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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.
We spend a lot of time talking about where capital should go - but far less about how it gets there. And right now, the how is quietly undermining the health of UK equity markets.
The UK government has made bold moves through the Mansion House reforms to unlock pension capital for domestic investment. On the surface, the direction of travel looks positive. But policy alone won’t fix what’s broken. Because at the core of our capital markets problem lies something deeper - a systemic shift toward passive, model-driven investing that is draining UK public markets of both capital and conviction.
Passive has become the default - and that’s a structural problem
Over the past decade, the combination of regulatory reform and technological innovation has transformed the way retirement savings are managed. Since the introduction of the Retail Distribution Review (RDR) in 20121, the financial advice industry has increasingly adopted model portfolio solutions (MPSs), discretionary fund managers (DFMs), and low-cost multi-asset platforms as the default vehicles for client investments. This shift has fundamentally reshaped advice incentives, portfolio construction, and the processes behind investment decision-making.
As a result, portfolios have become more automated, less personalised, and increasingly global in their orientation. One major consequence has been a sharp decline in domestic equity exposure within defined contribution (DC) pension schemes. In 2012, around half of the UK’s £1.1 trillion in DC pension assets were invested in UK equities. By 2023, that figure had dropped to roughly 20% - driven largely by the widespread adoption of global investment strategies.
Scottish Widows recently confirmed plans to significantly reduce their allocation to UK equities in default workplace pension funds. Instead, they cite a preference for a “more globally diversified approach” – signalling a divergence from the Mansion House Accord’s goal of supporting domestic investment, which they opted not to endorse.
But they are in the minority. Seventeen major providers, representing the vast majority of the UK DC market, have chosen to endorse the Accord – and with that, a renewed commitment to UK plc.
What’s more, increased domestic allocations aren’t a radical or uniquely British concept. In other countries - notably Australia - there are clear incentives and structural encouragements to direct pension capital into local markets. We need to ask why that isn’t happening here.
UK equities are still bleeding capital
Retail investor sentiment hasn’t helped either. According to the Investment Association (IA) retail fund data, UK equity funds experienced outflows of £0.8 billion selling out of UK equities in April 2025. This was down from £1.2 billion in March2, bringing total net redemptions to approximately £5 billion year-to-date, following £12.6 billion in outflows during 2024.
This is not just about performance or risk appetite. It’s about access, visibility, and structural disincentives. Passive flows don’t favour under-owned, under-researched UK stocks. They flow into the familiar names. And when “value for money” is defined purely by headline fees, active managers working in domestic small and mid-cap spaces simply don’t get a look in.
The Mansion House Accord: A well-meaning start - but not a solution
The 2023 Mansion House Compact aimed to shift this dynamic by encouraging pension providers to invest 5% of DC default funds into unlisted equities - including AIM. The 2025 Accord extended that commitment to 10%, including infrastructure and private equity, with at least half earmarked for the UK.
But public markets are still losing out. Despite AIM being one of the few public venues where genuine growth capital can still meet private company dynamism, it risks being sidelined in favour of opaque, higher-fee private structures.
Meanwhile, the government is preparing to use reserve powers under the Pension Schemes Bill to force the reallocation of pension capital into “approved” asset classes - if providers don’t comply voluntarily. That’s an aggressive move. And it risks entrenching the wrong incentives if we’re not careful.
The feedback loop is real - and dangerous
In today’s passive-dominated world, the biggest companies get the biggest inflows - which pushes up their valuations, lowers their cost of capital, and reinforces their market position. This isn't a meritocracy. It's a momentum machine.
The 'Magnificent Seven': The largest companies in the US stock market.
This dynamic is especially concerning when it concentrates exposure to already highly valued stocks – like the so-called Magnificent Seven. If these valuations prove overextended, the correction could be painful. Passive flows don’t question price; they follow it.
It also suppresses engagement. Passive capital doesn’t vote with conviction. It doesn’t speak to management. It doesn’t provide feedback loops that keep markets healthy and boards accountable.
Lord Alastair King, the Lord Mayor of London, recently urged employers to rethink the “value for money” of their pension schemes - encouraging a shift away from pure cost and toward long-term return. That’s the right direction. But talk is cheap, and behavioural change takes time. Especially when the structures pulling money away from UK equities remain untouched.
It’s time to defend AIM - and back active capital
At Downing, we don’t just allocate capital. We back businesses with purpose. Our team has a long history of board-level engagement, challenging strategy and supporting management with the aim of growing value - not just tracking it.
That kind of engagement is hard to scale in a passive world. But it’s exactly what the UK market needs right now. A functioning public equity ecosystem. A viable path to Initial Public Offering (IPO) for UK innovators. A commitment to transparency, liquidity, and shared growth.
So, if we’re serious about rebuilding the UK’s economic engine, let’s stop assuming that all capital is equal. Let’s challenge the idea that passive is always cheaper, and cheaper is always better. Let’s build a system that rewards alignment, stewardship and long-term thinking - not just lowest-fee inertia.
Because passive flows and poorly targeted policy may not make headlines yet - but they’re slowly strangling our markets from the inside out.
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.
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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