Transamerica Tactical Rotation. Monthly Dashboard February 2014

Transcription

1 TRANSAMERICA TACTICAL ROTATION Transamerica Tactical Rotation Monthly Dashboard February 2014 Class A: ATTRX Class C: CTTRX Class I: ITTOX Expectations Indicators Actual Allocations Positioning Risk Portfolio Changes Fund Underlying ETFs Performance Not insured by FDIC or any federal government agency. May lose value. Not a deposit of or guaranteed by any bank, bank affiliate, or credit union.

2 Macro Overview The decline in equities was short-lived as investors returned to risk taking in February. Major indices gained in the high single digits for the month and reversed the losses of January. Economic data in the developed nations was mostly positive but the rate of improvement trended lower compared to the strong 2013 finish that most witnessed. The combination of moderate growth, disinflation concerns, and central banks that remain committed to supporting ongoing expansion provided a backstop to the bond market as well. The U.S. 10-year Treasury yield finished the month near 2.66%, roughly where it started the period despite the Fed s commitment to the discontinuation of bond purchases. All the hand-wringing regarding interest rates moving dramatically higher has yet to come to fruition as inflation remains benign and capacity utilization across the globe continues at sub-optimal levels. The slow, steady growth environment, paired with low inflation has rewarded patient developed market equity investors. Fears the U.S. stock market has rallied for an extended period without witnessing a 10% correction has investors wondering how long it can last. The answer, it turns out, is longer than most thought. Other asset classes such as high-yield and convertible bonds also benefited from stable rates and positive risk sentiment, and have performed well year-to-date. While markets recovered in February, we continue to believe the type of volatility that occurred over the last two months could continue to arise more frequently in the future as valuations on asset classes reach lofty levels and central bank policy is closely scrutinized. Economic Indicators Global Economy Following a slightly weaker than anticipated January, the economic results for February in the developed markets were generally stable to marginally more positive. While growth in the emerging markets remains a question mark, the prospects for an ongoing European recovery remain intact. German and UK data continue to trend positive as the Citi Eurozone Economic Surprise Index hovers above neutral and German purchasing managers index (PMI) remains well above 50. As a result, we continue to anticipate a gradual recovery in the Eurozone but at a more modest pace when compared to the U.S. We also expect the European Central Bank will maintain a bias toward very low interest rates for the foreseeable future given the marginal growth rate and potential disinflationary trends. MSCI World Air Freight USD S&P World Commodity Industrial Metals Index 2

3 Citigroup Economic Surprise Index Eurozone U.S. Equities Economic growth in the U.S. remains on a positive trend despite the fact the first quarter of 2014 does not appear to be starting off as strong as the prior year ended. Many economists have attributed recent softness to the extended period of cold weather affecting much of the U.S. Only time will tell if the data improves dramatically as spring arrives. Despite the moderating data, investors pushed back into stocks after the January sell-off as optimism returned. The Fed also provided a backstop to interest rates as they indicated flexibility with regard to the unemployment target given the low level of inflation. The Bloomberg Financial Conditions Index recovered from a January dip signifying a more accommodative economic environment while the bottoming of the Citi Economic Surprise Index may bode well for economic outperformance relative to expectations in the coming months. These trends may be supportive of a positive backdrop for risk taking in the near term and continue to point toward ongoing U.S. economic expansion. Bloomberg United States Financial Conditions Index Citigroup Economic Surprise Index United States 3

4 U.S. Initial Jobless Claims SA Developed Markets Recent data out of Europe has moderated but continues to point to slow and steady growth. German PMI remained in positive territory as the UK Citi Economic Surprise Index indicated actual economic performance that generally outperformed expectations for three straight months. Japan s Citi Economic Surprise Index has faltered more recently which may explain why the Japanese stock market didn t rally as much as European or U.S. equities during the month. Australian data appears to be stabilizing for now which may have contributed to the strong gains in Aussie equities in February. Germany Manufacturing PMI Markit Survey Ticker Conference Board UK Leading Economic Indicator 2004=100 4

