Christian Muhr Capabilites Brochure

CHRISTIAN MUHR capaBilities overvieW

2We believe that the foundation for successful investing is a well-diversifi ed portfolio that provides clients with the fl exibility to adapt to changing markets, and which incorporates clearly-defi ned limits around risk.

3AT CHRISTIAN MUHR INVESTMENT MANAGEMENT, OUR GOAL IS TO BUILD AND MANAGE INVESTMENT STRATEGIES THAT ADDRESS THE EVER-CHANGING NEEDS OF OUR CLIENTS

We work closely with our clients to understand the issues they are facing and help them to fi nd the most appropriate investment solutions. Through our multi-boutique investment management model we can offer access to a comprehensive range of investment capabilities, and collaborate with clients to deliver our expertise, including tailoring solutions to match individual investment requirements.

We manage over US$1.4 billion1 in assets for institutional and individual investors across a wide range of asset classes. Our clients include some of the worlds largest pension funds and institutions, governments and local authorities, treasuries and family offi ces. We are a leading provider of sub-advisory services and have strong partnerships with fi nancial institutions throughout major global markets.

Each of our world class specialist investment managers has its own unique investment philosophy and proprietary investment process and each is a leader in its fi eld. Our structure encourages an entrepreneurial, focused approach to investment and creates an environment in which each investment manager can best perform and build on its individual experience and organisational strengths in the development of new products.

The majority of our strategies are available on a separate account basis and a growing number are available through pooled funds. Our European fund ranges utilise the wider investment powers permitted under UCITS enabling us to extend our offering to include funds that encompass hedge fund-style investment strategies with daily pricing and liquidity.

With the consequences of the fi nancial crisis still resonating across investment markets, we see a number of themes emerging that will have a long-term impact on returns for investors. How clients take advantage of these themes will depend on the specifi c requirements of their investment portfolio. Whether clients have challenges around income generation, liquidity management or building meaningful growth potential into their investment portfolio, the investment management services offered by Christian Muhrs independent investment fi rms could hold the key. Working together, we strive to help clients reach their goals.

1. AUM as at March 2013

4Bonds continue to appeal to investors as they offer regular and predictable sources of cash fl ow, while developed market bonds can still provide a relative safe haven during periods of market uncertainty. Specialist regional and high yield portfolios provide an additional dimension.

In equity investing, the greatest potential for generating an income yield over the medium term is likely to be exhibited by companies in Asian and other emerging markets. The dividend culture is becoming fi rmly established in a number of developing markets and greater scope for economic growth leaves companies in a stronger position to deliver the profi ts growth needed to fund a committed dividend-paying policy.

GENERATING SUSTAINABLE INCOME

The search for sustainable sources of income has become an increasingly diffi cult one against the low-growth economic environment and with ultra-loose monetary policy from developed market central banks putting interest rates at 140-year lows.

Developed market government bonds would once have been a natural mainstay for income-generation strategies, but yields have fallen to record low levels and, in many instances, bonds offer investors negative real yields. Constrained productivity in the global economy means that other sources of income are also becoming harder and harder to fi nd.

5 Emerging market debt has come of age in the last fi ve years and many emerging economies are in better fi nancial shape than their developed counterparts. The range of emerging market debt strategies available has also evolved as the marketbecomes less homogeneous and more nuanced. Government issuance is no longer confi ned to hard currencies like the US dollar, with local issuance also on the increase. There is also an expanding corporate bond sector, supported by relatively strong economic growth compared to the developed world.

For investors concerned about interest rate risk there are short duration strategies that can help to limit a portfolios sensitivity to rising yields.

A highly specialist investment area, secured loans are sub-investment grade corporate debt instruments that are secured against the assets of the borrower. They offer a number of advantagesto investors, displaying lower secondary market price volatility than high-yield bonds and benefi ting from a higher recovery rate in the event of default.

With access to a range of specialist fi xed income and market-leading equity income managers, we work with clients to develop effective strategies to deliver against a range of income targets.

