December 2017 Legal & General Investment Management L&G EUR Funds December 2017 For Financial Broker use only LGIM Ref: RET/0109
Customer-focused proposition SOLUTIONS Managed For You BUILDING BLOCKS Managed By You L&G EUR III Expected level of risk aligned to SRRI 3 L&G EUR IV Expected level of risk aligned to SRRI 4 L&G EUR V Expected level of risk aligned to SRRI 5 L&G World Equity Index Fund MSCI World Index USD L&G Europe ex. UK Index Fund MSCI Europe Ex. UK Index EUR L&G Emerging Markets Equity Index Fund MSCI Emerging Markets Index USD L&G Euro Treasury Bond Index Fund Barclays Euro Treasury Index 1 Aviva s L&G Funds invest in the L&G EUR Funds, sub funds of the L&G ICAV. Roman numerals in the EUR Funds refer to the UCITS Synthetic Risk and Reward Indicator (SRRI) objective of the fund. There is no guarantee that the expected level of risk will be achieved over any time period and there may be periods where the funds fall outside of the risk and reward indicators.
A choice of funds that draw on our index and asset allocation expertise EUR Funds EUR III EUR IV EUR V The Four Pillars: Multi-Asset Wish List 101bn North American Equities Global Index capability 71bn UK Equities 49bn European Equities Japanese Equities 18bn 19bn Emerging Market Equities 16bn Asian-Pacific Equities SUITABILITY ACTIVE ASSET ALLOCATION SIMPLICITY COST EFFECTIVENESS 136bn Fixed Income Index Tracking 2 Source: LGIM internal data as at 31 December 2016. Figures in Euros. Assets shown refer to passively managed funds split by fund mandates excluding cross holdings in other funds. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data excludes derivative positions and includes Liability Driven Investments (LDI). May not total due to rounding.
Key benefits to clients The Four Pillars: Multi-Asset wish list SUITABILITY ACTIVE ASSET ALLOCATION SIMPLICITY COST EFFECTIVENESS 3
Our team based approach LGIM asset allocation team: Team-driven approach we believe this makes for a robust and repeatable investment process Assess the macro environment and outlook Bank of England Chance of rate hike ahead of market expectations Analyse the impact of the macro-environment at an asset class level Translate asset class views into investments US High Yield Spreads at 3-year lows and low defaults Size and experience we are a team of 25 specialists with an average of 14 years of experience Proven track record we have a strong track record in navigating investment cycles LGIM Independent risk oversight Oil Markets Reduced risk of cheating on OPEC supply cuts India Reforms Increase exposure to Indian equities Dedicated implementation team Specialisation and collaboration allows an informed understanding of markets 4 Source: LGIM, as at 30 November 2017.
Our multi-asset solutions are supported by a Team based approach Our multi-asset specialists include: 25-strong team Justin Onuekwusi CFA Fund Manager 14 years experience Andrzej Pioch CFA Fund Manager 8 years experience Bruce White CFA Fund Manager 20 years experience Francis Chua CFA Assistant Fund Manager 10 years experience Managing more than 50 billion in multiasset strategies* Team interaction results in the development of our views Investment ideas Client solutions Multi-index funds 5 Source: LGIM as at 30 September 2017. *Including over 9 billion in L&G With Profits assets.
The investment process ESMA Objective Quantitative process Long term asset allocation Qualitative process Fundamental return tilts Dynamic asset allocation Medium term views Risk analysis L&G EUR Funds L&G EUR III L&G EUR IV L&G EUR V Bonds and cash Shares REITs & Infrastructure 6 Source: LGIM. For illustrative purposes only
Keeping risk on track EUR III Vol: 2 5%** Aim to keep risk broadly stable over time* Asset contribution Forward scenario EUR IV Vol: 5-10%** EUR V Vol: 10-15%** Mean weighted return Forward scenario 7 Source: LGIM. An illustrative model portfolio as at 31 December 2015 *The EUR Funds are expected to have a level of risk which broadly corresponds with the UCITS Synthetic Risk and Reward Indicator as outlined in their key investor information document for the Fund. However, as the Fund is managed on a forward looking basis there is no guarantee that this will be achieved over any time period and there may be periods where the Fund falls outside of the UCITS Synthetic Risk and Reward Indicator and therefore the stated volatility levels. **UCITS SRRI volatility ranges based on weekly return data over 5 years.
EUR Funds: Key features Building blocks Asset allocation Currency exposure Duration 100% 80% 60% Active / Passive / Cash 4% 2% 18% 21% 19% 100% 80% 60% Equity / Alternatives / FI & Cash 16% 7% 33% 11% 79% 100% 80% 60% Euro / Overseas 31% 64% 78% 5 4 3 98% 40% 64% 75% 40% 78% 57% 40% 69% 2 4.1 3.5 20% 0% EUR III EUR IV EUR V 20% 0% EUR III EUR IV 11% 10% EUR V 20% 0% 22% EUR III 36% EUR IV EUR V 1 0 EUR III EUR IV 0.6 EUR V 8 Source: LGIM as at 30 November 2017.
