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Real Assets Overview
Goldman Sachs Asset Management
2
Real Assets Overview Many Subcategories, Many Means of Implementation
Source: Goldman Sachs Asset Management. Note: As of 31-Mar-2017. These examples are for illustrative purposes only and are not actual results. If any assumptions used do not prove to be
true, results may vary substantially.
Real Assets Overview
INCOME GROWTH
EQUITY vs. DEBT
vs.
vs. PUBLIC/LISTED PRIVATE
Real Estate Infrastructure Commodities
3
This chart is for illustrative purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any interest in any fund or separate account managed by GSAM. In addition, it is
not, and should not be viewed as, predictions or projections of future returns of the classes of assets illustrated herein or of any investments, including any fund or separate account managed by
GSAM. “Senior debt” is debt that must be repaid first in the event of bankruptcy. “Junior debt” is either unsecured or is lower priority than senior debt claims in the event of bankruptcy. “Core” targets
stabilized, fully leased, secure investments in major markets. “Value add” targets properties with in-place cash flow but seek to increase cash flow over time via improvement or repositioning.
“Opportunistic” targets properties for the purposes of significantly rehabilitating in order to realize cash flow potential. The economic and market forecasts presented herein are for informational
purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Please see additional disclosures at the end of this presentation.
Real Assets Overview
Real Assets Overview Equity vs Debt / Income vs Growth
Retu
rn
Opportunistic
Core
Senior
Debt
Lower Risk / Higher Income
Junior
Debt
Value
Add
(Most “public/listed” falls here)
Higher Risk / Higher Growth
4
Real Assets Overview Global Real Estate (REITs): Spans Multiple Geographies and Sectors
Source: FactSet. Global REITs represented by FTSE EPRA/NAREIT Developed Index. Note: As of 31-Mar-2017. For illustrative purposes only.
Real Assets Overview
Global REITs Sector Exposure Global REITs Region Exposure
Retail Industrial
Buildings Office
Buildings Apartments Hotels Health
Care
Data Storage &
Towers
57.2%
10.8% 10.6% 10.4%
6.1% 4.8%
0%
10%
20%
30%
40%
50%
60%
North America Japan Europe Ex-U.K. Asia Ex-Japan Pacific United Kingdom
23%
21%
15% 13%
7% 7%
5%
4% 4%
2%
0%
5%
10%
15%
20%
25%
5
Real Assets Overview Global Infrastructure (Listed): Spans Multiple Geographies and Sectors
Utilities & Energy Infra Transportation Infra
Communications Infra Social Infra
Infrastructure: with predictable cash flows Infrastructure Related: with less predictable cash flows
Engineering & Construction Materials
Energy Production Shipping & Airlines
22.2%
11.4% 11.0%
Utilities Energy Telecom. Towers
U.S.
Source: FactSet. Global Infrastructure represented by DJ Brookfield Global Infrastructure Index. Note: As of 31-Mar-2017.
Non-U.S.
Real Assets Overview
Global Infrastructure Sector Exposure
20%
15%
11%
5%
1% 1% 1% 1%
0%
5%
10%
15%
20%
25%
Utilities Energy Toll Roads Airports Satellites Other Rail Ports Telecom.Towers
6
Real Assets Overview Attractive Investment Attributes
Investment Attributes
• Historically attractive yield relative to equities and bonds
• Long-term growth which provides interest rate resiliency
• Inflation hedging benefits
• Lower volatility compared to broader equities
• Diversification benefits
Attractive Yields1
Real Assets Overview
Interest Rate Resiliency2
Average 3-Month
Total Return in a
Rising Rate
Environment
7.0%
3.8% 3.4%
2.6%
1.6%
0%
2%
4%
6%
8%
US EnergyInfrastructure
GlobalREITs
GlobalInfrastructure
GlobalEquities
GlobalBonds
Inflation Hedging Benefits3
Average Total Return in
High-Inflation Years
17.1%
12.4%
10.6%
7.1%
5.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
GlobalInfrastructure
US EnergyInfrastructure
Global REITs Global Equities Global Bonds
1 Source: FactSet, as of 31-Mar-2017. US Energy Infrastructure: Alerian MLP Index; Global REITs: FTSE EPRA/NAREIT Developed Index; Global Infrastructure: Dow Jones Brookfield Global
Infrastructure Index; Global Equities: MSCI World Index; Global Bonds: Barclays Global Aggregate Index – Yield to Worst. 2 Source: Goldman Sachs Asset Management, Bloomberg, and Barclays, as
of 31-Mar-2017. Historical sensitivity to rising interest rates is represented by the asset class returns during three month periods of time in which the US 10-Year Treasury rose at least 1%, beginning
in 1995. 3 High-inflation periods are calendar years when inflation was ~3% or higher: 2004, 2005, 2007, and 2011. Average represents a simple average of the four inflationary years. Global
Infrastructure: S&P Global Infrastructure Index; US Energy Infrastructure: Alerian MLP Index; Global REITs: FTSE EPRA/NAREIT Developed Index; Global Equities: MSCI World Index; Global
Bonds: Bloomberg Barclays Global Aggregate Bond Index. Please refer to the disclosures in the appendix for asset class definitions. Diversification does not protect an investor from market risk and
does not ensure a profit. Past performance does not guarantee future results, which may vary. These examples are for illustrative purposes only and are not actual results. If any assumptions
used do not prove to be true, results may vary substantially.