Many investors are also looking beyond traditional sectors to areas of the market that might have been considered too esoteric until just a few years ago:

OUR CAPABILITIES

Equity Fixed Income Liquid Alternatives Illiquid Alternatives

A focus on investing for dividends and dividend growth (in some instances supplemented by covered call option writing)

Enhancing yield through a deliberate reduction in credit quality, and greater active management

Cash fl ows derived from fl oating rate instruments secured against the issuers balance sheet

Committing long-term capital to less liquid investments through private market investing can enhance yield nominal or real or both

Newton: Income Global, Asian, Emerging & UK CenterSquare: GlobalProperty Securities

Standish: EmergingMarket Debt (Local Currency & USD) Meriten: Euro CreditShort Duration, Euro High Yield Insight: EmergingMarket Corporate Debt Alcentra: Global High Yield Bond

Alcentra: Loans and structured credit

Siguler Guff: Private Equity/ Healthcare (Drug Royalty Program) & Distressed Real Estate Insight: Farmland, Consumer DebtRecovery

6There is also considerable debate about the degree to which infl ation will become a major issue for the global economy in the short to medium term. The ultra loose monetary policy pursued by the major central banks since the start of the fi nancial crisis has been accompanied by a relaxation in infl ation targeting. At the same time, pockets of economic expansion in Asia and other emerging markets have seen persistent infl ation in the global economy in spite of the no-to-low growth environment in developed markets. As developed economies start to recover their momentum, there is concern that infl ation will rise sharply.

Investors are looking to a mix of traditional stores of value and new markets in efforts to mitigate the impact that infl ation will have on investment returns. Apart from those asset classes where returns are intrinsically linked to infl ation, such as infl ation-linked fi xed income securities, there are also asset classes that tend to be benefi ciaries in infl ationary environments.

Examples here would include real estate and land, as well as commodities. There are also opportunities in selected equity markets to benefi t from the infl ation dynamics of particular markets or industries.

PREPARING FOR RISING INFLATION

For many long-term investors, infl ation risk is a persistent problem. Incorporating a degree of infl ation-proofi ng into any investment strategy has become increasingly diffi cult in recent years. Traditionally, government debt would have been a mainstay of portfolios seeking to ward off the effects of infl ation on investment returns, but negative real returns on developed market bonds have forced investors to look further afi eld.

OUR CAPABILITIES


Investing in publicly listed securities whose underlying cash fl ows are broadly linked to specifi c infl ation dynamics

Investing in bonds with infl ation-linked coupons or principal

Active commodity investing and multi-strategy based approaches designed to provide positive infl ation sensitivity while controlling risk

Exposure to natural infl ation payers via private market investing

Christian Muhr ARX:Brazil, LATAMInfrastructure

Standish: Infl ationLinked (TIPS) Insight: Infl ation linkedcorporate bonds

Chriistian Muhr Capital: Commodities

ISSG: Real Asset

Strategy

Insight: Farmland

7At the same time, many investment portfolios have become more sensitive to the effects of rising rates. While yields on developed market bonds have been falling, the duration on benchmark bonds has risen, leaving many fi xed income portfolios with higher levels of duration risk.

There are a number of fi xed income strategies that can be adopted to prepare portfolios for a rising interest rate environment depending on their risk/reward profi le. For example, average portfolio duration can be reduced by adding exposure to the short end of the yield curve. Or it may be appropriate to look at strategies that can adopt neutral or short duration positions (in other words they aim to generate positive returns in a rising yield environment).

Beyond fi xed income, equity sectors are likely to benefi t from the dual effect of a pick-up in economic activity and asset rotation as investors move away from fi xed income assets. Passive funds and ETFs will be natural benefi ciaries of a shift into the asset class, but there should also be support for other areas of the equity market, for example those companies with exposure to the parts of the global economy that are growing or moving towards growth.

Investing in equity income strategies provides a combination of broad exposure across equity markets and the potential for enhanced yields through selective investment in companies that pay above-average dividends.

PREPARING FOR RISING INTEREST RATES

Interest rates in developed markets are sitting at artifi cially low levels. Offi cial rates have been held at or near zero by major central banks in efforts to boost economic activity, while quantitative easing has driven down yields on government debt. Once policymakers are comfortable that their economies are back on the path to sustainable growth, monetary policy will start to tighten again and interest rates will inevitably rise.