Market outlook and fund review
Summary of LGIM asset allocation core view Neutral overall Economic cycle Valuations Systemic risk Economy remains mid cycle, but getting closer to late cycle Risk asset valuations are not excessive Material risks from geopolitics, and emerging market debt levels 10 Source: LGIM as at 30 November 2017.
Current top-down thematic views 4. Lower for longer: Allocation to core European government bonds REITS EMD Hard Currency Positive bias on Infrastructure 5. Helicopter money: Medium-term positive bias on Japanese equities 2. Divergence: Positive on USD 1. Approaching late cycle: Structural bias to US TIPS 3. New Political Paradigm: Lower allocation to Euro 6. China risk: Reduced EM equities Looking for relative winners within EM (e.g. Indian equities) 11 Source: LGIM as at 30 November 2017. For illustrative purposes only.
Target asset allocation Asset Class Underlying holding Investment style EUR III Fund EUR IV Fund EUR V Fund Equities 15.50% 33.00% 79.00% UK L&G UK Index Index 2.50% 5.00% 11.00% Europe Ex UK L&G Europe Ex. UK Equity Index Index 4.00% 8.50% 22.00% North America L&G North American Equity Index Index 4.00% 8.50% 18.50% Japan L&G Japan Equity Index Index 3.00% 5.50% 10% Pacific Ex Japan L&G Asia Pacific ex. Japan Equity Index Index 1.00% 2.50% 6.50% Emerging Markets L&G Emerging Markets Equity Index Index 1.00% 2.50% 8.00% India Nifty 50 Index * Index 0% 0.50% 1.00% Global Energy S&P Energy / STOXX 600 Oil & Gas Index * Index 0% 0% 2.00% Credit and EMD 30% 32.50% 8.00% Global High Yield L&G High Income Active 3.50% 4.50% 2.50% EM Debt (USD) L&G EM Govt Bond USD Index Index 5.50% 5.50% 2.50% EM Debt (local) L&G EM Govt Bond LC Index Index 4.50% 5.00% 3.00% Global Credit LGIM Global Credit / L&G Sterling Corporate Bd Index Active 16.50% 17.50% 0% Government Bonds 30% 20.25% 2.00% Eurozone L&G Euro Treasury Bond Index ** Index 11.00% 7.75% 0.50% Australia 10 Year Australian Govt Bond * Index 2.00% 1.00% 0% Global Inflation-linked L&G Global Inflation Linked Bond Index Index 17.00% 11.50% 1.50% Alternatives 7.00% 10.50% 11.00% Global Property (REITs) L&G Global Real Estate Dividend Index Index 3.00% 5.50% 6.00% Infrastructure STOXX 600 Utilities / S&P Utilities Index * Index 4.00% 5.00% 5.00% Cash 17.50% 3.75% 0% 12 Source: LGIM, as of 30 November 2017. *Implemented through index futures. ** Includes direct holdings of Portuguese bonds
Performance and positioning
Performance: risk-targeting UK funds Fund Name 3 Months YTD 3 Years (p.a.) SI (p.a.) 14 Legal & General 3 I Acc -0.28 3.56 5.08 6.19 Peer group median -0.36 3.56 4.88 5.10 Quartile 2 2 2 1 Legal & General 4 I Acc 0.15 5.57 6.33 7.51 Peer group median 0.27 5.44 6.42 7.08 Quartile 3 2 3 1 Legal & General 5 I Acc 0.59 7.47 7.87 8.77 Peer group median 0.69 7.18 7.43 7.90 Quartile 3 2 2 1 Legal & General 6 I Acc 0.95 9.41 8.66 9.44 Peer group median 1.01 9.40 8.30 8.34 Quartile 3 2 2 1 Legal & General 7 I Acc 1.33 10.97 9.47 9.86 Peer group median 1.33 11.92 9.44 9.23 Quartile 2 3 2 1 Source: Lipper, LGIM as at 30 November 2017. Peer group median is the average performance of funds targeting the same risk profile for each fund. Past performance is not a guide to future performance.
European Equity Asian Equity EM Equity US Equity Japan Equity UK Equity Infrastructure Global Energy High Yield EUR IV EM Debt (local curr.) EM Debt (hard curr.) Cash Global Credit Australia Govt. Bonds Global Linkers UK Credit Euro Govt. Bonds Global REITs Return (%) Asset class performance since inception Fund name YTD 2017 Performance* Since Inception Performance* 31/12/2016 to 30/11/2017 26/09/2016 to 30/11/2017 L&G EUR III 1.83 0.81 25 20 L&G EUR IV 3.59 3.66 L&G EUR V 7.97 12.66 15 10 5 0-5 -10 WARNING: The value of your investment may go down as well as up. WARNING: If you invest in these funds you may lose some or all of the money you invest. WARNING: Past performance is not a reliable guide to future performance WARNING: These funds may be affected by changes in currency exchange rates. 15 Source: Performance figures for Aviva Wrapped Series B source Financial Express, Xylophone chart source LGIM from 26/09/2016 to 30/11/2017. *The fund performance is quoted net of annual fund charges reflected in the unit price and excludes the impact of tax and other charges.
