the investment climate - financial mutuals climate.pdf · the investment climate chaired by: gareth...

THEINVESTMENTCLIMATE

Chairedby:GarethMee,EY

ChrisHills,InvestecWealth&InvestmentMeenaLakshmanan,LGTVestraBrynJones,RathboneInvestmentManagementTrevorGreetham,RoyalLondonAssetManagement

Maximising returns in a Solvency 2 worldChris Hills – Chief Investment Officer

September 2016

3

UK Equities

Overseas Equities

Government Bonds

Corporate Bonds

Property

Cash

CommoditiesPrivate Equity

Hedge Funds

Infrastructure

0

5

10

15

20

25

30

0 2 4 6 8 10

Vol

atilit

y

Annual Return % above inflationSource: Barclays Capital, CSFB, Deutsche Bank

Period of data 1925-2015• Government Bonds• Corporate Bonds• UK Equities• Overseas Equities• Property• CashCommodities since 1966Private Equity since 1986Hedge Funds since 1992Infrastructure Funds since 2005

Unfortunate

IdealistDefensive

Adventurous

Risk versus returnIncluding alternative assets

4

The importance of time horizonProbability of returns exceeding inflation over varying holding periods

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

1year 3years 5years 10years 20years

UK Equities

OS Equities

Gilts

Corp Bonds

Property

Cash

Source Investec Wealth & Investment

1925-2015 data

Contact detailsChris Hills

Chris HillsChief Investment Officer

Telephone: 020 7597 1234Email: [email protected]

Chris has over 40 years of experience in the investmernt management industry, half spent working withinthree very distinct institutional asset management businesses and the other half in his current role atInvestec.

He splits his time between the internal task of ensuring that the firm plays to its collegiate strengths inresearch and portfolio management, together with the external tasks of ensuring the firm receives thebest input from its suppliers amongst the large investment banks and asset management organisationsand presenting the firm‘s thoughts about current markets to a range of external clients and interestedadvisers.

Chris assists clients in developing appropriate investment benchmarks and policies to meet their needs.

Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange and the Investec Group.

Please note that the value of investments and the income derived from them may fluctuate and investors may not receive back the amount originally invested. Past performance is not necessarily a guide to the future. Current tax levels and reliefsmay change and the investments and investment services referred to may not be suitable for all investors.

US Elections 2016TRiUMPhant Clinton?

Meena LakshmananPartner, Head of Strategy

8

US Elections - 2016Ø The most divisive elections of the recent past

Ø Both the Presidential candidates with lowest poll ratings

Ø Contest for the lesser of the two “evils” than best candidate for the most important job in the world

Source: Real Clear Politics – average of 8 sources, till 6 Oct 2016

S&P500 Total Return Index

9

US Elections: Market resilient in spite of uncertainty

Source: Bloomberg

Markets no longer predict but react

0

10

20

30

40

50

60

70

0

500

1000

1500

2000

2500

3000

3500

4000

4500

01/0

1/19

9001

/11/

1990

01/0

9/19

9101

/07/

1992

01/0

5/19

9301

/03/

1994

01/0

1/19

9501

/11/

1995

01/0

9/19

9601

/07/

1997

01/0

5/19

9801

/03/

1999

01/0

1/20

0001

/11/

2000

01/0

9/20

0101

/07/

2002

01/0

5/20

0301

/03/

2004

01/0

1/20

0501

/11/

2005

01/0

9/20

0601

/07/

2007

01/0

5/20

0801

/03/

2009

01/0

1/20

1001

/11/

2010

01/0

9/20

1101

/07/

2012

01/0

5/20

1301

/03/

2014

01/0

1/20

1501

/11/

2015

01/0

9/20

16

CB

OE

SPX

Vol

atili

ty In

dex

S&P

500

TR

Inde

x

CBOE SPX Volatility Index

LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority (FCA). Our registration details are set out in the FCA Register: Firm Reference No. 471048, www.fca.org.uk/register. Registered in England and Wales: OC329392. Registered office: 14 Cornhill, London, EC3V 3NR.

