multi-asset investing with “grit”conferences.pionline.com/uploads/...wages rise, more fiscal...

Maura T. Murphy, CFAPortfolio Manager Loomis Sayles & Co.

Multi-Asset Investing With “GRIT”

Navigating the Changing Macro Landscape

Multi-Asset Investing

Stronger Global Economy

Wages Rise, More Fiscal

Policy, Faster Fed Hikes ?

Potential for higher Inflation

G4 Balance Sheet Normalization

Seek to Maximize Risk Adjusted Returns

Source: Loomis Sayles as of 10/12/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.The chart presented above is shown for illustrative purposes only. Data and analysis does not represent the actual, or expected future performance of any investment product.Past performance is no guarantee of future results.

MLPs

REITs

US Agg

US HY

US IG

CEMBI

Preferreds

MSCI WorldMSCI EM

Loans

S&P 500

MULTI-ASSET MODEL PORTFOLIO

0

2

4

6

8

10

12

14

16

18

20

0 2 4 6 8 10 12 14 16

3-Ye

ar R

etur

n

3-Year Volatility

RETURN VS VOLATILITY

Multi-Asset Investing: Strategic AllocationsEconomic Cycle

Views as of 9/30/2018. Green shading denotes asset classes the presenter expects to appreciate and red shading denotes asset classes the presenter expects to depreciate at each point in the economic cycle. This material is provided for informational purposes only and should not be construed as investment advice. Investment decisions should consider the individual circumstances of the particular investor. This reflects the current opinions of the presenter and views are subject to change at any time without notice. Other industry analysts and investment personnel may have different views and opinions.

-32%

-54%

7%

-13% -10%-18%

21%28%

7%

18%25%

35%11%

14%

3% 3%

8%

13%

9% 9%

4%

0%

4%6%

MSCI EMMSCI World

Bloomberg Commodity Index Bloomberg Barclays HY

Bloomberg Barclays Agg

FTSE NAREIT All Equity REITS Index

Euro Area

China

Latin America

EM Asia

EM Europe

India

United StatesUnited Kingdom

Japan

Multi-Asset Investing: Strategic Allocations

Source: Loomis Sayles as of 12/31/2017.Credit cycle regime periods: Expansion late cycle; 1/1/1997-8/31/2000, 3/1/2006-12/31/2007, 1/1/2014-12/31/2017; Downturn; 9/1/2000-10/31/2002, 1/1/2008-3/31/2009Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Data and analysis does not represent the actual, or expected future performance of any investment product.Past performance is no guarantee of future results.

0

1

2

3

4

5

6

7

8

9

10

Return Volatility

EXPANSION / LATE CYCLEBB B CCC

-50

-40

-30

-20

-10

0

10

20

30

Return Volatility

DOWNTURNBB B CCC

Multi-Asset Investing: Tactical allocations with a focus on GRIT

G R I TGROWTH RATES INFLATION TURMOIL

Scenario Analysis with GRIT






-15%

-10%

-5%

0%

5%

10%

15%

Tail Risk Low Medium High

Probability

Ret

urn

% 12

3

45

6

Base Case Return

Growth rising, inflation stable

EM inflows

Trade war escalates

EM capital flight

Italy leaves the Euro

1

2

3

4

5

6

Source: Loomis Sayles Charts are illustrative for presentation purposes. Market scenarios have inherent limitations and should not be viewed as predictions of future events. They rely on opinions, assumptions and mathematical models which can turn out to be incomplete or inaccurate. Past market performance is no guarantee of future results.

GRIT Growth

47

49

51

53

55

57

59

61

63

47

49

51

53

55

57

59

61

63

2014 2015 2016 2017 2018

IndexInde

x

US ISM Manufacturing PMI Euro Area Manufacturing PMI Emerging Markets Manufacturing PMI

Source: Institute for Supply Management, IHS Markit, Haver Analytics, as of 10/8/2018.

-6.10% -6.70% -6.60%

-16.50%

-2.10% -1.40% 0.00%

-11.90%

-4.90% -3.70%

-21.10%

-4.50%

-30%

-20%

-10%

0%

S&P500 DividendEquity

MSCIWorld

MSCI EM Preferreds US HY BankLoans

REITs CEMBI US IG MLPs USTreasury

Drawdown

S&P500 DividendEquity

MSCIWorld

MSCI EM Preferreds US HY BankLoans

REITs CEMBI US IG MLPs USTreasury

GRIT Growth

Source: Loomis Sayles, as of 9/30/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Data and analysis does not represent the actual, or expected future performance of any investment product.Past market performance is no guarantee of future results.

