The rise and rise of capital protected products

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2 The rise and rise of capital protected products Presented by Russel Chesler, Product Structurer Perpetual Structured Products 15 August 2007 Presentation to PortfolioConstruction Conference 2007

3 The rise and rise of capital protected products Global and domestic growth Relevance for specific investor groups Future trends Perpetual Protected Investment Series 2

4 3 Global and domestic growth

5 Global growth Providing comfort for investors who remember the pain of global equity market corrections and want more than a cash return 1. Growing strongly 2. In the mainstream 3. Different uses 25% per annum for the last three years 1 Four out of five UK advisers see capital protection as one of the building blocks of a sensibly diversified portfolio 2 Growth and income enhancement indices managed funds new asset classes 1 Source: Perpetual 2 Capital Protection key to UK advisers, says Skandia survey, StructuredRetailProducts.com, 20 December

6 Australian growth It s all about gearing Less than 1% of investors portfolios $2 billion in new flows to June 2007 $1 billion in new flows 2006 Access to 100% LVR Tax effective Strong Australian equity markets Source: Perpetual 5

7 Wide range of underlying investments Established offerings Managed funds ASIC registered funds across a range of asset classes Perpetual Protected Investments Macquarie Fusion Hedge funds Fund of funds and single funds OMIP HFA Octane Growth areas Thematic products Emerging markets, hard and soft commodities, water, renewable energy Macquarie Gateway JBWere Keystones Income products Credit or equity linked Westpac Halcyon Macquarie Alps 6

8 7 Increasing relevance for specific investors (and advisers)

9 The value of access to capital 25% 7 year capital protected managed fund product Internal rate of return 15% 5% -5% -15% -25% 5% 6% 7% 8% 9% 10% 11% 12% Breakeven of 7.5% Fund return per annum Extra return Franking credits Tax effective features (including ability to prepay interest) CGT at maturity Source: Perpetual. Please see the paper The rise and rise of capital protected products for the assumptions used. Past performance is no indication of future performance. 8

10 Distribution of returns Percentage 12% 10% 8% 6% 4% 2% 78% probability of receiving a positive return 64% greater than 8% 51% greater than 15% 0% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Internal rate of return per annum Source: Perpetual. Please see the paper The rise and rise of capital protected products for the assumptions used. Past performance is no indication of future performance. 9

11 The value of choice Probability 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% 9.0% 9.6% 10.1% Balanced 80% Balanced plus 20% Global Resources (protected) 80% Balanced plus 20% Global Resources Source: Perpetual. Please see the paper The rise and rise of capital protected products for the assumptions used. Past performance is no indication of future performance. 10

12 Increasing relevance for investors and advisers Meet investor goals Looking for higher returns and income Marginal tax rates still high Need to support retirement lifestyle Source: Perpetual Meet adviser goals New products for emerging wealthy Search for new sources of alpha Value-add after simplification of super 11

13 12 Future trends

14 The rise and rise of capital protected products Protected lending still a sound strategy for the right investor Access newer sources of alpha in a way that better suits investor s risk profile Greater focus on repackaging returns from any asset class to deliver income 13

15 14 Perpetual Protected Investments

16 Perpetual Protected Investments Series Choose from a menu of well-rated funds Accelerate investment performance through gearing with no margin calls Take advantage of market highs while being protected from the lows Tax effective investment with flexibility through direct ownership of funds Manage cash flow by having fees* paid directly from the product * Product fees include the administration fees and put option premium (if applicable) Source: Perpetual 15

17 A new generation of capital protection Investor benefits Superior investment menu Greater tax effectiveness More cost effective Better cash flow Adviser benefits Target emerging wealthy Options that better suit client s risk profile Revenue stream for 7 years Source: Perpetual 16

18 General advice IMPORTANT NOTE: This presentation has been prepared by Perpetual Investment Management Limited ABN , AFSL , a subsidiary of Perpetual Australia Limited for the use of advisers, dealer groups and research houses. It is intended to be read with the research paper accompanying it. While Perpetual strives to provide accurate information, this presentation should not be treated as a comprehensive statement of any law or practice. This presentation is not intended to provide you with personal advice and in providing this information, we have not taken into account your particular investment objectives, financial situation or needs. You should assess whether this information is appropriate for your particular needs, either by yourself or with your adviser. Perpetual expressly disclaims any responsibility or liability to anyone who acts or relies upon anything contained in, or omitted from, this presentation. 17