QUARTERLY FUNDS REVIEW Q2 2017

Transcription

1 QUARTERLY FUNDS REVIEW Q2 2017

2 IMPORTANT NOTE AMP Capital Funds Management Limited (ABN , AFSL ) and ipac asset management limited (ABN , AFSL ) are the issuers of units in the funds which are referred to in this document. To invest in any of the funds, investors will need to obtain the current Product Disclosure Statement (PDS) from the issuer. The PDS contains important information about investing in the relevant fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the fund. While every care has been taken in the preparation of this presentation, AMP Capital Investors Limited (ABN , AFSL ) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Unless otherwise stated in the terms of issue of the relevant fund, no company in the AMP Group guarantees the repayment of capital or the performance of any fund or any particular rate of return referred to in this document. Past performance is not a reliable indicator of future performance. As advisers /financial planners invest through an investment platform, this presentation shows platform class A, K and L performance after the deduction of platform class A, K and L fees. Please refer to our website for performance figures for direct investment class H. This presentation has been prepared for the purpose of providing general information, without taking account of any particular investor s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor s objectives, financial situation and needs. Certain information in this presentation identified by reference has been obtained from sources that is considered to be reliable and is based on present circumstances, market conditions and beliefs. The information has not been independently verified and no assurance that it is accurate or complete can be provided This presentation is solely for the use of AMP Capital and AMP employees and must not be provided to any other person or entity without the express written consent of AMP Capital. This presentation is provided strictly on a confidential basis and the information contained in it must be kept strictly confidential and may not be reproduced or redistributed (in whole or in part) or otherwise made available to any other person in any format without the express written consent of AMP Capital. 2

3 MACROECONOMIC AND CAPITAL MARKETS Q > Okay global growth: 3.3% (2017), 3.4% (2018) > 2017 GDP growth: China 6.5%, US 2.5%, Eurozone 2.0%, Japan 0.8%, Australia 2.0% > Interest rates to remain low. Expect 3 Fed rate hikes this year. ECB, BoJ and RBA on hold. > $US headed gradually higher, $A still headed down > Low returns from banks deposits and bonds > Shares at risk of a short term pull back, but should provide decent returns on a 6-12 month view as global growth improves > Key risks President Trump The Fed & $US, rising bond yields Eurozone break up worries China Australian property market North Korea QUARTERLY FUNDS REVIEW Q

4 BONDS AT THE END OF A 35 YEAR BULL MARKET YIELDS HAVE SO FAR JUST HAD A FLICK OFF THE BOTTOM year bond yields, % Australia US SOURCE: BLOOMBERG, AMP CAPITAL QUARTERLY FUNDS REVIEW Q

5 AUST LISTED COMPANY PROFITS HAVE SEEN A RETURN TO GROWTH Australian share market EPS growth Financial years, % change Market Consensus forecasts SOURCE: UBS, AMP CAPITAL QUARTERLY FUNDS REVIEW Q

6 AMP CAPITAL INCOME GENERATOR

7 HOW HAS INCOME GENERATOR PERFORMED? 30 JUNE year 2 years 3 years 4 years 5 years Since Inception Consistent level of incomes delivered since inception Income Growth Income Generator * Benchmark Past performance is not a reliable indicator of future performance Source: AMP Capital, as at 30 June Performance is annualised for periods greater than one year. Performance is after platform class K, management fees and before taxes, and assumes all distributions are reinvested. Inception date is 31 May Please refer to our website for performance figures for direct investment class H. QUARTERLY FUNDS REVIEW Q

8 DESIGNED FOR STABLE MONTHLY INCOME THAT RISES OVER TIME FOR INFLATION PROTECTION Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Income distribution in actual cents per unit Realised capital gains reinvested % Cumulative incomes based on $100k invested June 30, ,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 38,838 Financial year 2016/17 One year return (%) Monthly income 3.97% (0.378 CPU) Tax benefit of franking credits 0.87 Total income Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Past performance is not a reliable indicator of future performance. Note: The cumulative distribution shown above is for investments in Platforms class (Class K), net of fees and before tax. The 13 th distribution is automatically reinvested providing investors with an increased number of units. Source: AMP Capital. *automatically reinvested through additional units. QUARTERLY FUNDS REVIEW Q

9 CAPTURING DIVERSE INCOME OPPORTUNITIES TARGET ASSET ALLOCATION Growth Defensive Australian shares 37% Fixed interest 40% Global shares 6% Property 4% Listed Infrastructure 4% Growth oriented income Defensive oriented income Inflation-linked bonds 4% Cash 1% 45% Community Infrastructure 4% 55% RESPOND Managed to capture sustainable yield opportunities as they present themselves e.g.: when yield opportunities are abundant in growth assets the portfolio will move to capture them Source: AMP Capital QUARTERLY FUNDS REVIEW Q

10 MANDATED MANAGERS FOCUSED ON INCOME Asset class Type of securities Managers Australian shares and property > Stocks with high, sustainable yields > Property investments that rely on rental yield > Tailored mandates to capture opportunities International shares (unhedged) > Stocks chosen where yields are significantly higher than the market average Infrastructure (unhedged) > Exposure to investments with cash flows linked to inflation Fixed interest > Medium duration 0-5 years > Government bonds with consistent and stable yield > High quality corporate issues Inflation-linked bonds > Income that rises with inflation Direct infrastructure > Capture high sustainable income streams from social infrastructure Source: AMP Capital QUARTERLY FUNDS REVIEW Q