15.87%12.05% 10.82% 10.54% 9.80%

7.67%5.77% 4.92%

3.01% 2.70% 1.37% 1.22%0%

5%

10%

15%

20%

RETURNS & DRAWDOWNS IN RISING GROWTH DURING LATE EXPANSION PART OF THE CYCLE

Annualized Return

Forces for higher rates are gaining momentum, still expected to be gradual

Data source: Loomis Sayles illustration, as of 10/9/2018. This depiction shown above is for illustrative purposes only. This reflects the current opinions of the presenter and views are subject to change at any time without notice. Other industry analysts and investment personnel may have different views and opinions.

GRIT Rates

Global Strength

FED Pace Increases

High Inflation

Balance Sheet Normalization

Weak Growth

Supply Dynamics

Deflation Pressures

Negative Demographics

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Returns10

YrY

ield

VALUE VS 10 YR YIELD (LAST 10 YRS)

10 Yr Yield (LHS) Value Return (RHS)

Level of rates impacts style rotation

Data source: Loomis Sayles illustration, as of 6/30/2018. This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Past market performance is no guarantee of future results.

GRIT Rates






Yield Curve impacts equity sector allocations

Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the presenter only, and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. This information is subject to change at any time without notice.Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Past performance is no guarantee of future results.

GRIT Rates

Source: Thomson Reuters Datastream, data as of 10/8/2018

10 Year Yield less Fed Funds Rate

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025-6%

-4%

-2%

0%

2%

4%

yen

-6%

-4%

-2%

0%

2%

4%

US Recession Loomis Forecast through 2019






Yield Curve impacts equity sector allocations

Data source: Loomis Sayles illustration, as of 9/30/2018.This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.

GRIT Rates

-50

-40

-30

-20

-10

0

10

20

30

40

TECH S&P 500 FINANCIALS

%

NORMAL YIELD CURVE

RETURN DRAWDOWN

-50

-40

-30

-20

-10

0

10

20

30

40

TECH S&P 500 FINANCIALS

%

INVERTED YIELD CURVERETURN DRAWDOWN

GRIT Inflation






Data source: Bloomberg, as of 9/30/2018. Indices represented are from the CPI Index.This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Commodity interest and derivative trading involves substantial risk of loss.Past market experience is no guarantee of future results.

-

0.6

1.2

1.8

2.4

3.0

3.6

Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18

%

ENERGY CONTRIBUTION WENT FROM 17% OF CPI TO 34% IN 1YR

food energy commodities shelter medical services transportation svces recreation

-3

-2

-1

0

1

2

3

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Index Points

ENERGY PRICES CONTRIBUTING TO CPI

WTI yoy energy contrib to cpi

Scenario Shock with GRIT

GRIT Inflation

-0.98

-0.57

-0.38

-0.25

-0.09

0.01

0.05

0.11

0.13

-1.5 -1 -0.5 0 0.5

PORTFOLIO

REITs

US HY

S&P500

BANK LOANS

US IG

INTERNATIONAL EQUITY

CEMBI

MLPs

EXPECTED P/L (EXCLUDING CARRY)

Data source: Loomis Sayles illustration, as of 1/1/2002 through 9/30/2018.Charts are illustrative for presentation purposes. Market scenarios have inherent limitations and should not be viewed as predictions of future events. They rely on opinions, assumptions and mathematical models which can turn out to be incomplete or inaccurate. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past market performance is no guarantee of future results.

GRIT Turmoil

4.8 10.11-YR MAX1-YR MIN

High Yield 6.25.3 6.5

NOW

2.62.1

NOW

2.5

5.0 12.1MLPs 7.97.1 8.9

2.2 2.9MSCI World 2.3 2.52.2

NOW

NOW

019.2

NOW

16.1

9.5

NOW

6.51 –YR AGO

YIELD VOLATILITY

1 –YR AGO

1 –YR AGO

5-YR MAX5-YR MIN

1-YR MAX1-YR MIN

1-YR MAX1-YR MIN

Data source: Bloomberg, as of 9/30/2018. Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization. Data and analysis does not represent the actual, or expected future performance of any investment product.Past market performance is no guarantee of future results.

