investec asset management

OEIC Solving the Income Problem Investec Diversified Income Fund

John Stopford – Portfolio Manager, Co-Head of Fixed Income & Currency

January 2013

Growth

Defensive

Uncorrelated

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Sources: Investec Asset Management, UN

Dependency Ratios

The need for income is likely to rise...

● Aging populations will need income as they move to retirement

● The opportunities to earn real incomes are becoming more scarce

30

40

50

60

70

80

90

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Japan

UK

US

Western Europe

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● Annuity rates continue to fall putting pressure on retirement income

− At beginning of 1990s a £100,000 pension pot - income of £15,640

− 2012 a 65 year old man will get £5,140

...but retirement income continues to fall

Source: Telegraph.co.uk

£15,640 £5,140

1990s 2012

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Source: Investec Asset Management

Central banks are supressing real yields

● A little bit of inflation and low borrowing costs ease the burden of too much debt

UK Base Rate UK CPI vs. BoE Target

0

2

4

6

8

10

12

14

16

18

1694

1718

1742

1766

1790

1814

1838

1862

1886

1910

1934

1958

1982

2006

UK bank rate

-2

-1

0

1

2

3

4

Jan-0

1

Nov-0

1

Oct-

02

Sep-0

3

Aug-0

4

Jul-05

Jun-0

6

May-0

7

Apr-

08

Mar-

09

Feb-1

0

Jan-1

1

Nov-1

1

Oct-

12

Deviation from target

Pre-Crisis average

Post-Crisis average

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Investors will have to look further afield for income

Market Yields

2.7

0.5

1.3

1.9

2.8

3.9 4.04.3

5.5

6.2

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

UK

Infl

atio

n

UK

Cash R

ate

Glo

bal G

ov't B

ond

s

UK

Gilt

s

Glo

bal E

quitie

s

UK

Eq

uitie

s

UK

Co

rpo

rate

Bo

nd

s

EM

Hard

Curr

ency D

eb

t

EM

Lo

cal D

eb

t

Glo

bal H

igh Y

ield

Sources: ONS UK CPI YoY, Bloomberg UK GBP O/N LIBOR, Merrill Lynch Global Gov’t Bond Index YTM, Merrill Lynch UK Gilt Index

YTM, MSCI Dividend Yield, FTSE Dividend Yield, Merrill Lynch UK Corporate Bond Index YTM, JP Morgan EMBIG Index YTM,

JP Morgan GBI EM Index YTM, Merrill Lynch Global High Yield Constrained Index YTM, as at 3 January 2013

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Source: Investec Asset Management, November 2012

Equities look an increasingly attractive source of income

● But they also remain a source of volatility

Dividend Yield (%) US Dividend & Bond Yields have crossed over

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

UK France Japan Germany US Canada

Current

15 year average

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

1925

1929

1934

1939

1944

1949

1954

1958

1963

1968

1973

1978

1983

1988

1992

1997

2002

2007

2012

US long-term Treasury yield

S&P dividend yield

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-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

200 700 1200 1700

Annualis

ed 3

year

out-

perf

orm

ance

High Yield spread 3 years earlier

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

HY vs. Gilts Corporates & collateralised vs. Gilts

Sources: Investec Asset Management, Bloomberg, November 2012

High Yield bonds typically pay a risk premium

● Current yield spreads have tended to deliver decent out-performance historically

● High Yield bonds tend to be better insulated against rising rates than other bonds

Excess Return Over Treasuries Return Correlation to Gilt Returns

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0

50

100

150

200

250

Ru

ssia

Ch

ileN

ige

ria

Pe

ruIn

do

ne

sia

Au

str

alia

Co

lom

bia

Sw

ed

en

Tu

rke

yN

ew

Ze

ala

nd

So

uth

Afr

ica

Ph

ilip

pin

es

Me

xic

oC

ze

ch

Re

pu

blic

Th

aila

nd

Slo

va

k R

ep

ub

licS

witze

rla

nd

De

nm

ark

No

rwa

yF

inla

nd

Ma

laysia

Slo

ve

nia

Po

lan

dB

razil

Ne

the

rla

nd

sM

alta

Isra

el

Au

str

iaG

erm

an

yC

yp

rus

Ca

na

da

Un

ite

d K

ing

do

mF

ran

ce

Sp

ain

Ice

lan

dB

elg

ium

Sin

ga

po

reU

nite

d S

tate

sIr

ela

nd

Po

rtu

ga

lIt

aly

Gre

ece

Ja

pa

n

Emerging Markets Developed Markets

Sources: Investec Asset Management, IMF, 2012 (estimated)

Gross government Debt/GDP (%) Yield Premium Between EM & DM Bonds

Sources: Investec Asset Management, JP Morgan Indices, November 2012

● Emerging Market risks have tended to decline

● Their bond markets still tend to pay a yield premium

Emerging Markets are no longer the world’s basket cases

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Multi-asset approach can exploit diversified sources of yield

● Multi-asset approach aims to avoid the tail-risks associated with single asset strategies

● Exposure is actively managed to reflect evolving investment opportunities and risks