11 (%) KEY ISSUES AUSTRALIAN EQUITIES ARE WELL-ANCHORED Australian gross dividends maintaining significant advantage over current term deposits Recent outperformance in Australia market is lowering prospective yield Grossed up dividend yield - Australian shares 1Y Term Deposit Past performance is not a reliable indicator of future performance. Source: RBA, ASX, Bloomberg. QUARTERLY FUNDS REVIEW Q

12 KEY ISSUES AUSTRALIAN EARNINGS IMPROVING Australian earnings have risen in recent rally Dividends per share resilient and improving ASX 200 Dividends Per Share (DPS) ASX 200 Earnings Per Share (EPS) Past performance is not a reliable indicator of future performance. Source: RBA, ASX, Bloomberg. QUARTERLY FUNDS REVIEW Q

13 CASE STUDY DIRECT ASSET ROYAL NORTH SHORE HOSPITAL (RNSH) In February 2015, AMP Capital acquired 100% of the interest in Royal North Shore Hospital PPP and related car park and retail offering AMP Capital: experienced global infrastructure manager, with expertise in healthcare Exposure through Community Infrastructure Fund Hard facilities management subcontracted to suppliers. Responsibilities include: Fittings, Furniture and Fixed Equipment Planned and Preventative Maintenance Utilities Management and continuity of supply and Building Management System Robust income stream backed by government dissimilar to other demand-based infrastructure that are exposed to demand risk, patronage risk, competition or changes in economic activity QUARTERLY FUNDS REVIEW Q

14 TOP AUSTRALIAN STOCK HOLDINGS STOCK FUND % BENCHMARK % GROSS DIVIDEND Commonwealth Bank of Australia National Australia Bank Westpac Bank Wesfarmers Woolworths Telstra Australia & New Zealand Bank AGL Energy Stockland Group Insurance Australia Group Past performance is not a reliable indicator of future performance. Source: Bloomberg, Plato, Martin Currie, AMP Capital. Data as at 30 June 2017 QUARTERLY FUNDS REVIEW Q

15 HIGH QUALITY BUY-AND-HOLD STRATEGY CAPTURES INCOME Fixed income allocations as at 30 June % 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% BT Investment Management AMP Capital AAA AA A BBB BB Income Generator 0% BT Investment Management AMP Capital Income Generator Cash Securitised Corporate Government Portfolio Duration 1.85 years Source: AMP Capital, BT Investment Management, as at 30 June 2017 QUARTERLY FUNDS REVIEW Q

16 INCOME ESTIMATE FOR 2017/2018 INCOME ESTIMATE for 2017/18 year: 4.75% * Monthly income 3.90% (0.370 CPU) Tax benefit of franking credits 0.75% Potential reserve at year end 0.10% *Income estimate is estimated after fees and including franking credits. AMP Capital may review and change the investment managers and underlying funds including the level of distributions at any time, consistent with the terms of the Product Disclosure Statement. The information above is a hypothetical estimate only and is not a guarantee. The actual figures may be higher or lower than estimated. What you need to consider before you invest AMP Capital estimates the income and franking credits at the start of the financial year based on assumptions of the prevailing portfolio at that time and security level income forecasts. AMP Capital does not revisit the income estimate through the year unless there is a material change in conditions in particular, conditions which would lead to a widespread change in dividend payments. The estimates are converted to a monthly income figure in cents per unit (CPU) and into a yield based on 30 June prices. It is the expected yield that adjusts with changes in Unit Price daily. The latest unit price and income can be obtained by calling The value of your investment will go up and down over time. The income generated in the Fund may be higher or lower than anticipated due to, amongst other things, changes in the level of dividends, franking credits and interest coupons. There is a risk that the actual income may be lower than the pre-announced income. The Fund may change the level of their distributions giving at least three months' notice or if the responsible entity determines that it is in the best interests of investors to do so. Like all investment strategies, an investment in the Fund involves risks details of which are located at the end of the presentation. QUARTERLY FUNDS REVIEW Q

17 AMP CAPITAL MULTI-ASSET FUND

18 PERFORMANCE 30 JUNE 2017 SINCE INCEPTION 3 months 1 year 3 year Return Volatility Sharpe ratio Multi-Asset Fund (before fees) Multi-Asset Fund (after platform class A fees) Inflation + 5.5% MSCI World ex Australia (local currency) S&P/ASX Bloomberg AusBond Composite Past performance is not a reliable indicator of future performance Source: AMP Capital. Bloomberg. As at 30 June Inception date of the Multi-Asset Fund is 2 December Performance is platform class A, annualised for periods greater than one year, AFTER platform class A management fees and BEFORE taxes, and assumes all distributions are reinvested. As advisers /financial planners invest through an investment platform, this presentation shows platform class A performance after the deduction of platform class A fees. Please refer to our website for performance figures for direct investment class H. CPI means the Reserve Bank of Australia inflation rate (Consumer Price Index) trimmed mean (published on QUARTERLY FUNDS REVIEW Q

19 STRATEGY IN ACTION Contributors Detractors Action 2 nd Quarter Global Equities: Value and Quantitative strategies performed very well over the quarter as Europe and then Emerging markets have performed strongly Bonds: Positions in US Treasuries against Bunds have performed strongly as ECB ponders policy changes and US inflation disappoints Tail hedges: Put options on China H share shave dragged on performance as China rallied Added: AQR Style Premia Reduced: Energy ETF Removed USD longs Contributors Detractors Action 1 Year Alternatives: The broad absolute return strategy set also contributed strongly. Equities: Active equity strategies have performed strongly across Europe, globally and Australia. Bonds: Australian 10 year bonds have underperformed over the year as inflation recovered from mid year lows Added: Commif AQR Style Premia Reduced / exited: Banks Credit High yield TIPS Past performance is not a reliable indicator of future performance. Source: AMP Capital, As At 30 June 2017 QUARTERLY FUNDS REVIEW Q

