Reimagining the 60/40 Portfolio: Integrating the LV= Fixed Term Investment to balance risk and return
Advisors and investors have long returned to the traditional 60% equity/40% bonds portfolio to balance risk and return. However, with an increased emphasis on client composure and the investor experience, incorporating the LV= Fixed Term Investment (Protected Retirement Plan), or FTI, into your financial planning could allow you to strike a better balance.
This article considers how you could use the LV= Fixed Term Investment (FTI) to create an alternative to the 60/40 portfolio, and what it could do for your clients.
We’ll illustrate its impact using a combination of the FTI, the Vanguard LifeStrategy range, and the LV= Smoothed Managed Funds.
Incorporating the LV= Fixed Term Investment as a guaranteed asset
The Fixed Term Investment (FTI) offers an alternative to traditional bonds or gilts, thanks to its 100% FSCS coverage, while also providing a guaranteed return at levels competitive with bonds.
Although it can be used to generate income, the FTI can also serve as a guaranteed investment vehicle with a focus on growth rather than income.
For instance, the following table shows what returns a client could expect if they had purely invested their fund in the Vanguard LifeStrategy 60% Equity Fund (providing the traditional 60/40 equity/bond portfolio) compared to placing 40% of their fund in an FTI (replacing the bond exposure) and 60% in the Vanguard LifeStrategy 100% Equity Fund (retaining the equity exposure).
|
Period |
Vanguard 60% Equity fund returns1 |
60% Vanguard LifeStrategy 100% Equity/ 40% LV= FTI returns2 |
|
3 years |
40.02% |
43.85% |
|
5 years |
35.71% |
56.86% |
|
10 years |
111.90% |
166.47% |
Returns based on historical Vanguard and LV= performance. All returns are based on a client aged 60 investing £100,000 with Value Protection and on a minimal income basis. Vanguard figures include charges, LV= figures exclude any mutual bonus or adviser charges. Quote date: 22/06/2026.
A step further for cautious clients combining the FTI with Smoothed Managed Funds
As a globally diversified multi-asset fund range, Smoothed Managed Funds offer an alternative to traditional funds. Boasting a history of almost 20 years of smoothed performance, they are designed to significantly reduce the volatility experienced by investors, particularly during short term market instability.
The next table shows how a client who was considering investing in the Smoothed Managed Cautious fund could balance investor experience and returns by taking a similar approach.
In this example the client, instead, invests 40% of their capital in the FTI (where all returns are fully guaranteed), and replaces the lost equity exposure by moving the remaining 60% to the risk-rated six Smoothed Managed Growth fund – this will still leverage the smoothing mechanism of the LV= funds while retaining growth potential in addition to guaranteed returns from the FTI.
|
Period |
SMF Cautious returns3 |
60% SMF Growth/ 40% LV= FTI returns4 |
|
3 years |
27.17% |
28.13% |
|
5 years |
15.94% |
28.94% |
|
10 years |
53.47% |
78.38% |
Returns based on historical SMF and FTI performance. All performance figures are based on a client aged 60 investing £100,000 with Value Protection and on a minimal income basis. Vanguard figures include charges, LV= figures exclude any mutual bonus or adviser charges. Quote date: 22/06/2026.
Using this option provides an additional level of volatility management for cautious clients, or those with lower composure for loss appetite due to their circumstances and preferences. Investment in the smoothed managed funds can deliver a much calmer journey compared to that of an unsmoothed fund, and allocating a percentage of the client’s capital to FTI can reduce the risk exposure of their portfolio as a whole.
Whether alongside a traditional equity fund, or our Smoothed Managed Funds, incorporating the LV= Fixed Term Investment into a portfolio can provide a potentially more profitable investment strategy compared to traditional 60/40 equity/bond portfolios while reducing the amount of risk on the table for your client.
To find out more about LV= Fixed Term Investment, visit our dedicated page Fixed Term Annuity (Protected Retirement Plan) | LV= Adviser. Or, if you’re ready to get a quote and see the real-life impact it could have, log in to our Adviser Portal LV Adviser Login.
Please remember that past performance doesn’t reflect what will happen in the future. The value of your client’s investment can go down as well as up. This means your client is not certain to make a profit and could get back less than they invested.
Our smoothing process helps to reduce the impact of market volatility, but it won’t prevent an investment from dropping in value.
1 LifeStrategy® 60% Equity Fund – Accumulation
2 LV= and LifeStrategy® 100% Equity Fund – Accumulation
3 Defaqto
4 LV=
5 LV=
LV=
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