New Ideas in the Migration to Risk Hugh Prendergast, Head of Strategic Product and Marketing, Western Europe and International June 2013
Expected Real Returns % Income From Where? Real Annualized 10-Year Expected Returns 12% 10% 8% 6% 4% 2% 0% -2% US HY EU HY US IG EU IG Treasury Source. Pioneer Investments simulations, Data as of 28 May 2012. Market returns are obtained by the aggregation of the projected contributions to total returns from earnings growth, valuation re-rating and dividends (share buy backs are considered where meaningful), considering inflation effect. Earnings growth is calculated as the combination of sales growth and margin changes, valuations changes imposes a long run mean reversion on long term CAPE, while dividends are calculated on constant pay-out ratios. Government returns are obtained by the aggregation of the projected contributions of inflation and of mean and trend reversion assumptions. Credit returns to total returns are obtained by the aggregation of the projected contributions of interest rates curve and default rate. Page 2 I For Dublin 2013 Investment Conference Attendees Only and Not to be Bund US Equity Europe Equity EM Equity
Providing the Opportunities, Balancing the Risks Income and Risk Finding the Right Balance For illustrative purposes only Page 4 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Targeting Fixed Income Distribution Levels Target Fixed Income Distribution (Gross of fees) 8.00% 7.00% 6.00% 5.00% 5.25% 5.45% 5.45% 5.85% 7.00% 4.00% 3.50% 3.00% 2.00% 1.40% 1.00% 0.00% Cash Plus Investment Grade Flexible Fixed Income Emerging Market Debt High Yield - European High Yield - EM Corporate High Yield - Global Target Income figures are gross of all fees and represent calculations based only on a Target Distribution unit class in a fund which represents the relevant income/risk positioning. Other funds and other fund unit classes are available for investment, which do not feature the discussed target income distributions. These income targets can be exceeded or undershot and should not be construed as an assurance or guarantee. Page 5 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Wider Sponsorship From Investors Rising EM Debt Issuance Should Re-balance Global Aggregates Emerging Markets - Nearly 43% of World GDP, but only 5% of BarCap Global Aggregate Brazil, Russia, India (8.5%) World GDP China (11.1%) BarCap Global Agg Emerging Markets (5%) Other Emerging 22.7% Developed Markets 57.5% Rest of World (95%) Data source: BarCap, IMF, 30 November 2012 Page 6 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Corporate Issuance Exceeds Sovereign Issuance Across Currency US$ billion 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Corporates Sovereigns Source: JPMorgan, 31 January 2013 Page 7 I For Dublin 2013 Investment Conference Attendees Only and Not to be
EM Corporate Issuance In Context External EM Corporate Market Size Approaches the Size of US High Yield Source: JPMorgan, 31 August 2012 Page 8 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Yield In EM Corporate Debt EM Corporate Debt High Yield 29% EM High Yield Debt High Yield 100% Investment Grade 71% YTM: 4.8% YTM: 6.8% Source: JPMorgan, Pioneer Investments 15 February 2013 Page 9 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Low-Growth Environment Can Favour Dividend Stocks Dividends Have Been Main Driver of Equity Returns Percentage Dividend yield is the biggest driver of equity returns (real total returns since 1970) 8.0 6.0 5.7 5.5 3.7 5.3 4.9 4.5 4.0 2.7 2.0 0.0-2.0-4.0 UK US France Germany Australia Canada Japan Dividend Yield Dividend Growth Multiple Expansion Total Annualised Returns Source: SG Cross Asset Research as at 31 December 2012 Page 11 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Same Company Higher Yield Which is More Attractive to the Income Investor? Dividend Growing Example: A US Health Care company Dividend Yield 3.16% 5-Year Bond Current Yield 1.30% Bond Yield Falling Company Credit Rating AAA Dividends are not guaranteed. Source: Bloomberg 15 February 2013 Ratings based on an average of available ratings from S&P, Moodys and Fitch. S&P Rating: Source Standard and Poor s Copyright The McGraw Hill Companies (2013). Page 12 I For Dublin 2013 Investment Conference Attendees Only and Not to be
The Next Step In Income Evolution: Equity Target Income Focus On Attractive Regular Distributions Focus on Income Generation Income from Dividends approx. 2/3 + Premiums from Option Overlay = Annual Target Distribution approx. 1/3 Price Performance of the Equities Held in the Portfolio Target Income Products European Equity Target Income 2013 Target: 7% Semi-Annual distributions Launched: November 2011 Global Equity Target Income 2013 Target: 6% USD Quarterly distributions Launched: December 2012 Multi-Asset Target Income 2013 Target: 4.5% USD Quarterly distributions Launched: May 2013 These income targets can be exceeded or undershot and should not be construed as an assurance or guarantee Page 13 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Disciplined Covered Call Writing Process Aims to Increase Income Without Sacrificing Too Much Upside 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 3.98% 4.70% Income Selling Calls Dividend S H A R E P R I C E Sell Call Option Sell Call Exercise Price Option Expires worthless No Call Option Writing Expectation of Sharp Rally Sell Call Option Sell Call Exercise Price Option Expires Worthless TIME For illustrative purposes only. Source: Bloomberg 30 November 2012, Gross Calculation of yields. Page 14 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Pioneer Funds European Equity Target Income Income Higher Than Expected 12% 10% 8% 6% 11.70 % 6.10 % 7.30% Income Generated: 2/3 Dividend Income 1/3 Option Premium 4% 2% 20% 0% Total Returns Target Distribution Actual Distribution Covered calls averaging 20% on total Portfolio Source: Pioneer Investments as at 31 December 2012. Performance data provided refers to Pioneer