LONG TERM

PERSPECTIVES

Peter Brooke

MacroSolutions

2

PROBLEMS

How much

offshore do I

need?

How much income can I

draw?

How much do

I need to retire?

Will I run out of

money?

How do I pay

for my kids

varsity?

What equity

exposure

should I have?

3

SOLUTIONS: WEALTH RANGE

4

PROBLEM SOLVING PRINCIPLES

Real Returns

Long term perspective

Diversified = Multi asset class

Active asset allocation

Theme and price

Integration

5

REAL SOLUTIONS

Note: For inflation we used the relevant average inflation since 1990

Expense Cost Today Cost in 10 yrs Cost in 25 yrsInflation

Rate

1st Year Study

(Medical Degree)R130 000 R308 000 R1.1m 9%

Kidney Dialysis

(per year)R150 000 R414 000 R1.9m 10.7%

Family Sedan

(1300cc engine)R200 000 R348 000 R800 000 5.7%

6

Annualised real return since December 1929 – December 2014

LONG-TERM REAL RETURNS

Source: Old Mutual Investment Group, MacroSolutions

7

CASH IS TRASH

8

EQUITIES FOR THE LONG TERMDecember 1924 to December 2014

9

December 1924 to December 2014

RISK | DRAWDOWN FTSE/JSE ALL SHARE INDEX

10

December 1924 to December 2014

RISK | DRAWDOWN ALL BOND INDEX

11

TIME

Source: Old Mutual Investment Group, MacroSolutions

1 day and 1 week: Rolling total returns, June 1995 to current

1 month to 10 years: Rolling total returns, January 1925 to current

12

DIVERSIFICATION

Source: Old Mutual Investment Group, MacroSolutions

13

ACTIVE ASSET ALLOCATION

Source: Old Mutual Investment Group, MacroSolutions

14

EXCELLENT ASSET ALLOCATORS

Independent endorsement of MacroSolutions being the best in the

industry

BNP Paribas/Cadiz Securities study measured asset allocation alpha (relative to peer average) on rolling 1, 2, 3, 4, 5, 10yrs.

MacroSolutions have delivered the best average alpha in almost all these periods, and have done it with the least risk!

Bottom line: This is a different source of alpha that we have been very successful at capturing!

15

Buy lotsCheap

Expensive

Bo

tto

m U

pP

ric

e: V

alu

atio

ns

Reduce

Buy some

Sell all

Deteriorating theme

Improving theme

Top DownMacro Environment

“Integrating top

down

& bottom up”

HOW WE DO IT

16

THEMES

Global Goldilocks??

Cyclical bounce in Europe

SA suffers

– Sub trend growth

– Global growers

China transition

– Consumption > Investment

Low return world

– Absolute return

– Dividend yield

17

GLOBAL GROWTH

-2

0

2

4

-4

6

05 07 11 13

-2

0

2

4

-4

6

1509

World growth

1990 – 2014 aveExcl 2008/9

Source: Old Mutual Investment Group

18

CHINA TRANSITION |GDP GROWTH AFTER INVESTMENT RATE PEAKS

Source: Old Mutual Investment Group, MacroSolutions, Trailing 10y average GDP rates around the peak in the investment to GDP ratio

0

2

4

6

8

10

12

Japan - peak in 1973 USA - peak in 1979 Korea - peak in 1991 China - peak in 2010

10yr prior to peak

At peak

10yr after peak

20yr after peak

30yr after peak

19

SA SUFFERS

SA suffe

rs− Inflation

− Growth

− Employment

− Deficits

− Policy

20

PRICE: LOW RETURN WORLD

SA

Equity

Property

Bonds

Cash

Global*

Equity

Bonds

Cash

Real return View

5.0%

4.5%

2.5%

0.5%

5.0%

-1.0%

-1.0%

Neutral

Neutral

–

Neutral

+

–

–

More balanced outlook

Key risk is earnings delivery as economy

battles

Growing risk following huge bull market

Lack of alternatives makes SA bonds

attractive

Hawkish Reserve Bank helping boost returns

Maintain diversification for

risk management

Best risk adjusted returns

Record low yields = low returns

Cash is trash

Source: Old Mutual Investment Group | NB: These are long-term, real returns expected over the next five years, as at 15 July 2015* The international return expectations above are in US Dollar terms; any rand depreciation will add to returns in rands.

Comment

Neutral

+

–

21

0%

20%

40%

60%

80%

100%

Real

Income

Fund

Stable

Growth

Fund

Moderate

Balanced

Balanced

Fund

Edge 28 Flexible

Fund

Max return

Other (Multi Asset Class)

Commodities

Cash

Bonds

Alternatives

Property

Equities

ASSET ALLOCATIONEffective exposure as at 30 September 2015

Source: Old Mutual Investment Group

Does it work?

23

ANNUALISED RETURNS VS VOLATILITY OVER 20 YEARS

Source: Old Mutual Investment Group, MacroSolutions

10%

11%

12%

13%

14%

15%

16%

17%

18%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

RISK

RE

TU

RN

Profile Capital

Profile Stable Growth

Profile Balanced

Profile Pinnacle

Money Market

SA Bonds

Global

Equity

SA Equity

24

PERFORMANCE RELATIVE TO PEERS5 Years to 30 September 2015

Source: MorningStar

9.0%9.4%

7.5%

9.8%9.4%

8.5%

12.8%

11.3%10.5%

13.9%

12.0%11.5%

18.4%17.6%

0%

3%

6%

9%

12%

15%

18%

21%

Old

Mutual

Real

Income

South

African -

Multi Asset

- Low

Equity

CPI + 2%

p.a.

Old

Mutual

Stable

Growth

Fund

South

African -

Multi Asset

- Low

Equity

CPI + 3%

p.a.

Old

Mutual

Balanced

Fund

South

African -

Multi Asset

- High

Equity

CPI + 5%

p.a.

Old

Mutual

Flexible

Fund

South

African -

Multi Asset

- Flexible

CPI + 6%

p.a.

Old

Mutual SA

Quoted

Property

Fund

South

Africa - RE

-General

25

CONCLUSION

Multi-asset class solutions solve most client problems

Inflation is the No. 1 enemy

One needs to take a long-term view

Active asset allocation adds value

MacroSolutions has stood the test of time

26

REGULATORY INFORMATION

Old Mutual Investment Group (Pty) Limited

Physical Address: Mutualpark, Jan Smuts Drive, Pinelands, 7405

Telephone number: +27 21 509 5022

Old Mutual Investment Group (Pty) Limited (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the Registrar of Financial ServicesProviders (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002.

Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financialmarkets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance. The investmentportfolios may be market-linked or policy based. Investors’ rights and obligations are set out in the relevant contracts. In respect of pooled, life wrapped products, theunderlying assets are owned by Old Mutual Life Assurance Company (South Africa) Limited who may elect to exercise any votes on these underlying assetsindependently of Old Mutual Investment Group. In respect of these products, no fees or charges will be deducted if the policy is terminated within the first 30 days.Returns on these products depend on the performance of the underlying assets.

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