Recent portfolio changes Emerging Market $ and Local Currency Debt Global Equities Infrastructure Global High Yield Global Credit Cash 16 Source: LGIM, as of 30 November 2017
Summary of key positions Active asset allocation in action Bonds/alternatives Carefully managing fixed income exposure Diversify and remain active across the fixed income spectrum Positive on EMD in USD and increasingly on Local currency but reducing HY Added Australian and Portuguese Sovereign exposure Looking for diversifying alternatives Positive on Global REITs Added to Global Infrastructure (via European and US utilities equities) Equities After moving our overall view on risk assets from cautious to neutral we have been adding to global equities Developed markets Added global energy exposure Emerging markets More granular approach to EM equities Added small position in India Currency Increasingly active within FX exposure Moving to a neutral stance on GBP against EUR 17 As of 30 November 2017
EUR Funds Performance update since inception to 30 November 2017
European Equity US Equity EM Equity Asian Equity Japan Equity Infrastructure UK Equity Global Energy High Yield EUR III Cash EM Debt (local curr.) Global Linkers Global Credit Australia Govt. Bonds UK Credit EM Debt (hard curr.) Euro Govt. Bonds Global REITs Asset Class Performance (%) Contribution ro Return (%) EUR III attribution Since inception* 25.0 5.0 2 4.0 15.0 3.0 1 2.0 5.0 0.6 0.5 0.1 0.2 0.4 0.5 0.2 0.5 0.9-0.1-0.1 1.0-5.0-0.3-1.0-1 -2.0 19 Source: LGIM. *26/09/2016 to 30/11/2017. White columns show the gross return of the underlying funds. Coloured components and numerical labels show the contribution of the underlying funds to the return of the Multi Index Euro III Fund (approximately, the gross return multiplied by the weight). Fund return is an estimate and may be different from the official performance figures.
European Equity US Equity EM Equity Asian Equity Japan Equity Infrastructure UK Equity Global Energy High Yield EUR IV Cash EM Debt (local curr.) Global Linkers Global Credit Australia Govt. Bonds UK Credit EM Debt (hard curr.) Euro Govt. Bonds Global REITs Asset Class Performance (%) Contribution to Return (%) EUR IV attribution Since inception* 25.0 5.0 2 4.0 15.0 3.0 1 1.5 2.0 5.0-5.0 1.0 0.4 0.4 0.7 0.6 0.4 0.1 0.6 3.9-0.1-0.1-0.2-0.2 1.0-1.0-1 -2.0 20 Source: LGIM. *26/09/2016 to 30/11/2017. White columns show the gross return of the underlying funds. Coloured components and numerical labels show the contribution of the underlying funds to the return of the Multi Index Euro IV Fund (approximately, the gross return multiplied by the weight). Fund return is an estimate and may be different from the official performance figures.
European Equity US Equity EM Equity Asian Equity Japan Equity Infrastructure EUR V UK Equity Global Energy High Yield Cash EM Debt (local curr.) Global Linkers Global Credit EM Debt (hard curr.) Euro Govt. Bonds Global REITs Asset Class Performance (%) Contribution to Return (%) EUR V attribution Since inception* 25.0 14.0 2 15.0 13.4 9.0 1 5.0 4.5 3.0 1.4 1.0 1.5 0.7 1.4 0.1 0.5-0.2 4.0-1.0-5.0-1 -6.0 21 Source: LGIM *26/09/2016 to 30/11/2017. White columns show the gross return of the underlying funds. Coloured components and numerical labels show the contribution of the underlying funds to the return of the Multi Index Euro V Fund (approximately, the gross return multiplied by the weight). Fund return is an estimate and may be different from the official performance figures.
Disclaimer and important legal notice For financial broker use only This is not a consumer advertisement. It is intended for professional financial advisers and should not be relied upon by private investors or any other persons. The views expressed in this communication are those of the speaker and not necessarily those of Aviva Life & Pensions UK Limited or LGIM and LGIM may or may not have acted upon them. This document should not be taken as an invitation to deal in any Legal & General investment. Remember, the value of investments and any income from them may fall as well as rise and investors may get back less than they invest. Past performance is not a guide to future performance. Legal & General Investment Management (LGIM) Limited is the Investment Adviser to the Legal & General Multi Index EUR fund range. These are Irish authorised ICAV funds issued by LGIM Corporate Director Limited. Both companies are authorised and regulated by the Financial Conduct Authority in the UK. LGIM Corporate Director Limited, Registered in England and Wales no. 07105051. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority. 22
Disclaimer and important legal notice WARNING: The value of your investment may go down as well as up. WARNING: If you invest in these funds you may lose some or all of the money you invest. WARNING: Past performance is not a reliable guide to future performance WARNING: These funds may be affected by changes in currency exchange rates. Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is also regulated in the UK: by the Prudential Regulation Authority for prudential rules and, to a limited extent, by the Financial Conduct Authority for applicable UK conduct rules. Registered Branch Office in Ireland (No 906464) at One Park Place, Hatch Street, Dublin 2. Tel (01) 898 7000 Web www.aviva.ie Registered in England (3253947) at Wellington Row, York, YO90 1WR. 23