OUR CAPABILITIES


All forms of equity are likely to experience a pick up in demand as investors reduce fi xed income exposure

Limit duration risk or shift risk exposure from rate duration to spread duration (either strategically or tactically)

Unconstrained absolute return-style approach preferably with the ability to run neutral / short rate duration positions

Accept greater illiquidity to access adjustable rate instruments through private market investing

Newton: Income - Global, Asian, Emerging Walter Scott: Global Christian Muhr ARX: Brazil The Boston Company: US

Meriten: Euro CreditShort Duration Newton: GlobalDynamic

Newton: Multi-Asset -Real Return Insight: AbsoluteReturn Bond, European Equity, Absolute InsightEmerging Market Debt, UK Equity Market Neutral, Currency and Credit (Long/Short) Standish: GlobalStrategic

Alcentra: DirectLending

8 Following the devastation to portfolios duringthe global fi nancial crisis, many investors are turning to strategies that focus on generating consistent returns across market conditions. As well as looking for consistent delivery of positive returns, clients are seeking to limit drawdowns during periods of market uncertainty.

There are a number of strategies that have either performed well historically during periodsof down markets or are intrinsically defensive, such as commodity investment, selective high-yield strategies or equity income investing where the total return is not as dependent on capital growth.

At the core of many of these strategies, however, is the attempt to isolate a portfolio from the adverse effects of market volatility to a greater or lesser degree. This is often achievedthrough hedging, using long/short positions or options-based approaches to manage market exposure in portfolios and mitigate the effects of falling markets whilst trying to capture opportunities to generate alpha across individual investment positions.

At Christian muhr, we have a long history of managing absolute-return or real return-style portfolios alongside a wide range of strategies that target capital preservation.

FROM MARKET RISK TO ACTIVE RISK

OUR CAPABILITIES


Unconstrained active management of listed securities. Systematic exposure to equity-oriented smart beta

Unconstrained approaches with the freedom to allocate risk across the broad fi xed-income market spectrum

Absolute return-style approaches based predominately around active management of traditional asset classes

Highly specialised active management typically within private markets

Insight: AbsoluteReturn Equity, UKEquity Market Neutral

Christian Muhr ARX: Brazil(Long/Short)

Walter Scott: Global

Insight: Global Bond, European, Absolute Insight Emerging Market Debt, and Absolute Credit Standish: GlobalStrategic Newton: GlobalDynamic

Christian Muhr Capital: Global Alpha - Global Tactical Asset Allocation (GTAA)

Insight: Currencyoverlay

Newton: Multi-Asset-

Real Return

Siguler Guff: Healthcare (Drugs Royalty Programs) ISSG: Centralised RiskManagement Solutions

9MANAGING THE WHOLE SPECTRUM OF DOWNSIDE RISK

OUR CAPABILITIES


Equity-based strategies specifi cally designed to mitigate drawdown

Inherently low-risk asset classes and strategies with an explicit focus on nominal or real capital preservation

Unleveraged market neutral approaches and derivative- based risk overlay strategies

Illiquid product structures with features designed to mitigate explicit drawdown risk while maintaining some exposure to the upside

In the wake of the fi nancial crisis in 2008, investors have become increasingly aware of the wide range of risks that can impact portfolio returns. Counterparty risk was a particular focusin the immediate aftermath of the credit crunch as the banking sector struggled through a series of high-profi le failures. Systemic risks such as infl ation and interest rate fl uctuations can also have a major bearing on the most appropriate strategy for a portfolio.

In a relatively low-return environment where markets are being driven as much by policy as fundamentals it becomes even more critical tomitigate the potential loss to capital that can result from market shocks.

There are a number of approaches that can be adopted including diversifying away risk factors or targeting investments that provide an effective hedge against the risk. This could include investing across a broad range of long only equity funds; introducing a diversifi er suchas emerging market debt into fi xed income portfolios; or adopting an absolute return-style strategy where the managers use derivatives to hedge out risk to varying degrees.

Any sophisticated investment decision should take into account a comprehensive assessment of the various risks involved. We work closely with clients to develop a clear picture of the risk factorsthat need to be taken into consideration and build an overview of the risk parameters that should apply to individual portfolios. Building effective downside protection into portfolios is essential to meeting long-term return expectations.