20 PORTFOLIO EVOLVES THROUGH TIME DYNAMIC ASSET ALLOCATION & STRONG FOCUS ON RISK MANAGEMENT Jun 2011 *Europe in crisis *Falling global growth Credit and Cash Dec 2011 *Central bank rescue *Recovering growth *Cheap valuations IG Credit and Equities Dec 2012 *QE forever *Broadening growth *Cheap valuations Structured Credit and Equities Dec 2013 *Divergent policy *Divergent growth (EM vs DM) *Mixed valuations DM Equities Dec 2014 *Extreme low rates *Divergent policy *Rising volatility DM Equities and Alternatives Dec 2015 *Divergent policy *Rising volatility *Oil and China stress DM Equities, Alternatives, Hedges 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16 Oct 16 Apr 17 Equities Listed real assets Credit Bonds Alternatives Absolute Return Cash including hedges SOURCE: AMP CAPITAL. AS AT 30 JUNE 2017 QUARTERLY FUNDS REVIEW Q

21 DIVERSIFIED STRATEGIES We look for mandates which target differentiated sources of return to further diversify the portfolio Asset class Opportunity Implementation Australian shares International shares International shares > High alpha potential market > Fundamental and quantitative mandate in long/short equities > Very high breadth all country 130/30 stock portfolio > Differentiated and unique quantitative stock selection > Targeting cheap stocks with recoverable earnings > Significant earnings leverage in global market Real assets > Reliable contractual cash flows linked to inflation High yield credit > Senior bank loans typically senior and secured > Defensively positioned; primarily floating rate > Global hedge fund mandate with market leading platform > Bottom up replication 9 strategies capturing significant hedge fund value Absolute return > Alternative risk premia in niche market segments > Alternative risk premia in mainstream markets > Long / short stock selection Asia Pac SOURCE: AMP CAPITAL. MANAGERS LISTED ABOVE ARE SHOWN FOR ILLUSTRATIVE PURPOSES QUARTERLY FUNDS REVIEW Q

22 Jul 97 Mar 98 Nov 98 Jul 99 Mar 00 Nov 00 Jul 01 Mar 02 Nov 02 Jul 03 Mar 04 Nov 04 Jul 05 Mar 06 Nov 06 Jul 07 Mar 08 Nov 08 Jul 09 Mar 10 Nov 10 Jul 11 Mar 12 Nov 12 Jul 13 Mar 14 Nov 14 Jul 15 Mar 16 Nov 16 BEING OPPORTUNISTIC TREASURY VS BUNDS Background > The US central bank stopped buying bonds in September 2014, whilst the ECB is still buying 60B Euro a month > In next 12 moths this will likely change > The gap between Treasuries and Bunds for example reflects this buying disparity through extremely high spreads between US and European bonds > The gap is unsustainable in most scenarios over the next 5 years Treasury vs Bund Spreads A selective approach > Holding Treasuries vs European bonds provides positive carry and positive outcomes in both deflationary (compressing) or inflationary (rising) risk scenarios SOURCE: AMP CAPITAL, BLOOMBERG QUARTERLY FUNDS REVIEW Q

23 PORTFOLIO POSITIONING 30 JUNE 2017 Alternatives 26% Equities 41% Portfolio Characteristics Volatility 5.5% Equity Beta 0.35 Duration years Themes Global Equities Europe Eurostoxx and Germany equities European dividends 2020 Emerging markets Reflation Global value Low duration Liquid High cash component (20%) Cash 20% Alternatives High gross exposure to alternative strategies (26%) SOURCE: AMP CAPITAL. EXPOSURES SHOWN ABOVE ARE SHOWN FOR ILLUSTRATIVE PURPOSES. ALLOCATIONS AND UNDERLYING INVESTMENT MANAGERS MAY CHANGE WITHOUT PRIOR NOTICE. QUARTERLY FUNDS REVIEW Q

24 MYNORTH RETIREMENT FUND

25 MYNORTH RETIREMENT FUND ABOUT THE FUND Investment objective The fund aims to provide a stable, medium-term return of 3.5% pa above inflation* (before management fees) on a rolling 5-year basis. Focus on income The Fund has a focus on Australian equity income and other income-focused strategies across both growth and defensive assets Tax aware The Fund is designed and managed for low marginal tax payers and is tax aware Focus on risk The Fund will tactically implement tail risk hedging to help protect the portfolio against large losses Liquidity Daily liquidity provides clients with the flexibility to deal with emergencies Low cost The Fund has been designed to be a low cost option for retirees 0.70% management fee on platform and an estimated performance fee of 0.051% pa Inflation linked Exposure to assets such as real estate, infrastructure and inflation-linked bonds to protect retiree cash flows in real terms * INFLATION MEANS THE RESERVE BANK OF AUSTRALIA INFLATION RATE (CONSUMER PRICE INDEX) TRIMMED MEAN (PUBLISHED ON RBA.GOV.AU) QUARTERLY FUNDS REVIEW Q

