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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.
What I value in an Annual Report
There are some common factors in the annual reports that I most admire. These factors are perhaps not what you might imagine and probably won’t win the companies concerned any prizes at the PLC awards. However, these features will give valuable investor insights even if you are not particularly expert on the finer points of corporate accounting.
Brevity, restraint and focus
I favour companies with short annual reports which avoid verbosity. A short annual report will generally indicate management teams that are focused on the essentials. I don’t particularly value lots of photographs. I suspect that restraint in graphic design indicates a management team that is cost-conscious and focused on the bottom line. A company would do better to put up some video clips on its corporate website if it has an interesting manufacturing process or a consumer-facing product. I’m also happy to forgo pictures of the board of directors for the same reason. Better that than pictures of the CEO on every other page, which surely indicates an unhealthy degree of egotism.
Plain speaking and personal ownership
I like plain speaking in the statement of the chief executive. I am looking for unambiguous language, passionate beliefs, and an honest assessment of risks. I want to have the sense that the chief executive personally crafted their statement. Along with this, I am looking for identification with fellow shareholders, preferably through significant skin in the game.
The following four annual reports generally meet the criteria above and are among my recent and probably perennial favourites. In no particular order:
Games Workshop: cost conscious and measurable
Games Workshop, where the 2025 annual report runs to only 104 pages, probably the shortest of any FTSE100 index constituent, and much more focused than the average FTSE 100 report which ran to 262 pages even back in 2023. Printed entirely in black and white, as it has always been, with no photographs, this indicates a cost-conscious company where egos are lacking. The commentary is specific with plenty of measurables: for example, the cost of US tariffs is itemised to a 200 basis point gross margin decline and mitigation measures are anticipated but “may take longer than one year”.
JD Wetherspoon: long-term alignment
JD Wetherspoon has another short report at 86 pages in 2025, and again no photographs, but it does run to colour printing. Founder Tim Martin has been chairman since 1983, and with over 25% of the equity (valued at over £175 million), provides me with the reassurance of the owner’s eye and serious skin in the game. I like the long-term mindset, which is evidenced by setting out at the very front, the record of the business since 1979, not just serving up the standard five-year record that most companies trot out. I also like the fact that the staff share plan owns 9.3% of the company, and the impressive annual statistics are supplied on the average service period of pub managers and kitchen managers: clearly staff retention and incentivisation is high on the agenda at Wetherspoons.
Next: clarity from experience
Next cannot claim brevity for its 200+ page 2025 annual report, but the chief executive’s review consists of 51 pages of utter clarity as to strategy and performance. Lord Simon Wolfson clearly has skin in the game, owning 1.1million shares worth around £150 million today. He has served for 34 years at the company, 24 as chief executive, illustrating his long-term commitment. There are no photographs of the board. His review oozes common sense. Two examples illustrate this: “we do not know which of our endeavours will succeed or fail” and “no strategy day required” – Next Annual Report, January 2025. Lord Simon Wolfson’s statements are, I would say, the go-to place for anyone who wants to understand the key trends in retailing in the UK.
S&U: directness and conviction
S&U is my fourth and probably least well-known exemplar. A family-run financial services business running since 1938, the Coombs family controls c.41% of the company (worth over £100 million today) with several family members on the board. It has made some good strategic calls along the way, selling a doorstep lending business in 2015 for £82.5 million to Non-Standard Finance PLC (itself dissolved in 2024) and started Aspen bridging finance in 2017, which now generates profits before tax of £7.2 million (2025). Its 2025 annual report is only 96 pages long. I like the refreshingly direct commentary of the board, which does not mince its words on financial regulation: “ ..a tsunami of often inconsistent directives, CEO advice, thematic reviews, and a new Consumer Duty, set against a geriatric Consumer Credit Act has threatened to undermine the UK specialist lending industry” – S&U Annual Report & Accounts 2025. S&U is equally clear on the undervaluation of its shares, providing comparative valuation measures for US peers and somewhat unsubtly titling its annual report for the year ending 31 January 2025, “Ready for the Rebound”.
Quiet signals that endure
None of these reports will win awards for design flair or marketing polish - and that is precisely the point. In my experience, the most investable businesses are rarely the loudest. They communicate simply, spend shareholders’ money carefully, and focus their energy on running the business rather than promoting it. A concise report, plain language, and meaningful insider ownership tell you far more about a company’s culture than any glossy spread ever could. Over time, it’s these quiet signals - discipline, honesty and alignment - that tend to translate into durable returns.
Character over presentation
For me, an annual report is not a branding exercise; it is a window into character. And character, more often than not, is what drives long-term performance.
Opinions expressed represent the views of the author at the time of publication, are subject to change, and should not be interpreted as investment advice.
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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