Active Asset Allocation Fund

Transcription

1 Active Asset Allocation Fund

2 Targeting good long-term growth with an asset mix that can deliver lower volatility. Features of the Active Asset Allocation Fund Significant level of diversification. Active management of a range of assets. Access to a wider range of asset classes. A limited equity content and a range of alternative assets that can dampen volatility. Strong performance track record with low volatility. The fund has returned almost 7% per annum since launch, with volatility of 7.3%, much lower than a typical managed fund. * Available for both pension and investment clients (excludes PRSAs). * Source: Zurich Life, May The return is based on an investment in the fund and does not represent the return achieved by individual policies linked to the fund. Investments 3

3 Targeting strong long-term growth with an asset mix that can deliver lower volatility The Active Asset Allocation Fund The Active Asset Allocation (AAA) Fund is an actively managed, diversified unit-linked fund. It seeks to achieve performance from a well-diversified portfolio of global equities, government bonds, property shares, cash and alternative assets. The fund offers investors access to the performance of a wide range of asset classes without incurring large costs or the administrative difficulties of dealing directly in the asset classes. The range of alternative assets may include: oil, gold, inflation-linked government bonds, soft commodities, industrial metals and corporate bonds. This range may be extended over time. Typical asset class exposures of the AAA Fund versus those of an average managed fund Over the long term, investing in higher risk assets such as equities is expected to give higher returns. However, this may not be appealing if you are looking for a less volatile vehicle for your money. By investing across a wider range of asset classes, as well as having a lower exposure to higher risk assets, the AAA Fund can deliver lower volatility. The table overleaf illustrates how volatility can be reduced compared to the average managed fund. Fund Allocation as at 31/03/13 Equities 37% Bonds 38% Property 1 6% Alternatives 2 9% Cash 10% Alternative Assets Oil Gold Inflation-linked Government Bonds Soft Commodities (e.g. wheat) Industrial Metals Corporate Bonds 1 ETFs invested in quoted property companies. 2 The number and type of alternative assets may change over time. Alternative assets are generally in the form of ETFs. Source: Zurich Life, May

4 Active Asset Allocation Average Managed Asset Class Fund (as at 31/3/13) Fund 1 Equities 37% 67% Bonds 38% 19% Property 6% 2 5% Alternatives 9% 3 2% Cash 10% 7% 5 Year Volatility 9.3% % 5 The AAA Fund is designed to perform in a variety of market conditions, so that if equities are underperforming this can be counter-balanced by the performance of other asset classes which have low/lower correlations to the movement in equity prices. We actively manage the fund within the following typical ranges: Asset Class Typical Exposure Equities 15% - 65% Bonds 10% - 60% Property 2 0% - 20% Alternatives 3 10% - 40% Cash 0% - 50% The active approach can be demonstrated by the chart below. This shows the changes in asset allocations in the AAA Fund since it was launched. What differentiates the AAA Fund from similar funds offered by competitors? It s simple - active management We do not take a passive approach of simply rebalancing the fund every few months. Our team of investment experts manages this fund continuously in an active fashion so you can rest assured that managing your investment is a priority for us. 1 Based on the weighting of the Managed Balanced fund sector as at 31/03/2013 (Source: Financial Express). 2 ETFs invested in quoted property companies. 3 The number and type of alternative assets may change over time. Alternative assets are generally in the form of ETFs. 4 Simulated Volatility: Simulated Annualised standard deviation of weekly returns over the period 30/03/ /03/ Volatility: Annualised standard deviation of weekly returns over the period 30/03/ /03/201 (Source: Financial Express). Warning: The simulated and past performance figures stated above are estimates only. They are not a reliable guide to the future performance of this investment. Past performance is not a reliable guide to future performance. Active Management of the Asset Classes Source: Zurich Life, May

