companies. Real impact.
What makes AIM especially compelling is its proximity to the UK economy. Unlike FTSE 100 multinationals with global revenue streams, over 70% of AIM company earnings are domestic. These are firms creating jobs, paying local taxes, and revitalising regional economies across the UK.
From affordable housing to clean tech, AIM is rich in companies that align with sustainability goals and place-based investing priorities. For pension funds and ESG-minded clients, AIM offers a unique way to generate returns while supporting UK growth and regeneration.
AIM isn’t the FTSE 100. It’s not about banks and big oil. It’s about niche businesses, often led by founders, with skin in the game. And right now, they’re cheap - very cheap - relative to their history and their fundamentals.
Structural tailwinds: policy is catching up
In July 2023, the UK government announced the Mansion House Compact - a voluntary agreement in which 11 of the UK’s largest defined contribution (DC) pension providers committed to allocate at least 5% of their default funds to unlisted equities by 2030. Building on this, the 2025 Mansion House Accord expanded the commitment. Seventeen major UK workplace pension providers agreed to invest at least 10% of their DC default funds into private markets by 2030, with half of that potentially directed towards UK-based assets including AIM and Aquis.
In a previous article, we questioned whether AIM could afford to wait for policy initiatives like the Mansion House reforms to fully materialise. That concern still stands - but encouragingly, we are now seeing signs of momentum and alignment. The commitments are gaining substance, and the ongoing AIM market consultation could catalyse more immediate action. Downing continues to support this direction - but we also believe industry voices must press for faster, clearer implementation.
While headlines have centred on private equity, the underlying message is broader: the UK must back its own growth engine. AIM, as a key part of that innovation ecosystem, is well positioned to benefit.
Local Government Pension Schemes (LGPS) have already made soft overtures toward investing in UK growth businesses, including both unquoted firms and those listed on AIM. The next major step is for defined benefit (DB) schemes to follow suit - a direction the Accord now actively encourages.
This isn’t a “tilt” – it’s a structural shift
There’s been a lot of chat about rotating out of the “Magnificent Seven” US mega caps. The reality? It’s not a tilt - it’s a seismic shift. The concentration risk in global indices is now extreme. The valuation gap between UK small caps and their global peers is near historic highs.
If you believe in mean reversion - and frankly, history suggests you should - now is the time to re-engage with AIM. Allocators will need to think strongly about concentration risk, and we think that there should be good upside for UK companies as capital flows out of expensive American names into lower risk and cheaper UK names.
Estate Planning? There’s no better time
For clients planning their legacy, AIM offers both long-term capital growth potential and inheritance tax benefits, along with speed and flexibility. AIM shares should qualify for Business Relief after just two years, which is a huge benefit when compared to other strategies – such as gifting - that lock money away for longer.
At Downing, we’ve been managing AIM BR strategies for over a decade Our Downing AIM Estate Planning Service (DAEPS) gives clients access to a high-conviction, actively managed portfolio – and comes with two types of insurance. The first is our unique ‘Wealth Guard’, which covers a fall in value of up to 20% of the net initial investment (i.e. the amount invested after charges). The protection comes at no extra cost to investors and it’s built to give clients extra security and peace of mind.2 There is also optional Life Cover designed to mitigate the risk of having to pay inheritance tax when your investment hasn’t yet qualified for Business Relief, further enhancing the Service’s appeal to investors seeking both tax efficiency and risk mitigation.
Where others flinch, we lean in
Markets are uncertain. But uncertainty creates opportunity. At Downing, we’re not in the business of chasing sentiment - we focus on fundamentals, valuation discipline, and backing good people running good businesses. Now is not the time to look away from AIM. It’s the time to lean in. Don’t miss it. AIM is hiding in plain sight.
1 Since inception, the Downing AIM Estate Planning Service has delivered a cumulative return of over 182.73% net of fees, as at May 2025. Past performance is not a reliable indicator of future performance.
2 Wealth Guard is available at no extra cost and guaranteed for the first two years you are invested, after which it will be reviewed annually by the insurer. Please refer to T&Cs for more details.
Important notice
Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice.
Past performance is not a reliable indicator of future returns.
This article has been approved and issued as a financial promotion. This content is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing LLP as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street London EC3R 6AF.
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