Dynamic Real Return Series

Transcription

1 RUSSELL INVESTMENTS Dynamic Real Return Series Outcome-oriented Dynamic asset allocation Limited downside risk February 2017

2 A new approach for challenging times Financial markets are experiencing unusually high levels of volatility while delivering low returns. Term deposits offer meagre rates of around 3% and we project that returns from traditional share and bond investments are likely to fall to low single-digits. At the same time, the value of financial assets are experiencing extreme volatility and episodes of drops of 10% or more over short periods, and these jolts appear to be becoming more frequent. Unless investors take a radically different approach many will be unable to grow their assets sufficiently to meet the rates of return required to meet their objectives. Those objectives might include keeping up with price inflation or maintaining their standard of living. In this environment, investors also need to realise that meeting their objectives the usual way will mean accepting higher levels of risk than they can tolerate. Introducing real returns Real return funds offer a solution to this dilemma by allowing investors to remain in the market while improving their chances of achieving their portfolio objectives. Dynamic or multi-asset real return funds have grown in popularity in recent years as an investment instrument that sits neatly next to established balanced funds. They provide a means to achieve longer term objectives and shorter-term agility, along with the added benefit of exposure to non traditional investment opportunities. A focus on specific investment objectives (CPI + X%) brings this flexibility and offers the added bonus of smoother return streams, avoiding significant reliance on returns from traditional equity markets. Strategy: Real return funds provide diversification through an optimal mix of equities, fixed income, alternatives, real assets and opportunistic portfolio segments. The overall asset mix, and each segment within it, is designed, constructed and managed using a mixture of sophisticated quantitative and qualitative analysis (including state-of-the-art risk management techniques), built on a foundation of extensive capital markets research and 45 years experience managing multi-asset investment solutions for a blue-chip global client base. All of these capabilities are applied within a proven, robust investment process and a strict investment governance framework. Objective: Real return funds are designed to deliver long term capital appreciation over a full market cycle. The aim is to achieve equity like returns with lower volatility, providing greater assurance to investors who require more stable returns. What is different about real return funds? Real return funds focus on achieving a very specific outcome (for example CPI + 4%) over a full market cycle usually seven to 10 years. Rather than being dependent upon a peer group benchmark, these funds have a much broader portfolio discretion and investment opportunity set than established balanced funds. Specifically, real return funds offer the added benefits of: limiting downside risk taking advantage of short-term investment opportunities while still positioning a portfolio to achieve longer-term return objectives gaining exposure to high conviction investment opportunities in a timely manner. The low-return imperative In a low-return environment, no investor can afford to: ignore investment strategies that may offer incremental returns take risks that don t deliver financial results implement strategies inefficiently. Russell Investments // Dynamic Real Return Series 1

3 The Russell Investments Dynamic Real Return Series Russell Investments has offered real return funds in Australia since These three outcome-oriented funds do not have fixed asset allocation benchmarks. Instead, they are designed to meet the growing demand for smoother return streams. Russell Investments Dynamic Real Return Series Russell Investments Multi-Asset Income Strategy Fund Russell Investments Multi-Asset Growth Strategy Fund Russell Investments Multi-Asset Growth Strategy Plus Fund Inception date 12 December May December 2012 Investment objective To provide a return (after fees and costs) of 2.0% p.a. above inflation over the short to medium term, with a focus on risk management To provide a return (after fees and costs) of 4.0% p.a. above inflation over the medium to long term, with a focus on risk management To provide a return (after fees and costs) of 5.0% p.a. above inflation over the long term, with a focus on risk management Investment strategy The funds are diversified across a range of asset classes, including equities, fixed income and alternatives, with a dynamic approach to asset allocation. Derivatives may be used to implement investment strategies. Distribution Quarterly Quarterly Quarterly Benchmark CPI + 2% CPI + 4% CPI + 5% Management costs (excluding performance related-fees) Performance-related fees (for the period 12 months to 30 June 2016) 0.87% 0.94% 1.08% 0.00% 0.16% 0.24% Performance fees The funds do not charge a performance fee but may invest in underlying funds (including other funds managed by Russell Investments) that charge performance fees. Please see the PDS for more information. * This fee refers to the Class A fund. Please see the PDS for the retail version of the fund. For more information about the funds please see the PDS. Characteristics 1. Outcome-oriented: These three innovative funds are designed for Australian investors, targeting specific, aboveinflation return objectives. 2. Broad perspective: By accessing leading investment managers, the funds benefit from greater exposure to enhanced best-in-class investment opportunities. More than 12,000 investment products from around the world are considered. 3. Dynamic asset allocation: Wide trading bands allow managers to change asset allocation quickly and significantly to capture the best opportunities and respond to volatile market conditions. 4. Limited downside risk: A sophisticated investment toolkit minimises unnecessary investment risks and limits negative returns. 5. Global expertise: Russell Investments is a skilled global asset manager offering award-winning experience in multi-asset strategies. We have a strong track record of delivering results for Australian and international multi-asset clients. Limited downside risk: A sophisticated investment toolkit minimises unnecessary investment risks and limits negative returns. Russell Investments // Dynamic Real Return Series 2

