John Deehan - Investment Sales Manager

Transcription

1 The investment cycle The return of volatility & The importance of being selective for multi asset investors in the current environment John Deehan - Investment Sales Manager

2 Multi-Asset Choice Cost efficient 3 world class, multi award winning fund managers Seeks to optimise returns for the level of risk taken Blended approach of active and passive investments Active, passive and blended styles Seeks to optimise returns by targeting different risk levels Primarily low cost passive investments Reduce risk and create unique portfolios by blending funds from the same risk profile Lifestyle options available Seeks to optimise returns by varying the funds exposure to return seeking assets Primarily active investments 1. Source: Aviva 30 November Source: Aviva 31 December Over 86,000 customers 1 Over 3 billion in 2 assets 2

3 Aviva Investors Collaboration and diversity is at the heart of our process Fixed Income Equities Multi-asset Corporate Research ESG 87 investment professionals 250 billion AuM 27 investment professionals 78 billion AuM 36 investment professionals 118 billion AuM* Team: Equities team in London 28 investment professionals Industry & regional focus 9 investment professionals 395 investment professionals Team: FI team in Chicago Team: Equities team in Paris Team: Strategy team in Singapore Source: Aviva Investors. Staff data updated as at 28 February AUM data updated as at 30 September *Please note: Our Multi-asset team manage 118 billion ( 104bn, $140bn) of assets managed by investment desks across Aviva Investors and would be included in the equities and fixed income figures above. The coloured boxes on the map represent examples of AIMS strategies in the fund proposed by our global asset class teams. 3

4 Looking back in time A three year review 4

5 What happened to asset classes? Asset class performance for a EUR-based investor over the last 3 years Asset class performance for a EUR-based investor over the last 12 months Past performance is not a guide to future performance. Source: Bloomberg, Aviva Investors as at 31 January

6 % Yield US equities implied volatility What happened in 2017? Bond markets not fully pricing in positive US economic fundamentals US 10 y yields lower Bye-bye liquidity, hello volatility? US rates implied volatility US 10-year government bonds yield US equities volatility US rates volatility Past performance is not a guide to future performance. Source: Bloomberg, Aviva Investors as at 31 January

7 House View Key themes Turning point for global monetary policy in sight Underweight duration and credit Opportunistic Chinese reform Overweight to emerging market assets Market outcomes to be increasingly determined by fundamental factors Overweight value regions and sectors Peak financial regulation Preference for European banks Expectations of sustained inflation Overweight to US inflation Source: Aviva Investors as at 31 December

8 $bn Turning point for global monetary policy Expect higher interest rates 4,000 2,000 Asset purchases Bond issuance Net supply 0-2, Source: Federal Reserve, ECB, BoE, BoJ, SIFMA, Datastream as at 30 September

9 Historically low drawdowns for S&P 500 Expect volatility to normalise % -5% -6% -5% AVERAGE -8% -3% -7% -11% -12% -17% -19% -14% -7% -7% -7% -10% -16% -19% -10% -6% -7% -10% -12% -3% -29% -27% -33% Warning: Past performance is not a reliable guide to future performance. -47% Source: Aviva Investors, Bloomberg as at 31 December

10 Building a multi-asset solution in todays environment Key considerations Home bias Global Passive Active Internal External Unhedged Hedged Static asset allocation Dynamic asset allocation 10

11 Investment process Our investment process draws on all our strengths Strategic asset allocation Tactical asset allocation Implementation Long-term asset allocation House View Asset Allocation Committee Portfolio construction Fund management Globally unconstrained Published quarterly but constantly debated Meets regularly to apply House View to asset classes Selecting the optimal investment vehicle and ongoing risk management Daily rebalancing of cash flows by dedicated implementation team Harnessing our global resources to determine optimal asset allocation Constructing risk-managed portfolios that are robust 11

12 Strategic asset allocation Aligned to ESMA risk bands MAF Funds MAF Cautious MAF Strategic MAF Dynamic ESMA* risk rating year volatility band (%) MAF Cautious (Risk 3) MAF Strategic (Risk 4) MAF Dynamic (Risk 5) Growth Defensive Uncorrelated Source: Aviva Investors at 31 December * ESMA is European Securities and Markets Authority. The asset allocation splits shown are for illustrative purposes only. 12

