Skandia Diversified Fund John Ventre Lead Portfolio Manager
Better designed investments Managed by outstanding investors utilising superior investment intelligence What does this mean? SIG is a leading international investment manager committed to delivering world class investment solutions to its clients Our investment solutions are carefully designed and constructed to meet specific client needs SIG has assets under management of $20bn* distributing in over 20 countries worldwide Delivering on expectations We work with our clients to understand their investment needs which enable us to deliver * Source: SIG as at 31 December 2010
What does the Skandia Diversified Fund try to achieve? Key attributes: The target is UK CPI plus 4% inflation plus target to protect the wealth of the investor Time horizon: 7 year rolling periods to achieve the objective horizon gives time for objective to be achieved given effect of market volatility IMA Cautious Managed can be used for shorter term performance comparison Risk approach: To achieve real returns you need to take some risk The assets which deliver real returns over the cycle can be volatile Volatility: Anticipated volatility of 10% over the cycle (a Skandia risk level 5) But the actual risk will vary between 4 and 6 depending on the funds current positioning
Even these great protagonists agree on the effects of inflation on long term wealth accumulation Inflation is one form of taxation that can be imposed without legislation. Milton Friedman By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. John Maynard Keynes
Mind the gap 1350 1300 1250 wealth destruction UK Retail Price Index (IN) National Savings Investment > 20 1200 Wealth destruction 1150 wealth creation 1100 1050 1000 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Source: Lipper, Bid to Bid with net income re-invested, 02/01/01 to 31/12/10. Past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up. You may not get back as much as you invested. National Savings minimum investment 20.
Key investment beliefs Maximise the available opportunity set Alternative strategies are underused by the typical multi-asset fund Multiple opportunity sets / alpha sources makes potential outperformance more sustainable Superior qualitative understanding of potential returns and risk is a competitive advantage There is a difference between volatility and capital risk Tail risks / event risks are best managed tactically by maintaining portfolio liquidity Past performance is a poor guide with respect to both asset selection and manager selection Currency risk doesn t provide effective diversification No-one can be an expert in everything! Seek out specialist asset class managers Leverage dedicated analytical resource Collective decision making is weak
Key sources of added value more tools = more opportunity Manager Selection Strategic Asset Allocation Optimising returns Tactical Asset Allocation
Strategic asset allocation Global Equities 25% Fixed Interest (GBP hedged) 30% UK Equities 25% Alternatives (GBP hedged) 20% Source: Skandia Investment Group as at end April 2011
Tactical Philosophy All truths are easy to understand once they have been discovered. The point is to discover them. Galileo Galilei
Tactical asset allocation focus on change
Market regimes and a focus on change
US labour market picking up tightening now possible ISM employment index and private-sector jobs Source: Deutsche Bank
Inflation expectations stable in DM Inflation expectations Derived 5y/5y forward inflation expectations Source: JP Morgan
China raising rates to tackle inflation risk Policy rate and required reserve rate, China China: headline CPI, food prices, and nonfood inflation Source: JP Morgan
Figure 22: Equity market performance has been driven in part by a re-rating toward developed-market PEs Source: MSCI
Current positioning Min Neutral Max Current Cash 0%* 0% 10% 5.5% Fixed interest 20%* 30% 40% 29.3% Equities 40% 50% 60% 50.0% Alternatives 10% 20% 24% 15.2% * Note that Fixed Interest and Cash must be at least 30% under IMA sector rules Source: Skandia Investment Group; as at 13 May 2011
Current positioning Neutral on equities Overweight emerging markets equity (particularly Asia) Overweight Japan equity Underweight UK equity Neutral on fixed interest Overweight credit Underweight interest rate risk Overweight cash Underweight alternatives
Competitive advantage Information Analysis Execution
Alternative Betas Real Return Other Managers Henderson Horizon Currency Fund (Carry) Commerzbank Uk Premia Fund (Short Volatility) Threadneedle Enhanced Commodity Fund Fulcrum Alternative Beta Plus Fund (Diversified Alt Beta / Momentum) Fulcrum Commodity Fund Hedge Fund Alpha strategies Aviva Index Opps High Alpha (Index Arbitrage) Amundi Volatility World Equities (Long / Short Volatility Arbitrage) Majedie Tortoise Fund (Long-Short Equity) M&G Macro Episode Fund (Macro) JPM Highbridge Statistical Market Neutral Fund (Long-Short Equity) Source: Skandia Investment Group; as at May 2011
A superb track record 40 35 30 Skandia Diversified IMA Cautious Managed 25 20 15 10 5 0 3m 6m 1yr 2yrs 3yrs 5yrs Skandia Diversified Fund IMA Cautious Managed Quartile 3m 2.18% 2.27% 3 6m 5.25% 3.82% 1 1 year 8.93% 5.90% 1 2 years 37.73% 29.42% 1 3 years 20.36% 10.68% 1 5 years 19.21% 12.55% 1 Source: Financial Express, Bid to Bid with net income re-invested as at 30 April 2011. Past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up. You may not get back as much as you invested.
Skandia Diversified Fund availability
Summary Inflation is a constant danger for savers and investors alike The only way to maintain or increase the purchasing power of your wealth is to focus on generating real returns The Skandia Diversified Fund aims to use multi-asset approach to spread risk and deliver long term returns in excess of inflation The fund leverages from a strong and experienced investment team and from key competitive advantages in information, analysis and implementation The fund has delivered consistent long term outperformance of the peer group
Important investment notes What you get back will depend on investment performance and is therefore not guaranteed. The value of investments and any income from them can fall as well as rise. When you cash in your investment you may get back less than you invested, especially in the early years. The past performance of an investment is not a guide to future investment performance. You should appreciate that there are inherent risks in all types of investment. There can be no guarantee that the objectives of the funds will be achieved. This Fund includes some exposure to emerging markets, which tend to be less well regulated and more volatile than more established stock markets, so increasing the potential risk to investors. Where the fund enters into derivative transactions with counterparties, there is a risk that they may default on their obligations or become insolvent. At times, the Fund may invest in smaller companies, which may carry a higher degree of risk and be more difficult to sell than larger companies. You should remember that the real value of your investment will be reduced by inflation. Where the Fund invests in securities designated in a different currency to the Fund, the value of the Fund may rise and fall purely as a result of exchange rate fluctuations. Skandia Investment Group is a trading name of Skandia Investment Management Limited. Skandia Investment Management Limited is authorised and regulated by the Financial Services Authority, FSA Registered Number 208543. Registered in England and Wales. Registered Number: 4227837. Registered office: Skandia House, Portland Terrace, Southampton, SO14 7EJ. The Authorised Corporate Director for the Skandia Diversified Fund is Skandia Investment Management Limited. This presentation is designed for financial advisers only and should not be relied upon by existing or prospective clients of Skandia. May 2011