Funds European Equity Target Income Class A in EUR units only, and is based upon NAV net of fees. For details of other unit Classes available, please refer to the prospectus. Past performance does not guarantee and is not indicative of future results. Please contact your local sales representative for more current performance results. Page 15 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Widening the Income Net to Multi-Assets Diversification* May Increase Income Potential Income Contribution 4.5% 4.0% 3.5% Hypothetical Portfolio Allocations for Illustrative Purposes Only Sample Portfolio Illustrative 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Pioneer Investments as at 30 April 2013. For illustrative purposes only to demonstrate diverse sources of potential income for a multi-asset income fund. Allocations to asset classes shown do not represent the current or intended allocations of Pioneer Funds Global Multi-Asset Target Income. *Diversification does not ensure a profit or protect against loss Page 16 I For Dublin 2013 Investment Conference Attendees Only and Not to be
...While Aiming to Reduce Risk Diversification* May Reduce Portfolio Risk Standalone VaR 10% Hypothetical Portfolio Allocations for Illustrative Purposes Only Risk Reduction Source: Pioneer Investments as at 30 April 2013. For illustrative purposes only to demonstrate diverse sources of potential income for a multi-asset income fund. Allocations to asset classes shown do not represent the current or intended allocations of Pioneer Funds Global Multi-Asset Target Income. *Diversification does not ensure a profit or protect against loss Page 17 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Potential for Income and Growth Pioneer Funds Global Multi-Asset Target Income Targeting Income Generation within a Low-Volatility Framework Full-Year 2013 Income Target 4.5% 1) (in USD) 4% income from diversified asset classes and 0.5% premiums 2 ) from options FX hedge will be maintained on the non-usd exposure Growth with downside risk mitigation Capital appreciation 3 ) from underlying assets Active risk management to target a volatility between 5-10% 1) Target based on a full-year 2013. Pioneer Funds Global Multi-Asset Target Income (the Sub-Fund ) was launched on 2 May 2013. The Sub-Fund aims to achieve a pro-rated percentage of the full year income target. It is not intended that the Sub-Fund will meet the full year income target of 4.5% from its launch until the end of 2013. Please note that the value achieved might deviate significantly from the forecast (also to the downside), especially in periods of pronounced market fluctuations. The income target can be exceeded or undershot and should not be construed as an assurance or guarantee. The reference currency for the target income is USD. The portfolio s target yield is adjusted annually. The income earned is distributed quarterly or semi-annually. 2) Option premiums earned. Model calculations based on historical data of the last few years. Please note that the value may also deviate significantly from model calculations (also to the downside). 3) The performance of the asset class exposure to some extent also depends on general market trends and is subject to considerable fluctuations. It may thus also draw down the fund s total return and might even lead to negative total return. Page 18 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Conclusions Income is a Major Part of Total Return How to Survive the Deep Freeze? Actively Managed Fixed Income Emerging Market Corporate Debt Extracting Income from Equity Extracting Income from Multi-Asset Page 19 I For Dublin 2013 Investment Conference Attendees Only and Not to be
Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 29 May 2013. Pioneer Funds European Equity Target Income, Pioneer Funds Global Equity Target Income and Pioneer Funds Global Multi-Asset Target Income are sub-funds (the Sub- Funds ) of Pioneer Funds (the Fund ), a fonds commun de placement with several separate sub-funds established under the laws of the Grand Duchy of Luxembourg. Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. More recent returns may be different than those shown. Please contact Pioneer Investments for more current performance results. This material is not a prospectus and does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any United States person (being residents and citizens of the United States or partnerships or corporations organized under United States laws). The non-us Pioneer Investments range of investment funds have not been registered in the United States under the Investment Company Act of 1940 and units/shares of these funds are not registered in the United States under the Securities Act of 1933. This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. The content of this document is approved by PGIL. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, 8th Floor, Bressenden Place, London SW1E 5BH, authorised by the Central Bank of Ireland and regulated by the Financial Services Authority for the conduct of UK business. The Pioneer Investments range of investment funds (with the exception of Pioneer SICAV) are unregulated collective investment schemes under the UK Financial Services and Markets Act 2000. The Pioneer Investments range of investment funds do not carry the protection provided by the UK regulatory system. Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA 02109 ( PFD ), a U.S.-registered broker-dealer, provides marketing services in connection with the distribution of Pioneer Investments products. PFD markets these products to financial intermediaries, both within and outside of the U.S. (in jurisdictions where permitted to do so) for sale to clients who are not United States persons. For Dublin 2013 Investment Conference Attendees Only and Not to be Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Date of First Use: 6 June 2013. Page 20 I For Dublin 2013 Investment Conference Attendees Only and Not to be