13 Tactical asset allocation Adding value around the strategic asset allocation Relative weights to strategic asset allocation (%) Underweight Overweight Growth assets UK equity European equity North American equity Japanese equity Pacific basin equity Emerging markets equity Global high yield Emerging markets debt (local currency) Emerging markets debt (hard currency) Defensive assets US Treasuries Australian government bonds US Inflation Protected Securities Global investment grade Cash Short AUD v EUR Short CAD v EUR Uncorrelated assets Absolute return -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Source: Aviva Investors as at 31 January

14 US 10yr Inflation Breakeven Outlook Expect a pick-up in inflation Global inflation expectations recovered during yr US Inflation Breakeven Tighter labour market creating upward pressure on wage growth US Unemployment Rate(LHS) US Wage Growth (RHS) 9.0% 7.0% 5.0% 4.5% 3.5% 2.5% Macro economic fundamentals point towards a sustained return of inflation to target Positive backdrop for Growth assets but Defensive assets will be more challenged Tactical overweight to growth assets and US Inflation Protected Securities (TIPS) 3.0% % Source: Aviva Investors, Macrobond and Bloomberg, as at 31 December

15 Price to Book value ratio The importance of being selective European versus US equity 20% 10% 0% -10% -20% -30% -40% -50% Source: MSCI and Morgan Stanley as at 31 August Europe vs USA PBV (% Premium) WARNING: Past performance is not a reliable guide to future performance. Median 15

16 Level Bn Outlook Expect European banks to outperform broader market European banks are well capitalised Tier 2 Additional Tier 1 Core equity Tier 1 Banks are attractively valued and should benefit from an increase in rates European banks positively correlated to higher yields Euro Stoxx Banks index (Lhs) 10yr German bond yield (Rhs) Yield (%) Tilt portfolio to European banking sector Implemented via a Euro Stoxx Banks Future Sources: Bloomberg, Aviva Investors, Basel Committee on Banking supervision as at 31 December

17 Spread Looking further afield Emerging market versus developed equities 20% 10% P/E relative to developed markets P/B relative to developed markets 0% -10% -20% -30% -40% WARNING: Past performance is not a reliable guide to future performance. Source: Bloomberg, MSCI, Factset, as at 31 August

18 Debt to GDP % A closer look at fundamentals Emerging economies benefit from solid fundamentals G7 Govt. Debt to GDP Emerging Markets Govt. Debt to GDP WARNING: Past performance is not a reliable guide to future performance. Source: Aviva Investors, Macrobond as at 31 August

19 PMI A closer look at fundamentals Emerging economies benefit from improving sentiment Emerging Markets Manufacturing PMI 47 Emerging Markets Services PMI 46 Sep 2014 Mar 2015 Sep 2015 Mar 2016 Sep 2016 Mar 2017 WARNING: Past performance is not a reliable guide to future performance. Source: Aviva Investors, Macrobond as at 31 August

20 Indexed performance (%) Emerging Markets Equity Small Cap Active & internal 150 Why active Why EM Active? small & internal? cap? Source: Bloomberg as at 31 August Aviva Investors Emerging Markets Equity Small Cap MSCI Emerging Market Index MSCI Emerging Markets Small Cap ishares MSCI Emerging Markets Small-cap ETF 70 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 WARNING: Past performance is not a reliable guide to future performance. 20

21 Higher interest rates Volatility to normalise Asset prices to be determined by fundamentals 21

22 What have we learned? Those who do not remember the past are condemned to repeat it Benjamin Graham, The Intelligent Investor 22

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24 Thank you

25 Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is also regulated in the UK: by the Prudential Regulation Authority for prudential rules and, to a limited extent, by the Financial Conduct Authority for applicable UK conduct rules. Registered Branch Office in Ireland (No ) at One Park Place, Hatch Street, Dublin 2. Tel (01) Web Registered in England ( ) at Wellington Row, York, YO90 1WR. WARNING: The value of your investment may go down as well as up. WARNING: If you invest in these funds you may lose some or all of the money you invest. WARNING: These funds may be affected by changes in currency exchange rates.