5 Citigroup Economic Surprise Index United Kingdom Citigroup Economic Surprise Japan Australian Industry Group Performance of Manufacturing Index 5

6 Emerging Markets Emerging market outflows slowed and in some cases may have reversed during February as equity markets in the majority of the larger emerging market economies performed well. The Citi BRIC Economic Surprise Index showed some positive signs but part of the cause may be the lowered expectations from the group. The data out of China and Russia continues to disappoint and may endure for some time as neither has seemed to reach a positive turning point. We remain cautious regarding emerging market equities until sentiment bottoms or the data shows a more stable trend. Citi BRIC Enhanced Commodities Index ER Citi Economic Surprise Index BRIC China Manufacturing PMI SA 6

7 Russia Industrial Production Manufacturing MoM Fund Performance The Transamerica Tactical Rotation Class A Shares (at NAV) returned 3.36% for the month of February which compares favorably to the Morningstar Tactical Allocation category average return of 3.04%. Equities recovered from a shallow slump in January as developed markets led the gains for the month. The most significant contributor to the fund was U.S. equity paced by improvements in health care and consumer discretionary. Developed market equity also added to the performance led by gains in the European, Australasia, Far East and more specifically the UK, Germany and Australia. The sole negative performer was Russia due to capital flight as the data worsened and the situation in the Ukraine escalated. Despite the decline, the impact to the fund was negligible as the position is less than 1.00% of the fund s assets. Overall the risk profile of the portfolio declined during the month but remains biased toward equities. The changes to the equity component of the portfolio during the month included an increase in technology and consumer staples while banking and developed market equity declined. Within the fixed income portion of the portfolio the inflation protected assets increased as the position in investment grade bonds decreased. Fund Performance (%) Source: Transamerica Asset Management (TAM) *Inception of the fund is 10/31/12. Reflects average annual total return Monthly data as of 2/28/14 Quarterly data as of 12/31/13 Portfolio February 2014 Past 3 Months 1 Year Since Inception* Transamerica Tactical Rotation A Shares (at NAV) Transamerica Tactical Rotation A Shares (at POP) Transamerica Tactical Rotation C Shares (at NAV) Transamerica Tactical Rotation C Shares (at POP) Transamerica Tactical Rotation I Shares FTSE All-World Index Blended Benchmark Morningstar OE Tactical Allocation The performance data presented represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Please see transamericainvestments.com for performance data current to the most recent month-end. The investment return and principal value of mutual funds will fluctuate over time so that shares, when redeemed, may be worth more or less than their original cost. Public Offering Price returns include reinvestment of dividends and capital gains and reflect the maximum sales charge of 5.50%. Net Asset Value returns include reinvestment of dividends and capital gains, but do not reflect any sales charges. Purchases of Class C shares are subject to a 1.00% contingent deferred sales charge if redeemed during the first 12 months of purchase. There are no sales charges on Class I shares. The gross expense ratios for this fund are 1.37%, 2.07%, and 1.11% for Class A, C and I shares, respectively. The FTSE All-World Index and Transamerica Tactical Rotation Blended Benchmark (80% FTSE All-World Index TR and 20% Barclays 1-3 month U.S. Treasury Bill Index) are unmanaged indices used as a general measure of market performance. It is not possible to invest directly into an index. Calculations assume dividends and capital gains are reinvested and do not include any managerial expenses. As discussed in previous Dashboard updates, Transamerica Tactical Rotation is designed to attain certain objectives that result in the fund underperforming its peer group and benchmark in rising equity markets and outperforming in falling equity markets. 7