4 Investment approach The funds in the Dynamic Real Return Series give investors access to traditional and non-traditional asset classes including equities, fixed income, real assets, alternative yield sources, non-directional absolute return strategies and esoteric investment strategies that may not be accessible to the average investor. For example, your portfolio could benefit from: long- or short-term absolute return strategies that do not depend on the underlying direction of the share market volatility strategies that reduce the funds reliance on returns from traditional equity markets robust strategies that invest in quality high-yield credit securities alternative yield sources, such as senior bank loans, that reduce exposure to rising interest rates alternative real assets, such as global listed property, infrastructure and commodities specialist insights into regional share and bond markets, including emerging markets, Asia, pan- Europe and Japan. A history of navigating the market environment This chart below illustrates how the Russell Investments Multi-Asset Growth Strategy Fund has navigated the changing market environment in recent years. As investors enjoyed very strong double digit returns in recent years, buoyed by near zero interest rates and accommodative monetary policy, our strategists and portfolio management team have been anticipating and progressively preparing the portfolio for a lower return, higher volatility world over the last months. This has seen our exposure to listed growth assets reduce from 70% of the portfolio to around 40%. Early investors in the portfolio benefited from the higher allocation to equities during the rally in 2013/14 and are now prepared for lower returns and higher volatility through the defensive shift in Along with increased allocations to strategies that are not reliant on the underlying direction of traditional equity markets, such as volatility strategies, these dynamic asset allocation decisions have cushioned the impact of significant market fluctuations since mid 2015 and early Dynamically changing asset allocations as market conditions change % Cash & traditional bonds Cash and Enhanced Cash Australian Bonds International Bonds Alternatives Absolute Return Bonds Emerging Market Debt Local Currency Global High Yield Volatility (short) Volatility (long) Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Listed growth assets Global Listed Infrastructure International Property Asian Equities Emerging Market Equities US Equities - Small Cap US Equities - Large Cap Global Equities - Defensive Global Equities - Higher Conviction Strategies Aust Equities - Quantitative Aust Equities - Enhanced Income and Higher Conviction Strategies Russell Investments // Dynamic Real Return Series 3

5 Our exposure to defensive assets such as bonds and cash has also adapted in response to the outlook for interest rates around the world, with allocations to traditional bond and cash investments dipping as low as 5% and increasing to more than 35% at different times in the market cycle. In addition, we have diversified away from traditional government bond exposures to take advantage of opportunities in emerging market local currency debt and high yield debt markets where valuations are attractive compared to equities. Who manages the Dynamic Real Return Series? Our Dynamic Real Return funds are managed by Russell Investments global multi-asset team, which has a robust record in delivering long-term performance in multi-asset investing across traditional and alternative asset classes and strategies. As an adviser to some of the largest institutional investors in the world, we have spent decades refining our understanding of long-term market behaviour through empirical research and direct observation. When you or your clients invest in one of our Dynamic Real Return funds, you gain access to all of this experience and expertise. Our three-step model We follow a three-step process to create funds that generate a client s chosen rate of return at a level of risk they can commit to. Design 1 We design the optimal mix of investments based on our cuttingedge research into the expected behaviour of securities, markets and currencies, allocating assets strategically to optimise performance and achieve the funds stated return objectives. Construct 2 We construct portfolios to provide diversified exposures to traditional and non-traditional asset classes from the best managers we can find. In our search for these superior managers, we look for best-in-class investment strategies from around the globe, giving you access to the world s best managers and strategies. Manage 3 We manage short-term market impacts through dynamic asset allocation and other sophisticated overlays to best position the portfolio for current and expected conditions. This means your asset allocations can be quickly adjusted if the portfolio manager perceives the risks to be too high or when attractive new investment options appear, taking advantage of small windows of opportunity. Russell Investments // Dynamic Real Return Series 4

6 About Russell Investments Russell Investments is a global asset manager and one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. For more than 40 years, Russell Investments has directed the investments of some of the world s largest investors to help them achieve their investment goals. Today Russell Investments works with institutional investors, financial advisers and individuals using the firm s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures to help each achieve their desired investment outcomes. Russell Investments has more than $356 billion in assets under management (as of 31 December 2016) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell Investments has $3.3 trillion in assets under advisement (as of 30 June 2016). The firm has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell Investments also traded more than $1.7 trillion in 2014 through its implementation services business. Our mission is to improve people s financial security. We do this by adapting to current opportunities and risks. Our system is dynamic to ensure we can continuously respond to changes in market conditions and client needs. Our methods are time-tested, with years of multi-asset, multi-manager expertise and a history of proven innovation. What gives Russell Investments the award-winning edge year after year? Russell Investments has been named Money magazine s Best Multisector Fund for four years in a row.* Speak to your Russell Investments representative, call , or go to for more information. * For the fourth year in a row, the Russell Investments Diversified 50 Fund - Class A was recognised. Issued by Russell Investment Management Ltd ABN , AFS Licence ( RIM ). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. Past performance is not a reliable indicator of future performance. Any potential investor should consider the latest Product Disclosure Statement ( PDS ) in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. The PDS can be obtained by visiting or by phoning (02) RIM is part of Russell Investments. Russell Investments or its associates, officers or employees may have interests in the financial products referred to in this information by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell Investments or its associates, officers or employees may buy or sell the financial products as principal or agent. Copyright 2017 Russell Investments. All rights reserved. R_B_T2_RealReturnsSeries_V1F_1703