-15% -10% -5% 0% 5% 10%
Global Equities
US Equities
US Energy Infrastructure
Global REITs
Global Infrastructure
Short US Treasury
Intermediate US Treasury
US Aggregate Bonds
Global Aggregate Bonds
Long US Treasury
7
Real Assets Overview: Public/Listed vs Private We Believe Each Has Its Advantages and They Should Co-Exist in a Portfolio
Source: Goldman Sachs Asset Management, NAREIT.
As of 31-Mar-2017. Diversification does not protect an investor from market risk and does not ensure a profit. Past performance does not guarantee future results, which may vary.
Real Assets Overview
Considerations Public
(Listed)
Private
(Core/Core Plus)
Liquidity Higher Lower
Diversification (by geography, type, tenant) Higher Lower
Minimum Investment Lower Higher
Fees Often Lower Often Higher
Scope of style Narrower: Core/Core Plus Wider: Core to Opportunistic
Control Low Varies (w/ potential to be higher)
Volatility Higher Lower
(but higher than often assumed by investors)
Correlation to Other Asset Classes Higher Lower
(but higher than often assumed by investors)
8
We believe one needs to adjust for the following factors when comparing the two:
1) Differences in leverage: Private return data is often quoted without leverage, public includes it
2) Differences in frequency of pricing: Public is priced real time, private less frequently
3) Differences in composition: Private typically includes the four major sub-sectors, public includes more
1 Source: GSAM. 1-Jan-1981 to 31-Dec-2016. US Public Real Estate: FTSE/NAREIT All Equity REIT Index. US Private Real Estate: NCREIF Fund Index-Open End Diversified Core Equity. 2 Source: CEM Benchmarking, 2016. Note: 1-Jan-1995 to 31-Dec-2014. The study analyzes return data from individual US Defined Benefit Pension Plan sponsors/endowments. Past correlations
are not indicative of future correlations, which may vary. Past performance does not guarantee future results, which may vary. Views and opinions expressed are for informational purposes only
and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not
be construed as investment advice.
Post-Adjustment, Public and Private Correlations Increase… 1 …While Risk Discrepancies Narrow2
Real Assets Overview
Real Assets Overview: Public/Listed vs Private While Public/Listed Exhibits Higher Volatility & Correlations than Private, We Believe
the Difference is Lower than Often Assumed by Investors
0.64
0.76 0.81
0.86 0.86
0.22
0.40
0.49 0.52 0.56
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1 2 3 4 5
Co
rrela
tio
n C
oe
ffic
ien
t
Rolling Return Holding Period (Years)
Correlations US REITs vs. US Private Real Estate (Core)
1994-2016
Data Adjustments
No Adjustments
11.5%
16.8%
18.6%
0%
5%
10%
15%
20%
US PrivateReal Estate
US PrivateReal Estate (adj.)
US PublicReal Estate
US Pension Fund Real Estate Investments 1998-2014
An
nu
ali
zed
Vo
lati
lity
9
1 Source: FactSet. Global REITs: FTSE EPRA/NAREIT Developed Index. Note: As of 31-Mar-2017. 2 Source: FactSet. Global Infrastructure: Dow Jones Brookfield Global Infrastructure Index. Note: As of 31-Mar-2017.