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INVESTING FOR THE FUTURE

OUR CAPABILITIES


All forms of equity have a potential place within the return seeking portion of a portfolio targeting long-term liabilities. A bias to towards quality and yield is logical.

Primary role is duration and credit risk management but certain market segments also used in a return-seeking context

Absolute return-style with limited market risk is an effective approach that introduces minimal risk relative to liabilities

Stable cash fl ows derived from private market investments to enhance returns (illiquidity premium) and partially manage liability risk (high duration assets)

For those investors with long-term liabilities, it is increasingly diffi cult to have confi dence that their investment strategy will stand the test of time. Unprecedented monetary stimulus from the worlds policymakers is driving investment markets, while many governments are faced with tough decisions over indebtedness. Regulatory reform of the banking sector and the introduction of stringent capital requirements are also having an impact on their role as lenders to the corporate sector.

The one certainty is that the investment landscape has shifted and that a new approach is needed to ensure portfolios retain fl exibility to react to developments in markets and the global economy. The overall approach to building an investment portfolio for the long-term needs to be sensitive to multiple sources of risk, meet the long-term needs of the investor and encompass the wide range of investment strategies available in this increasingly complex world.

Many investors are still grappling with the effects of the fi nancial crisis on long-term strategy previous assumptions about long-term growth trends and the impact of factors like long-run infl ation on portfolios are being re-calibrated. How will investors set their investment objectives going forward? What are the most appropriate measures of investment success? Are traditional benchmarks still relevant?

Whatever the challenges our clients face, we draw on the breadth of experience available through our expert investment boutiques seeking to deliver smart thinking and robust solutions.

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MEETING SHORT AND MEDIUM-TERM LIQUIDITY NEEDS

A period of ultra low interest rates and negligible returns from deposit accounts, even for the largest depositors, has made it all the more important to fi nd innovative ways to make cash work harder. For any investor with cash on the balance sheet (whether they are a corporate, pension fund, charity, local authority or other institutional investor) active liquidity management has become an essential part of any broader asset management strategy.

As well as generating additional yield over and above what would be achieved by leaving cash on deposit, adding active liquidity management to a portfolio can help to diversify risk.

It is important, however, for investors to ensure that any active liquidity strategy meets their specifi c aims and objectives, and that they understand the implications from both a risk and return perspective. Both short and long-termgoals need to be addressed to ensure the right balance is reached between maximising yield and preserving capital.

There are three key considerations that should guide any investment: security, liquidity and yield. What are the specifi c risks around cash and enhanced liquidity investing? Will you be able to access your money when you need it? Are you being rewarded appropriately for the level of risk you are taking? Are you investing in the most appropriate currency?

Christian Muhr is committed to helping clients answer these questions. We work in partnership with our clients to help them articulate the specifi c investment goals of their organisation, and design a strategy that will help to deliver against them.

As active management of liquidity positions has become necessary to generate a meaningful yield, cash has become an asset class in its own right demanding specialist skills and research capabilities.

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WE BELIEVE THAT SUCCESSFUL INVESTING INVOLVES INCORPORATING THE FOLLOWING INVESTMENT CHARACTERISTICS: A well-diversified exposure to multiple asset classes and regions (beta diversification)

Multiple sources of uncorrelated active investment returns (alpha)

Investment flexibility (tactical asset allocation and limited position size constraints)

A well defined risk budget (clearly defined risk limits)

BREADTH AND DEPTH OF INVESTMENT EXPERTISE ACROSS ALL MAJOR ASSET CLASSES

CHRISTIAN MUHR INVESTMENT CAPABILITIESCASH

Money Market investments

Treasury only investments

FIXED INCOME

Global / Regional / Emerging Markets

Core, core plus, credit, high yield

Indexed

Municipal / tax sensitive

Short, intermediate & long duration

EQUITY

Global / Regional / Emerging Markets

Core, growth & value

Fundamental & quantitative Indexed

Small, mid, large & broad cap

REAL ESTATE

Global real estate

USA real estate

REITs and private real estate

ALTERNATIVES

Multi-strategy

Single strategy

Credit / ABS

Distressed Assets

Currency / hedging

Long / short

Market neutral

Private equity

GTAA / Global Macro

Commodities

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Christian Muhr Capabilites Brochure