● Well placed to exploit yield potential of both developed and emerging markets

Calendar Year Returns in GBP for different assets – best to worst

Lowest

return

Highest

return

Source: Investec Asset Management, Bloomberg FTSE 100 Index Total Return for Equities; 50:50 JP Morgan EMBIG & ELMI+

index prior to 2002 then 50:50 JP Morgan EMBIG & GBI_EM for EM Bond in GBP for EM Debt; Merrill Lynch European Non-

Financial High Yield Constrained Index hedged into GBP for High Yield; 1/3rd mix of Equities, EM Debt & High Yield for Mixed

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Investec Diversified Income Fund

● Aims to provide an attractive yield through an actively managed multi-asset portfolio

● Managed by highly experienced portfolio manager John Stopford,

backed by a specialist Multi-Asset team

● Uses the breadth and depth of Investec’s global investment capabilities across the

developed and emerging world

● Actively manages downside risk

● RDR-ready share class and part of Investec’s Managed Solutions Range

Seeking attractive income from a diversified portfolio of “global best ideas”

* The Distribution Yield reflects the amount that may be expected to be distributed over the 12 months beginning 1 October 2012, as a percentage

of the mid-market unit price of the Fund. The Underlying Yield reflects the annualised income expected to be received by the Fund. Both are based

on a snapshot of the portfolio as at 30 November 2012, are not guaranteed, will vary over time and take no account of any preliminary charge. The

Distribution Yield is higher than the Underlying Yield because the Fund’s expenses are charged to capital. This has the effec t of increasing the

Fund’s distribution (which may be taxable) whilst reducing its capital to an equivalent extent and may constrain future capital and income growth.

As at 30 November 2012 A-class I-class

Distribution yield 5.6%* 5.6%*

Underlying yield 3.9%* 4.7%*

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Multi-Asset approach to providing diversified income

Equities

● Focus on large and

medium-cap

companies with high

and sustainable yield

High Yield debt

● High-yielding

companies with strong

balance sheets

Emerging markets debt

● Attractive yield

opportunities relative

to developed markets

debt

Indentifying attractive opportunities within leading Investec strategies

Equities High Yield Emerging Market

Debt

20-40% of Portfolio 0-50% of Portfolio 0-50% of Portfolio

Global Franchise

Universe

Temple Bar

Universe

Blended EMD

Strategy

Monthly High

Strategy

The investment team can also invest in attractive opportunities across listed property, infrastructure and the broader fixed income

market. These internal parameters are subject to change without notification necessarily to investors

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John Stopford (22*)

Portfolio Manager

Co-Head of Fixed Income & Currency

High YieldGlobal Equities

Contrarian Equities

A highly experienced, multi-disciplinary team

Diversified Income team(A 14 strong multi-asset team with an average experience

15 years in industry, 10 years at Investec)

Diversified Income team and specialist support 26/07/2012

Clyde Rossouw (18*) – Portfolio Manager

6 team members with average experience of

11 years in industry, 6 years at Investec

* Industry experience

Strategy Leader

Core team

Chris

Freund (22*)

Seamus

Vasey (8*)

Peter Eerdmans (18*) – Head of Emerging

Markets Debt & Currency

12 team members with average experience

of 10 years in industry, 5 years at Investec

Emerging Markets Debt &

CurrencyAlastair Mundy (24*) – Head of Contrarian,

Portfolio Manager



Kieran Roane(12*) – Investment Specialist



Philip

Saunders (31*)

Max

King (28*)

Diversified Income

Multi-asset core team and specialist support

A highly experienced, multi-disciplinary team * Industry experience

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-1% 0% 1% 2% 3% 4% 5% 6%

Equities

Tilts

Equity Futures

Credit

CDS

Bond Futures

EMD

FX

Portfolio

Diversified asset exposure and defensive equity holdings help

to control risk

Asset Allocation

● Expected volatility c.40% of UK equity market and c.2/3rds of High Yield

● Risk exposure managed to reflect relative value and changing economic conditions

Contributions to Expected Volatility

Source: Investec Asset Management, as at 17 December 2012

The portfolios may change significantly over a short period of time. Tilts include listed property and infrastructure

Equities, 26%

Tilts, 7%

Credit, 32%

EMD, 33%

Cash, 2%

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Why the Investec Diversified Income Fund?

● Targets an attractive yield through an actively managed multi-asset portfolio

● Managed by highly experienced portfolio manager backed by a specialist Multi-Asset

team

● Uses the breadth and depth of Investec’s global investment capabilities across the

developed and emerging world

● Actively manages downside risk

● RDR-ready share class and part of Investec’s Managed Solutions Range

● Distribution Technology risk profiled 4

Attractive income from a diversified portfolio of “global best ideas”

Dynamic Planner is a registered trademark of Distribution Technology

OEIC Thank you www.investecassetmanagement.com

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Contact details

Fergus McCarthy

Sales Director

Tel: +44 (0) 20 7597 1891

Email: [email protected]

Charles Wilson

Sales Director

Tel: + 44 (0)20 7597 2184

Email: [email protected]

Investec Asset Management

Woolgate Exchange

25 Basinghall Street

London

EC2V 5HA

United Kingdom

www.investecassetmanagement.com

Telephone calls may be recorded for training and quality assurance purposes.

Issued by Investec Asset Management, January 2013

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contact us at +44 (0)20 7597 1900. The value of this investment, and any income generated from it, will be affected by changes in

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Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management Limited, which is

authorised and regulated by the Financial Services Authority, January 2013.