We have taken the decision to downgrade the Schroder Multi-Manager Diversity fund to A from AA. This follows a challenging period of performance where the fund has struggled to consistently deliver in line with its long-term CPI plus 4% p.a. performance target. The structure of the fund, which only permits up to a third of the portfolio to be held in equities, has proved a headwind in what has been a strong environment for the asset class over recent years. Portfolio positioning has also acted as a performance drag over recent periods, with the managers favouring ultra low-risk bonds and equity managers who are more valuation aware. The premise for their positioning is that the unwinding of QE will have a negative impact on bond prices as well as equity managers with an investment style which is broadly described as "quality growth".

We believe the A rating better reflects our current conviction in the managers' ability to meet the long-term performance target of the fund.