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Ten tumultuous years set up a great time for defined return investing


Marking the 10th anniversary of our flagship £1.7bn Atlantic House Defined Returns Fund

Tom May, Chief Executive & Chief Investment Officer


There has been nothing predictable about the past ten years. Investors best laid plans have been disrupted by electoral shocks, Brexit upheaval, the pandemic, war and inflation.

Any attempt over this period to predict the future would have come up short which is why we have a simple rule about forecasting here at Atlantic House. We don’t.

We have spent the past ten years trying to do something much simpler – make the Atlantic House Defined Returns Fund deliver a return of 7-8% a year over the long-term in all but the bleakest market conditions.

It is encouraging then, particularly as we wonder what the future will bring, that despite all the tumult and disorder of the past decade that the fund has all but achieved its objective in the first ten years of its life.

Cumulative performance of the Atlantic House Defined Returns Fund since launch

Past performance does not predict future returns.

Source: Bloomberg, Solactive, 04/11/2013 to 29/09/23. UK Large Cap: Solactive United Kingdom 100 Index (Net Total Return), US Large Cap: Solactive US Large Cap Index (Net Total Return) and Euro Large Cap: Solactive Euro 50 Index (Net Total Return). Fund: B Shares, Total Return.


As our business has grown, we have evolved to launch new funds that provide investors with other means of increasing the predictability of their portfolios, such as a global version of Defined Returns, our Uncorrelated Strategies Fund and our Dynamic Duration Fund.

Our secret weapon when we develop funds at Atlantic House is really simple. We ask our clients what they need. This is why we launched the Defined Returns Fund ten years ago.

So it is particularly encouraging that so many of the clients who invested with us in the first year of this fund are still with us today, including two large, national DFMs who invested right at the start and therefore enabled us to launch, and to whom we will always be grateful.

Our objective is simple; help multi-asset investors build better portfolios. We believe that our derivative expertise gives us key tools that can help achieve this.

For most of the past ten years of course interest rates were at record lows, and this can be one factor that makes the pricing of the autocalls which are found in the Defined Returns Fund challenging to achieve. However, we have benefitted from our uniquely broad set of global banks to trade with to achieve our objective over this time, whilst maintaining the protection barriers we committed to on day one.


Today the pricing of defined return investments is better than it has been for some time. Over the past year some 65% of the investments in the fund have matured. Those that matured had an average coupon of 7.8% and have been replaced with investments offering coupons of around 9.2%. 


This goes to prove that after difficult markets and with rising interest rates, just as the very visible returns on cash have increased, so have the potential returns of many assets, including those in the fund.

Par coupons for standard defined return shapes

Source: Atlantic House as at 29-09-23


Not only have we been able to increase potential returns, but also lower risk. The average final autocall barrier level has fallen from 69.5% to 65.5%. Equity markets would need to fall on average over 31% from current levels, without any recovery, for the current crop of investments in the fund to not pay out a positive return. Lastly, 36% of the maturities were triple index autocalls, whereas only 11% of the new trades are triple index.


These conditions give us the confidence that if we stick to our simple goals we can continue to deliver the defined returns our clients seek for another decade.


I'd like to take this opportunity to thank all our clients for their support and wish you all a very happy and prosperous 2024.

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