26 PERFORMANCE OVERVIEW THREE OFFERS The MyNorth Retirement Fund has been open for less than 12 months, therefore we are restricted from displaying performance numbers The MyNorth Retirement Fund invests all assets into an internal retirement strategy, AMP Capital s Diversified Retirement Fund, which has been running for longer, with inception date 6 May 2016 Core Retirement Fund (known on platform as MyNorth Retirement Fund) > Multi-Asset Fund tailored for post-retirement MyNorth Retirement Fund (with Pension Payment Planner) > Fixed horizon, variable cashflows Future Cash Flow Range > Fixed Cashflows, variable horizon QUARTERLY FUNDS REVIEW Q

27 ASSET ALLOCATION BREAKDOWN JUNE 2017 Designed for retirees. Portfolio is built to reflect the finest attributes of different return sources in a balanced mix, without reference to peers or benchmarks. Allocations adjust depending on outlook for each market using AMP Capital s dynamic asset allocation process. ASSET CLASS Range (%) Australian shares 0-40 International equities 0-40 Listed real assets 0-20 Direct assets 0-10 High yield credit 0-20 Growth alternatives 0-20 Total Growth 0-70 Fixed income & credit Cash Defensive alternatives 0-30 Total Defensive Source: AMP Capital. Exposures shown above are shown for illustrative purposes. Allocations and underlying investment managers may change without prior notice. QUARTERLY FUNDS REVIEW Q

28 DYNAMIC ASSET ALLOCATION JUNE 2017 Asset allocation adjusted through AMP Capital s DAA process 100.0% Position History - Asset Class Summary 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Australian Equities Income Global Equities EM Equities Listed Real Assets Fixed Income and Credit Alternatives Cash Source: AMP Capital. Exposures shown above are shown for illustrative purposes. Allocations and underlying investment managers may change without prior notice. QUARTERLY FUNDS FUNDS REVIEW REVIEW Q Q

29 DIVERSIFIED STRATEGIES ASSET CLASS RATIONALE IMPLEMENTATION Australian shares Focus on income and franking for retirees International shares High quality earnings paid out to shareholders Additional focus on buybacks supporting yields Real assets Global Listed Property Listed Infrastructure Seeking inflation linkage and diversification High yield credit SMA - bank loans, high yield, mortgage bonds Defensively positioned, primarily floating rate Absolute return Bottom up replication capturing significant hedge fund value Alternative risk premia in niche market segments Fixed Income and Credit Inflation linked bonds Floating rate credit 29 QUARTERLY FUNDS REVIEW Q

30 KEY DIFFERENCES MYNORTH RETIREMENT FUND V MULTI-ASSET FUND Growth Assets Diversifying Assets Defensive Assets Alternative Strategies AMP Capital Multi-Asset Fund characteristics: Diversified portfolio of growth and defensive assets Aims to deliver returns above inflation Strong focus on risk management 3 stage investment process asset allocation, implementation and tail hedging Uses dynamic asset allocation which allows for a flexible approach to changes in the asset class mix to meet changes in the market environment. Aims to have lower volatility than traditional balanced funds MyNorth Retirement Fund characteristics are similar with the following differences: The Funds have a greater focus on income and manage risk specifically for retirees in drawdown The Fund is managed for investors in or close to retirement, utilising those investors zero marginal tax rate by fully valuing franking credits The Fund manages risks that are more prevalent when delivering cash flows in retirement, such as interest rate risk and inflation risk. Dynamic Asset Allocation and portfolio positioning will be slightly more defensive QUARTERLY FUNDS REVIEW Q

31 BEING OPPORTUNISTIC AUSTRALIAN VS US INFLATION Background > Inflation protection is also one of the attributes the Fund targets to align to post-retirement investment needs. Within fixed income, the Fund will have a bias toward holding inflation linked bonds over nominal bonds (given reasonable pricing) US Breakeven 10 Year Target Close Australia Breakeven 10 Year Open > While Australian inflation is the key risk to hedge, an opportunity arose in mid 2016 in which US inflation protection was priced very cheaply. > The Fund switched half of its breakeven inflation exposure from Australia to the US in June Once the US inflation normalised, we closed the position A selective approach > Opportunistically switching inflation exposure from Australia to the US allowed the Fund to maintain inflation protection while also increasing returns. 1.2 SOURCE: AMP CAPITAL, BLOOMBERG QUARTERLY FUNDS REVIEW Q