GRIT Turmoil






5.09%3.38% 2.54%

-1.05%-2.94% -3.19%

-4.57% -4.96%

-11.46%-13.73%

-14.82% -15.08% -15.64%

-20%

-15%

-10%

-5%

0%

5%

10%

TSY AGG IG CEMBI MLP LOANS HY PFD Stock DIV Equity EM Equity SPXT MSCI World REIT

AVERAGE QUARTERLY RETURN WHEN S&P 500 IS DOWN AT LEAST 10% IN A QUARTER

S&P500Preferreds

Data source: Bloomberg, as of 9/30/2018. Data is historical and based on the period from 1/1/2002-9/30/2018.Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Data and analysis does not represent the actual, or expected future performance of any investment product.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.

DividendEquity

Multi-Asset InvestingFocus on diversified sources of income with attractive total return potential while managing drawdown risk

Multi-Asset Model Portfolio Equity Fixed Income Alternative Sources of Income

AVG YIELD (%)

3-YR AVG ANNUAL DRAWDOWN (%)

3.99 1.80 2.32 2.745.76

2.95 4.07 6.24 5.17 5.82 4.067.86

-5.06 -4.95 -6.56

-19.97

-7.06-3.51 -3.53 -3.87

-1.67 -3.46-9.72

-42.27-50.00

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00

Multi-AssetModel

Portfolio

S&P 500 MSCI World MSCI EM Preferreds US Treasury US IG US HY Bank Loans EM Debt REITs MLPs

Data source: Zepher Analytics as of 9/30/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index. The hypothetical model portfolio is a blend of the indices shown excluding those that have the largest drawdown in each asset class (MSCI EM, US HY, MLPs). The model portfolio is not intended to represent the actual or expected future performance of any account managed by Loomis Sayles. The hypothetical model portfolio has inherent limitations. Material economic and market factors may affect investment decisions differently when the managers are investing actual client assets. It is shown for illustrative purposes only.

G R I TGROWTH RATES INFLATION TURMOIL

Euro Area

China

Latin America

EM Asia

EM Europe

India

United States

United Kingdom

Japan0

2

4

6

8

10

12

14

16

18

Sep-

66

Sep-

68

Sep-

70

Sep-

72

Sep-

74

Sep-

76

Sep-

78

Sep-

80

Sep-

82

Sep-

84

Sep-

86

Sep-

88

Sep-

90

Sep-

92

Sep-

94

Sep-

96

Sep-

98

Sep-

00

Sep-

02

Sep-

04

Sep-

06

Sep-

08

Sep-

10

Sep-

12

Sep-

14

Sep-

16

Sep-

18

Yiel

d

10 Year Treasury

10-YEAR TREASURY

MLPs

REITs

US Agg

US HY

US IG

CEMBI

Preferreds

MSCI WorldMSCI EM

Loans

S&P 500

MULTI-ASSET MODEL

PORTFOLIO

0

2

4

6

8

10

12

14

16

18

20

0 5 10 15 20

3-Ye

ar R

etur

n

3-Year Volatility

RETURN VS VOLATILITY

The hypothetical model portfolio has inherent limitations. Material economic and market factors may affect investment decisions differently when the managers are investing actual client assets. It is shown for illustrative purposes only. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.

REDEFINING MULTI-ASSET INVESTING TAKES GRIT.

Past performance is no guarantee of future results.This is not an offer of, or a solicitation of an offer for, any investment strategy or product. Any investment that has the possibility for profits also has the possibility of losses. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.This presentation is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein, reflect the subjective judgments and assumptions of the authors only, and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. Data and analysis does not represent the actual, or expected future performance of any investment product. Information, including that obtained from outside sources, is believed to be correct, but Loomis can not guarantee its accuracy. This information is subject to change at any time without notice.This material cannot be copied, reproduced or redistributed without authorization. Principal Investment Risks: Investments in bonds can lose their value. When interest rates rise, bond prices usually fall and vice versa. High yield securities are subject to a high degree of market and credit risk, including risk of default. In addition, the secondary market for these securities may lack liquidity which, in turn, may adversely affect the value of these securities and that of the portfolio. Foreign investments involve special risks including greater economic, political and currency fluctuation risks, which may be even greater in emerging markets. Currency exchange rates between the US dollar and foreign currencies may cause the value of the investments to decline. Commodity-related investments, including derivatives, may be affected by a number of factors including commodity prices, world events, import controls and economic conditions and therefore may involve substantial risk of loss. Equity securities are volatile and can decline significantly in response to broad market and economic conditions.MALR022699

Disclosure

multi-asset investing with “grit”conferences.pionline.com/uploads/...wages rise, more fiscal...

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