Aviva 2013 Annual Report Download - page 173

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
171
Notes to the consolidated financial statements continued
26 – Interests in structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant activities
are directed by means of contractual arrangements. The Group has interests in both consolidated and unconsolidated structured
entities as described below.
The Group holds redeemable shares or units in investment vehicles, which consist of:
 Debt securities which comprise securitisation vehicles that Aviva does not originate. These securities consist of: Residential
Mortgage-Backed Securities (RMBS), Commercial Mortgage-Backed Securities (CMBS), Asset Backed Securities (ABS), Asset
Backed Commercial Papers (ABCP) and Wrapped credits securities. The Group also has extremely limited exposure to
Collateralised Debt Obligation (CDO) and Collateralised Loan Obligation (CLO) securities.
 Investment funds which include: hedge funds, liquidity funds, private equity funds, unit trusts, mutual funds and Private
Finance Initiative (PFIs).
 Specialised investment vehicles which comprise Open Ended Investment Companies (OEICs), Property Limited Partnerships
(PLPs), Specialised Open Investment Funds (SOIFs), Sociétés d'Investissement à Capital Variable (SICAVs), Fonds Communs de
Placement (FCPs) and Special Purpose Vehicles (SPVs).
The Group’s holdings in investment vehicles are subject to the terms and conditions of the respective investment vehicle’s offering
documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles.
The investment manager makes investment decisions after extensive due diligence of the underlying investment vehicle including
consideration of its strategy and the overall quality of the underlying investment vehicle’s manager.
All of the investment vehicles in the investment portfolio are managed by portfolio managers who are compensated by the
respective investment vehicles for their services. Such compensation generally consists of an asset-based fee and a performance-
based incentive fee, and is reflected in the valuation of the investment vehicles.
(a) Interests in consolidated structured entities
The Group has determined that where it has control over investment vehicles, these investments are consolidated structured
entities. As at 31 December 2013 the Group has granted loans to consolidated PLPs for a total of £371 million (2012: £351
million). The purpose of these loans is to assist the consolidated PLPs to purchase or construct properties within the funds business
activity. The Group has also provided support, without having a contractual obligation to do so, to certain PLPs via letters of
support amounting to £39 million (2012: £34 million) in relation to loans to consolidated PLPs.
The Group has also given support to the consolidated structured entity Aviva Equity Release UK Limited (AER).
As reported in note 25, at the inception of the securitisation vehicle, the UK subsidiary, Aviva Equity Release UK Limited (AER),
has granted subordinated loan facilities to some of the ERF companies. AER receives various fees in return for the services provided
to the entities. For the administration of the loan note liabilities Aviva receives cash management fees based on the outstanding
loan balance at the start of each quarter. As compensation for managing the mortgage assets, AER receives portfolio
administration fees.
As at the reporting date, the Group has no intentions to provide financial or other support in relation to any other
investment vehicles.