32 AMP CAPITAL FUTURE CASH FLOW RANGE

33 HELPING PROVIDE GREATER CERTAINTY ON CASH FLOW THE FUNDS DELIVER KNOWN MONTHLY CASH FLOWS, ADJUSTED ANNUALLY FOR INFLATION, UNTIL ALL INCOME AND CAPITAL IS RETURNED TO INVESTORS. THERE ARE 3 FUNDS IN THE RANGE: FUTURE 6 CASH FLOW FUND SERIES 1 Monthly cash flow of 6 cents per unit pa adjusted annually for inflation* Managed with the aim of lasting 15 to 30 years from the inception of the Fund. We estimate the Fund's lifetime to last 21 years and 3 months** from the inception of the Fund FUTURE 9 CASH FLOW FUND SERIES 1 Monthly cash flows of 9 cents per unit pa adjusted annually for inflation* Managed with the aim of lasting 10 to 16 years from the inception of the Fund. We estimate the Fund's lifetime to be 12 years and 11 months** from the inception of the Fund FUTURE 12 CASH FLOW FUND SERIES 1 Monthly cash flows of 12 cents per unit pa adjusted annually for inflation* Managed with the aim of lasting 7.5 to 11 years from the inception of the Fund. We estimate the Fund's lifetime to last 9 years and 4 months** from the inception of the Fund * Until all income and capital is returned ** Modelling and assumptions Our modelling and assumptions used to determine the indicative range and estimate of the life of the Funds are based on a financial model built by AMP Capital that generates 1,000 random simulated scenarios for the investment returns and associated capital drawdown of the Funds. The result of each simulated scenario is an estimate of the life of the Funds for that scenario. Key assumptions factored into the modelling include a return of 5.3% per annum after fees, volatility of 6% per annum on investments held by the Funds, interest rates being determined by the current real yield curve for Australian government bonds and CPI of 2.5% per annum. The results of these 1,000 simulated scenarios allows us to understand the distribution of possible outcomes, which provides an indication of the likelihood of a particular estimate of the life of the Funds occurring. See 'Modelling and assumptions' on page 5 of the incorporated information document. You should be aware that the information related to the indicative range and estimate of the life of the Funds is predictive and does not represent a guarantee by AMP or affiliated parties. Known and unknown risks and other uncertainties may arise which impact the assumptions used in the modelling. This may result in the predictive estimates being materially different from actual outcomes. QUARTERLY FUNDS REVIEW Q

34 Cash Flows per $100k Invested ILLUSTRATIVE CASH FLOW PER $100K INVESTED FUTURE CASH FLOW 9 FUND 20,000 The Future Cash Flow 9 Fund pays monthly distributions at a rate of 9 cents per annum (0.75 cents per month). It is indexed against inflation in July each year until all income and capital is returned to investors. 18,000 16,000 14,000 Fixed monthly cash flow distributions - inflation indexed Expected franking credits received INDICATIVE RANGE OF THE LIFE OF THE FUND YEARS Tracking the Fund s goal Upon launch of the Fund in August 2016, we estimated the life of the Fund to be 12 years and 11 months (as described in the PDS). As the portfolio performed well since inception, pleasingly we have extended our estimate of the life of the Fund to be 13 years and 4 months from inception (that is, to November 2029). This estimate will be updated quarterly to give retirees enhanced capability to plan their retirement, and is subject to the assumptions outlined in the PDS. From July, monthly distributions will increase by 1.9% in-line with the current rate of inflation. 12,000 10,000 8,000 6,000 4,000 2, YEAR Estimate of the life of the Fund at inception: 12 years, 11 months Updated Estimate of the Life of the Fund: 13 Years, 4 months > For illustrative purposes, we have provided the above chart showing the monthly cash flows and return of capital profile for the Fund, based on $100,000 invested at the inception of the Fund. > The increasing blue bars over time illustrate the monthly cash flows starting at $6,000 per annum and increasing with inflation. The monthly cash flows are shown as 12 segments within each blue bar. > The orange bars show actual cash flows received per $100k as at the date of this report. > The green bars are the estimate of franking credits that will be received by the Fund (based on the historical franking yield of the Fund s underlying Australian equity strategies). > The amount and frequency of the Fund s cash flows are known, however the Fund has an end date which is dependent on the Fund s performance. Chart above is based on our modelling and assumptions of future portfolio returns and inflation as at the date of this presentation and the PDS. Please see slide 60 for further information. QUARTERLY FUNDS REVIEW Q

35 Follow AMP Capital For Advisers on

36 THE MULTI-ASSET SALES TOOLKIT PACKAGED FOR YOUR USE IN CONVERSATIONS WITH ADVISERS SALES TOOLKIT The sales toolkit includes useful information on the following: > PIC Packs > 2017 Super Reforms and NCC > 2017 Insurance Inforce Pricing > 2017 Insurance New Business Pricing FURTHER INFORMATION > Please visit the Hub for further information MULTI-ASSET AND GOALS-BASED INVESTMENT SOLUTIONS BOOKLET > MyNorth Pension Payment Planner > Customer Diagnostics > 2017 Wealth pricing desk > MyLife > MyNorth Retirement Fund Portfolio Summary QUARTERLY FUNDS REVIEW Q

37 Q&A

38 AMP CAPITAL DYNAMIC MARKETS FUND

39 DYNAMIC MARKETS FUND PERFORMANCE AS AT JUNE 2017 $17,000 Cumulative return since September 2011 $16,000 12m 3yr (pa) 5yr (pa) Since inception DMF 9.8% 5.6% 8.4% 8.0% CPI+4.5% 6.3% 6.6% 6.8% 6.7% DMF 13.1% 12.5% 13.5% 0.6% 4.9% CPI+4.5% 6.7% 6.9% 7.2% 6.8% 6.2% $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 Past performance is not a reliable indicator of future performance. SOURCE: BLOOMBERG, AMP CAPITAL. AS AT JUNE INCEPTION DATE IS SEPTEMBER DYNAMIC MARKETS FUND RETURNS ARE NET OF RETAIL FEES (50 BPS) AND BEFORE TAX. PERFORMANCE IS ANNUALISED FOR PERIODS GREATER THAN ONE YEAR. RETURN HORIZON IS OVER ROLLING 5 YEARS. CPI MEANS THE RESERVE BANK OF AUSTRALIA INFLATION RATE (CONSUMER PRICE INDEX) TRIMMED MEAN (PUBLISHED ON AS ADVISERS/FINANCIAL PLANNERS INVEST THROUGH AN INVESTMENT PLATFORM, THIS DOCUMENT SHOWS PLATFORM CLASS A PERFORMANCE AFTER THE DEDUCTION OF PLATFORM CLASS A FEES. PLEASE REFER TO OUR WEBSITE FOR PERFORMANCE FIGURES FOR DIRECT INVESTMENT CLASS H. $9,000 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 DMF CPI + 4.5% PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE. SOURCE: AMP CAPITAL, RBA. AS AT JUNE INCEPTION DATE IS SEPTEMBER PERFORMANCE IS AFTER PLATFORM CLASS A MANAGEMENT FEES AND BEFORE TAXES, AND ASSUMES ALL DISTRIBUTIONS ARE REINVESTED. PERFORMANCE IS ANNUALISED FOR PERIODS GREATER THAN ONE YEAR. RETURN HORIZON IS OVER ROLLING 5 YEARS. CPI MEANS THE RESERVE BANK OF AUSTRALIA INFLATION RATE (CONSUMER PRICE INDEX) TRIMMED MEAN (PUBLISHED ON AS ADVISERS/FINANCIAL PLANNERS INVEST THROUGH AN INVESTMENT PLATFORM, THIS DOCUMENT SHOWS PLATFORM CLASS A PERFORMANCE AFTER THE DEDUCTION OF PLATFORM CLASS A FEES. PLEASE REFER TO OUR WEBSITE FOR PERFORMANCE FIGURES FOR DIRECT INVESTMENT CLASS H. QUARTERLY FUNDS REVIEW Q