This document is for information and illustrative purposes only and is for use of the recipient. It is not to be reproduced,copied or made available to others. This document is considered to be a general market or informational commentaryand does not constitute any type of investment or other professional advice, it is not a personal recommendation anddoes not take into account the particular investment objectives, financial situations or needs (including tax) of individualclients. This document is not intended and should not be construed as an offer, solicitation or recommendation to buy orsell any specific investments or participate in any investment (or other) strategy. You are recommended to seek adviceconcerning suitability of any investment from your investment or other professional adviser. Investors should be awarethat past performance is not an indication of future performance and the value of investments and the income derivedfrom them may fluctuate and you may not receive back the amount you originally invested. Not all investmentsmentioned are regulated by the FCA.When we provide investment advice it is on the basis of a restricted approach, that is to say whilst we review and adviseon retail investment products from the whole of the investment market and can also advise you on direct investments, wewill not consider your wider financial planning and pension requirements, unless you wish us to do so, when we willrefer you to one of our wealth planners.The information and opinions expressed herein are the views of LGT Vestra LLP and are based on current publicinformation we believe to be reliable but we do not represent that they are accurate or complete and should not be reliedupon as such. Any information herein is given in good faith, but is subject to change without notice. No liability isaccepted whatsoever by LGT Vestra LLP, employees and associated companies for any direct or consequential lossarising from this document. This document is not for distribution outside the European Economic area.

LGT Vestra LLP is a limited liability partnership registered in England & Wales. Registered Office: 14 Cornhill, LondonEC3V 3NR. Registration number OC 329392.

LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority and is a member of the London StockExchange

LGT Vestra (Jersey) Limited is incorporated under the laws of Jersey. Registered office: Charles Bisson House, 30-32New Street, St Helier, Jersey JE2 3TE. Registration number 102243.

LGT Vestra (Jersey) Limited is regulated by the Jersey Financial Services Commission in the conduct of investmentBusiness under the Financial Services (Jersey) Law 1998, as amended.

LGT Vestra US Ltd. Is authorised and regulated by the Financial Conduct Authority and the Securities and ExchangeCommission

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Important information

TheQEinfinitytrap

SomedynamicsofQE

6October2016

BillGross’“itsjustagame”

6October2016

£Non-financialyield

Volatilityamplification Carryisking

0

10

20

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90

100

OLD NEW

CashGiltsLinkersCreditHigh YieldCommodityPropertyEM EquityOverseas EquityUK Equity

Traditional Portfolio GMAP allocation

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TWO TARGET RISK PORTFOLIOS WHICH LOOKS THE MOST DIVERSIFIED?

ASSET MANAGEMENT

Source: RLAM and Moody’s Analytics; % allocation to different asset classes using an illustrative risk targeted benchmark.

0

10

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80

90

100

OLD NEW

CashGiltsLinkersCreditHigh YieldCommodityPropertyEM EquityOverseas EquityUK Equity

Traditional Portfolio GMAP allocation

A SYSTEMATIC FRAMEWORK FOR DECISION MAKING

16

RESEARCH-LED BUT WITH ROOM FOR JUDGEMENT

Experience and judgement to warn when “this time is different”

ASSET MANAGEMENT

Tactical Models Implementation templatesFundamental Analysis

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170

Inde

x of

Add

ed V

alue

Sector FX

Regional Balanced

Multi Asset

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x of

Add

ed V

alue Sector

FXRegionalBalancedMulti Asset

Volatility

Hunt for yield

Monetary policy

Politics

Macro Economics

QUESTIONTOTHE

AUDIENCE

HasBrexitgeneratedinvestmentopportunitiesforthemutualsector?

YES

NO

QUESTIONTOTHE

AUDIENCE

Shouldthemutualsectorbelargeinvestorsinnon-traditionalassetssuchasinfrastructure,commercialrealestateandprivateequitytypeinvestments?

YES

NO

QUESTIONTOTHE

AUDIENCE

Thereisasignificantdebateinthepensionsmarketandtheannuitymarketatpresentaroundwhetherweshouldbehedginginterestratesinthecurrentyieldenvironment.Howdoyoufeelaboutthisforthemutualsi.e.shouldwebehedginginterestrateriskinourportfolios?

YES

NO

QUESTIONTOTHE

AUDIENCE

WillDonaldTrumpbepresidentoftheUSlaterthisyear?

YES

NO

the investment climate - financial mutuals climate.pdf · the investment climate chaired by: gareth...

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