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6 Active management can deliver stronger returns For the equity and bond components we adopt an active approach to all levels of the investment process - geographical bias, sector preference and security selection. An integrated team-based investment process ensures that investment strategy is implemented quickly and effectively. The goal is to add value and investments are selected to take advantage of opportunities over all parts of the economic cycle. If you look more closely at some of the investment decisions made by our investment team over the years, for example in relation to the Zurich Life Balanced Fund, you can see clearly the value of our active approach to investment. The value of active investment management ( ) 1,000% Return % Major switch from equities to bonds as property/banking crisis hits the real economy 500% Cut equities in advance of Asian crisis Cut equity & technology exposures as dot.com bubble bursts High equity content during much of the 90s due to falling inflation/interest rates & rising P/E multiples 0% High equity weighting in the middle of the decade especially in Asia (ex-japan), Europe & cyclical stocks Increased equities (but stayed well weighted in bonds) due to exceptionally low equity valuations and the introduction of economic stimulus Jan 90 Feb 92 Mar 94 Apr 96 Jun 98 Jul 00 Aug 02 Oct 04 Nov 06 Dec 08 Sept 10 Jan 12 Zurich Life Balanced Fund Sector Average Source: Financial Express May Figures up to 30/04/13. All figures relate to individual pension managed balanced sector. Returns are based on offer to offer performance and do not relate to premiums paid into a policy. Warning: The value of your investment may go down as well as up. Past performance is not a reliable guide to future performance. The returns are based on an investment in the funds and do not represent the returns achieved by individual policies linked to the funds. Benefits may be affected by changes in currency exchange rates. 4

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8 Diversification can deliver lower volatility As an investor, it is prudent to hold a variety of asset classes. The benefit of this approach is reduced volatility if those asset classes have a lower correlation to movements in equity prices. Many of the asset classes in the Active Asset Allocation Fund have historically had low correlations to movements in equity prices and, hence, are expected to dampen the volatility of the fund s returns. The table below shows the five-year correlations of weekly returns (up to 31/03/2013) between the various component assets of the AAA Fund. Correlation is a statistical measure of how closely linked the returns on different assets have been in the past. The correlation between two assets will be a number between -1 and 1. A correlation close to 1 means that the returns between two assets were very closely linked. A correlation of -1 means that returns were negatively linked (i.e. if the price of one asset rises, the price of the other asset is likely to fall). Values close to zero indicate little or no correlation. A B C D E F Correlation of asset classes Equities 1.00 Bonds Cash European Property Australasia Property Alternatives Crude Oil Example: The correlation between Equities (A) and Gold (G) is which would indicate that these assets are not closely linked. G H I J K L Gold Inflation-linked Government Bonds Water Soft Commodities Industrial Metals Corporate Bonds A B C D E F G H I J K L Equities = Zurich Life International Equity Fund European Property = Zurich Life European (Ex-UK) Property Fund Bonds = Zurich Life Active Fixed Income Fund Australasia Property = Zurich Life Australasia Property Fund Source: Zurich Life Warning: Past performance is not a reliable guide to future correlations between asset classes. 6

9 Prisma is Zurich Life s investment platform It consists of a wide range of investment funds, across different asset classes and risk/reward categories. Prisma also consists of a number of useful planning tools: Risk Profiler that helps you identify your attitude to investment risk, Portfolio Builder that enables you to build an investment solution that matches your risk profile. To learn more about Prisma, you should speak to your Financial Broker or Advisor. Where is the AAA Fund positioned in the Prisma range of funds? Potential Risk/Return Spectrum Lowest Low Low-Medium Medium Medium-High High Highest Access to fund performance and information You can keep track of the performance of the Active Asset Allocation Fund by using the Fund Growth Calculator available at For Active Asset Allocation Fund quarterly updates visit the Funds section of our website. For more information contact your Financial Broker or Advisor. 7

10 Targeting strong long-term growth with an asset mix that can deliver lower volatility 8

11 Print Ref: IB Zurich Life Assurance plc Zurich House, Frascati Road, Blackrock, Co. Dublin, Ireland. Telephone: Fax: Website: Zurich Life Assurance plc is regulated by the Central Bank of Ireland. Intended for distribution within the Republic of Ireland.