40 DMF HAS DELIVERED POSITIVE CALENDAR YEAR RETURNS 15% 10% 5% 0% -5% -10% -15% Biggest intra year decline Calendar year return Past performance is not a reliable indicator of future performance. Source: AMP Capital. As at December Returns are net of fees and before tax. Inception date is September QUARTERLY FUNDS REVIEW Q

41 AUS EQY FX HEDGES COMMODITIES AUS BONDS CASH DM EQY EM EQY OIL SERVICES AUS EQY ENERGY FX HEDGES WTI CRUDE BRENT US BIOTECH SHIPPING US BANKS EUROPEAN BANKS SOYBEAN RUSSIA EQY NICKEL GREECE EQY AUS BONDS CORN GERMANY EQY TRANSPORTATION CHINA H EQY SPAIN EQY US VALUE ITALY EQY COPPER KOREA EQY MATERIALS JAPAN BANKS INDUSTRIALS EUROPE EQY CASH CHINA A EQY WHEAT EM EQY JAPAN EQY CONTRIBUTION TO RETURN ASSET CLASS & INDIVIDUAL SECURITY LEVEL 1.0% Asset class contributions over the quarter 0.5% Individual security contributions over the quarter 0.5% 0.0% 0.0% -0.5% -1.0% -0.5% Past performance is not a reliable indicator of future performance. Source: AMP Capital. As at June Returns are net of fees and before tax. Inception date is September QUARTERLY FUNDS REVIEW Q

42 CONTRIBUTION TO RETURN SINCE INCEPTION, CONTRIBUTIONS TO RETURN HAVE BEEN DIVERSIFIED Since inception FX Cash & hedges Global inflation linked bonds Global credit (Inv grade) Global credit (high yield) Global sovereign bonds Australian sovereign bonds Commodities Global REITs Global shares (EM) Global shares (DM) Australian shares Contribution to return (% pa) Past performance is not a reliable indicator of future performance. Source: AMP Capital. As at June Returns are net of fees and before tax. Inception date is September QUARTERLY FUNDS REVIEW Q

43 % Allocation ASSET CLASS FLEXIBILITY THROUGH THE CYCLE Change in growth/defensive mix and hedge ratio 100% Total growth assets Total defensive assets AUD effective exposure 75% 50% 25% 0% Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Past performance is not a reliable indicator of future performance. AA AS AT JUNE SOURCE: AMP CAPITAL. CHANGE TO ASSET ALLOCATION FOR THE ORIGINAL UNLISTED FUND. QUARTERLY FUNDS REVIEW Q

44 COMPARISON OF RISK/REWARD FROM DECEMBER 2012 TO NOW Dec 2012 Current 25% 25% DM equity DM Equity 20% EM Equity 20% EM Equity 15% Global REITs Commodities 15% Global REITs Commodities 10% Global Sovereign Bonds Global IG Credit 10% Global Sovereign Bonds Global IG Credit 5% Global HY Credit Cash 5% Global HY Credit Cash 0% 0% 5% 10% 15% 20% 25% Global Inflation Linked Bonds 0% 0% 5% 10% 15% 20% 25% Global Inflation Linked Bonds Growth/defensive mix has gone from 85% / 15% in December 2012 to 72% / 28% in July 2017 Past performance is not a reliable indicator of future performance. Source: Bloomberg, Datastream, AMP Capital. As at July Expected returns represent the merged return expectations from the Dynamic Asset Allocation process. Expected volatility is based on historical volatility. QUARTERLY FUNDS REVIEW Q

45 CURRENT POSITIONING Allocations Range (%) Current AA (%) Growth Australian Shares Developed Market Shares Emerging Market Shares 5.0 Global REITs Commodities Global High Yield Credit Defensive Australian Sovereign Bonds Global Sovereign Bonds Global Investment Grade Credit Global Inflation Linked Bonds Cash & Hedges AUD effective exposure (% of total fund) CURRENT AA AS AT JULY Global equities % Europe - Eurostoxx - Germany - European banks - Spain - Italy - Greece Japan - Topix - Japanese banks Global energy 4.0 US value 3.5 Oil services 3.0 US banks 2.0 Global materials 2.0 China H 2.0 Emerging Markets 1.5 Global shipping 1.5 Global industrials 1.0 US biotech 1.0 Commodities % Soybeans 2.0 Corn 2.0 Copper 1.5 Nickel 1.5 WTI crude 1.5 Brent 1.5 Wheat 1.0 QUARTERLY FUNDS REVIEW Q