8 ETF Monitor % Allocation* Security Name Ticker Component Asset Class January 2013 February 2014 % February Performance ishares MSCI Australia ETF EWA Income & Growth - International Developed ishares MSCI U.K. ETF EWU Income & Growth - International Developed ishares MSCI South Korea Capped ETF EWY Income & Growth - International Developed ishares MSCI Germany ETF EWG Income & Growth - International Developed ishares MSCI Japan ETF EWJ Income & Growth - International Developed ishares MSCI Hong Kong ETF EWH Income & Growth - International Developed ishares MSCI EAFE Minimum Volatility ETF EFAV Income & Growth - International Developed Market Vectors Russia ETF RSX Income & Growth - International Emerging ishares MSCI Brazil Capped ETF EWZ Income & Growth - International Emerging ishares MSCI South Africa ETF EZA Income & Growth - International Emerging ishares MSCI Turkey ETF TUR Income & Growth - International Emerging ishares India 50 ETF INDY Income & Growth - International Emerging SPDR S&P China ETF GXC Income & Growth - International Emerging Vanguard FTSE Europe ETF VGK Income & Growth - International Global Equity ishares MSCI USA Minimum Volatility ETF USMV Income & Growth - U.S. U.S. Equity Vanguard S&P 500 ETF VOO Income & Growth - U.S. U.S. Equity Industrial Select Sector SPDR Fund XLI Income & Growth - U.S. Industrials Consumer Staples Select Sector SPDR Fund XLP Income & Growth - U.S. Consumer Staples Consumer Discretionary Select Sector SPDR Fund XLY Income & Growth - U.S. Consumer Discretionary SPDR S&P Regional Banking ETF KRE Income & Growth - U.S. Financials Materials Select Sector SPDR Fund XLB Income & Growth - U.S. Materials Health Care Select Sector SPDR Fund XLV Income & Growth - U.S. Healthcare Energy Select Sector SPDR Fund XLE Income & Growth - U.S. Energy Technology Select Sector SPDR Fund XLK Income & Growth - U.S. Information Technology Utilities Select Sector SPDR Fund XLU Income & Growth - U.S. Utilities ishares Short Treasury Bond ETF SHV Principal Stability U.S. Treasury ishares Barclays 0-5 Year TIPS Bond ETF STIP Principal Stability Inflation Protected Securities ishares Floating Rate Bond ETF FLOT Principal Stability Inflation Protected Securities Vanguard Short-Term Bond ETF BSV Principal Stability Investment Grade Fixed Income * Does not include cash and cash equivalents. Due to rounding, totals may not equal 100%. Income & Growth - International Income & Growth - U.S Principal Stability

9 Shares of the fund may only be sold by offering the fund s prospectus. Your clients should consider the investment objective, risks, charges, and expenses of the fund carefully before investing. The prospectus contains this and additional important information regarding the fund. To obtain the prospectus and/or a summary prospectus, please contact your wholesaler or go to transamericainvestments.com. The prospectus should be read carefully before investing. Mutual funds are subject to market risk, including the loss of principal. The selection of a Tactical Asset Allocation portfolio will not guarantee a profit nor protect against a loss. ETFs generally present the same risks as an investment in a conventional fund that has the same investment objectives, strategies, and policies. The market price of an ETF s shares may be above or below the shares net asset value; and an active trading market for an ETF s share may not develop or be maintained. The ability of the fund to achieve its objective depends largely on the performance of the underlying ETFs in which it invests. Each underlying ETFs performance, in turn, depends on the particular securities in which it invests. Accordingly, the fund is subject indirectly to all risks associated with the underlying ETFs, as stated in the prospectus. The risks of investing in foreign securities are magnified in emerging markets. These may include risks related to market and currency volatility, adverse social and political developments and the relatively small size and less liquidity of these markets. Fixed income investing is subject to credit risk, inflation risk and interest rate risk. This material contains the current opinions of the manager and such opinions are subject to change without notice. This material contains general information only on investment matters; it should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The information it contains does not take into account any investor s investment objectives, particular needs or financial situation. The value of any investment may fluctuate. Results achieved in the past are no guarantee of future results. This fund is sub-advised by Aegon USA Investment Management, LLC and investment advised by Transamerica Asset Management, Inc. and distributed by Transamerica Capital, Inc. Any opinions, estimates and projections included herein constitute the current judgment of the sub-adviser and are subject to change. MTTRMDBDJAN transamericainvestments.com