46 DAA PROCESS OUTPUT ASSET CLASS TRAFFIC LIGHT SUMMARY Signal Equities Listed property Fixed income Commodities VALUATION Following the strong rally during 2016, equities are generally not as attractive as they previously were. However, there is still value around, with markets such as Europe and Japan remaining relatively more attractive. CYCLE Economic indicators point to solid global growth. LIQUIDITY Liquidity conditions remain favourable for equities, with global interest rates low and quantitative easing programs in place in Japan and Europe. The prospect of more rate hikes by the Fed than markets expect is a risk. SENTIMENT Investor sentiment towards equities remains bullish which is a negative in the DAA process. TECHNICAL Technical signals have seen improvement in trend across different markets, as well as being supported by positive market breadth. RESULT Favourable Neutral Negative Favourable Favourable Neutral Negative Source: AMP Capital, as at June QUARTERLY FUNDS REVIEW Q

47 NORTH PROFESSIONAL

48 Return (%) WHAT HAPPENED IN FINANCIAL MARKETS? Months 1 Year Cash Australian Bonds Global Sovereign Bonds (H) Global Corporate Bonds (H) Australian Shares International Shares International Shares (H) Emerging Markets Global REITs (H) Global Listed Infrastructure (H) Past performance is not a reliable indicator of future performance Source: Bloomberg, AMP Capital, Asset class returns as at 30 June 2017 QUARTERLY FUNDS REVIEW Q

49 Net performance (%) HOW HAS NORTH PROFESSIONAL PERFORMED? DIVERSIFIED FUNDS PERFORMANCE? Continued strong performance from international shares over Q2 Performance negated by losses from Australian shares and AREITs Conservative Moderately Conservative Alternative Balanced Balanced Growth High Growth 3 months 1 year 3 years Past performance is not a reliable indicator of future performance Source: AMP Capital, as at 30 June Performance is annualised for periods greater than one year. Performance is after platform class K management fees and before taxes, and assumes all distributions are reinvested. The North Professional range was previously known as the North Select Active range. QUARTERLY FUNDS REVIEW Q

50 HOW DID ASSET ALLOCATION IMPACT PERFORMANCE? The balanced fund delivered 10.0% net over FY16/17, versus a benchmark return of 9.7%. How did asset allocation decisions impact performance? Low exposure to government bonds Added value over the quarter and year Modest overweight to emerging markets added value over the quarter and year How did asset allocation decision affect peer relative performance? Modest outperformance over the quarter Australian shares detracted value over the quarter but added value over the year International shares added value over the quarter and year Equities remains a solid source of value add over the long-term Government and corporate bond managers added value over the quarter and year Past performance is not a reliable indicator of future performance. Source: AMP Capital as at 30 June Balance Fund performance reflects North Select Active Balanced. (North Professional Balanced) performance is after platform class K management fees and before taxes, and assumes all distributions are reinvested. QUARTERLY FUNDS REVIEW Q

51 SPECIALIST FUND RANGE UPDATE

52 AMP CAPITAL SPECIALIST FUNDS A PACKAGED SOLUTION QUARTERLY FUNDS REVIEW Q

53 SPECIALIST GEARED AUSTRALIAN SHARE FUND HIGHLIGHTS OVER THE QUARTER Portfolio summary Australia s S&P/ASX 200 accumulation index rose strongly over the quarter and finished up by 4.5% The fund posted a positive return and comfortably outperformed its benchmark during the quarter Expectations for non-mining company profits are stronger than a year ago Fund commentary The Fund posted a positive absolute return and comfortably outperformed its benchmark during the quarter. Underlying manager performance was mixed (on an ungeared basis). All managers posted positive returns on an absolute basis Vinva investment management outperformed the benchmark, AMP capital enhanced index share fund performed in line, and the AMP capital fundamentals underperformed the benchmark Gearing had a positive impact in the march quarter, leading to overall outperformance relative to the benchmark, as positive returns in absolute terms were magnified. QUARTERLY FUNDS REVIEW Q

54 SPECIALIST FUND RANGE PERFORMANCE Specialist Australian Share Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (October 2002) Specialist Australian Share Fund Specialist Composite Benchmark Specialist Geared Australian Share Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (December 2004) Specialist Geared Australian Share Fund Specialist Composite Benchmark Specialist International Share Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (February 2004) Specialist International Share Fund Specialist Composite Benchmark Past performance is not a reliable indicator of future performance. 1 As at 30 June Performance is annualised for periods greater than one year. Performance figures are calculated using month end hard close exit prices, are net of platform class A fees, ongoing fees and expenses, assume distributions are reinvested and tax is not deducted. Some investment managers may charge a performance fee when their investment exceeds a specified hurdle. Please see the PDS for more information. Also note that returns are net of the fund manager fees, however do not include any fee amounts charged by the platform operator or your financial adviser. Please contact your financial adviser or platform operator for details of these fee amounts. QUARTERLY FUNDS REVIEW Q

55 SPECIALIST FUND RANGE PERFORMANCE Specialist International Share (Hedged) Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (February 2004) Specialist International Share (Hedged) Fund Specialist Composite Benchmark Specialist Australian Small Companies Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (January 2005) Specialist Australian Small Companies Fund Specialist Composite Benchmark Specialist Diversified Fixed Income Fund 1 (%) 1 month 3 months 1 year 3 years 5 years Since inception (May 2014) Specialist Diversified Fixed Income Fund Specialist Composite Benchmark Past performance is not a reliable indicator of future performance. 1 As at 30 June Performance is annualised for periods greater than one year. Performance figures are calculated using month end hard close exit prices, are net of platform class A fees, ongoing fees and expenses, assume distributions are reinvested and tax is not deducted. Some investment managers may charge a performance fee when their investment exceeds a specified hurdle. Please see the PDS for more information. Also note that returns are net of the fund manager fees, however do not include any fee amounts charged by the platform operator or your financial adviser. Please contact your financial adviser or platform operator for details of these fee amounts. QUARTERLY FUNDS REVIEW Q

56 SPECIALIST FUND RANGE PERFORMANCE Specialist Property and Infrastructure Fund 1 (%) 1 month 3 months 6 month 1 year 3 years Since inception (December 2014) Specialist Property and Infrastructure Fund N/A 7.05 Specialist Composite Benchmark N/A Past performance is not a reliable indicator of future performance. 1 As at 30 June Performance is annualised for periods greater than one year. Performance figures are calculated using month end hard close exit prices, are net of platform class A fees, ongoing fees and expenses, assume distributions are reinvested and tax is not deducted. Some investment managers may charge a performance fee when their investment exceeds a specified hurdle. Please see the PDS for more information. Also note that returns are net of the fund manager fees, however do not include any fee amounts charged by the platform operator or your financial adviser. Please contact your financial adviser or platform operator for details of these fee amounts. QUARTERLY FUNDS REVIEW Q

57 KEY RISKS OF AMP CAPITAL INCOME GENERATOR Risks specific to the Fund may include or be associated with: Risk of capital loss - Assets with the highest long-term returns may also carry the highest level of short-term risk, particularly if you do not hold your investment for the minimum suggested investment timeframe. Returns are not guaranteed - Future returns may differ from past returns, the level of returns may vary, the value of your investment may vary, and there may be the risk of loss of invested capital. Market risk - The Fund will be affected by any risks associated with the securities (including securities listed on share markets around the world) in which it invests and other investments it makes. YOUR CLIENT SHOULD READ THE IMPORTANT INFORMATION ABOUT FEES AND COSTS BEFORE MAKING A DECISION Go to the Fund page on to view the PDS and Incorporated Information documents. The material relating to fees and costs may change between the time when you read this PDS and the day when your client acquires the product. QUARTERLY FUNDS REVIEW Q

58 DEFINITIONS & KEY TERMS FUTURE CASH FLOW RANGE KEY TERMS IN THIS PRESENTATION Adjusted annually for inflation Annual cents per unit distribution rate End date Estimate of the life of the fund Indicative range of the life of the fund Monthly cash flows MEANING The movement in the most recent March Trimmed Mean Consumer Price Index (CPI) and the prior March CPI. This can result in a positive (ie due to an inflationary upward movement) or negative (ie due to a deflationary downward movement) change to the monthly cash flows. Each Fund has a cents per unit per annum, adjusted annually for inflation, distribution. Investors will be updated online in July each financial year of the annual cents per unit distribution rate for that financial year. The date on which the Fund is terminated, at the discretion of the Responsible Entity. This date is variable and dependent on the performance of the Fund. At the time of termination, a final distribution and any residual capital remaining in the Fund will be paid to investors. The estimate of the life of the Fund is the best estimate of the period of time the Fund will be able to pay monthly cash flows from the inception of the Fund. It is a guide only, based on our modelling and assumptions, as at the date of the PDS and will change throughout the life of the Fund. See 'Modelling and assumptions' on page 3 of the PDS and for further details, page 11 of this presentation. Investors will be updated regularly throughout the life of the Fund on changes to the estimate of the life of the Fund online at This is based on our modelling and assumptions, as at the date of the PDS, which provides an estimate of the shortest and longest period of time that the Fund will be able to pay monthly cash flows from the inception of the Fund. See 'Modelling and assumptions' on page 3 of the PDS and for further details, page 11 of this presentation. The distributions of the Fund, which may comprise both income and the return of capital invested. Calculated as the number of units held by the investor multiplied by the annual cents per unit distribution rate divided by 12, after fees and costs. QUARTERLY FUNDS REVIEW Q

59 MODELLING AND ASSUMPTIONS Our modelling and assumptions used to determine the indicative range and estimate of the life of the funds are based on a financial model built by AMP capital that generates 1,000 random simulated scenarios for the investment returns and associated capital drawdown of the funds. The result of each simulated scenario is an estimate of the life of the funds for that scenario. Key assumptions factored into the modelling include a return of 5.3% per annum after fees, volatility of 6% per annum on investments held by the funds, interest rates being determined by the current real yield curve for australian government bonds and CPI of 2.5% per annum. The results of these 1,000 simulated scenarios allows us to understand the distribution of possible outcomes, which provides an indication of the likelihood of a particular estimate of the life of the funds occurring. See modelling and assumptions on page 5 of the product disclosure statement. You should be aware that the information related to the indicative range and estimate of the life of the funds is predictive and does not represent a guarantee by amp or affiliated parties. Known and unknown risks and other uncertainties may arise which impact the assumptions used in the modelling. This may result in the predictive estimates being materially different from actual outcomes. QUARTERLY FUNDS REVIEW Q