Real Assets Overview
Real Assets Overview: Public/Listed vs Private We Believe the Public Market is Now Liquid Enough and Diverse Enough for Large
Institutional Capital
Global REITs1 Global Infrastructure2
The Global REIT market has grown at a
Compound Annual Growth Rate (CAGR) of
13% since 2002
The Global Infrastructure market has grown
at a Compound Annual Growth Rate (CAGR)
of 15% since 2002
$0
$200
$400
$600
$800
$1,000
$1,200
2002 2004 2006 2008 2010 2012 2014 2016
Mark
et
Cap
italisati
on
($m
n)
$1.0tn $1.6tn
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2002 2004 2006 2008 2010 2012 2014 2016
Mark
et
Cap
italisati
on
($m
n)
10
Why Liquid Real Assets Now?
Limited supply
Stable or improving demand
Accommodative financing environment
Expensive relative to history
Fair relative to equities
Cheap relative to bonds
Cheap relative to private
Transition from monetary to fiscal and ensuing
inflation may benefit real assets
US policy changes (lower taxes and less
regulation) should be especially supportive of US
Energy Infrastructure
1) Healthy Fundamentals
4) Fair Valuations
2) Policy Tailwinds
As of 31-Mar-2017. Source: Goldman Sachs Asset Management, Preqin. Goldman Sachs does not provide accounting, tax or legal advice. Please see additional disclosures at the end of this
presentation. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved.
Please see additional disclosures at the end of this presentation.
Backdrop makes relative attributes more
attractive vs. bonds
Billions of dollars of capital have been raised in
the private markets but not yet invested
3) Strong Technicals
Real Assets Overview
Healthy Fundamentals, Policy Tailwinds, Strong Technicals, Fair Valuations
11
Why Liquid Real Assets Now? Attractive Total Return Expectations in 2017
Source: Goldman Sachs Asset Management. Note: As of 31-Mar-2017. Past performance does not guarantee future results, which may vary. The economic and market forecasts presented
herein have been generated by GSAM for informational purposes as of the date of this presentation. They are based on proprietary models and there can be no assurance that the forecasts will be
achieved. Please see additional disclosures at the end of this presentation. Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to
buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.
• We anticipate high single digit returns:
Multiple expansion: none
Potential for upside from M&A activity
• In 2017, we believe LRA may:
Outperform fixed income
Outperform defensive equities (e.g. utilities, consumer staples)
Underperform cyclical equities (e.g. industrials, consumer discretionary)
2017 Return Expectations
Higher Total
Return
Lower Total
Return
Cyclical equities
Liquid Real Assets
Defensive equities
Fixed income
Real Assets Overview
12
16%
31%
0
10
20
30
40
50
60
70
80
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Co
rrela
tio
n (
%)
S&P 500 3-month Pairwise Stock Correlation
3 mo Stock Correlation Long-term Average
85 bps
65 bps
20 bps
0
10
20
30
40
50
60
70
80
90
US EnergyInfrastructure
Global RealEstate
GlobalEquities
ETF Expense Ratios
Active Managers Have a
History of Outperforming2
70%
36%
82%
52%
92%
73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Energy Infrastructure Global Real Estate
Return Percentile Rank of Select Benchmarks
(100th Percentile is the Lowest Rank)
Last 1 Year Last 5 Years Last 10 Years
Why Liquid Real Assets Now? We Believe an Active Approach is Prudent In Real Assets, Especially Today
Real Assets ETFs are Expensive1
Real Assets Overview
1 Source: Morningstar. Alerian MLP ETF is used since there is no index that is representative of the opportunity set for offshore investors. iShares Global Real Estate UCITS ETF. iShares Core MSCI
World UCITS ETF. As of 31-Mar-2017. 2 Source: eVestment. As of 31-Mar-2017. Energy Infrastructure = Alerian MLP vs. MLP eVestment universe. Global REITs = FTSE EPRA/NAREIT Developed
Index vs. Global REIT eVestment universe. 3 Source: Goldman Sachs Global Investment Research. As of 31-Mar-2017. Past correlations are not indicative of future correlations, which may vary.
These examples are for illustrative purposes only and are not actual results. If any assumptions used do not prove to be true, results may vary substantially. The economic and market forecasts
presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Please see additional disclosures at the end of
this presentation. Past performance does not guarantee future results, which may vary.
Stock Correlations Have Come Down3
Likely Dispersion Ahead
• In our view, the equity return environment of the next 5 years will likely be very different than the last 5 years
• We believe varying interest rate policies, broadening growth opportunities, and increased M&A should create increased dispersion ahead
13
Portfolio Positioning: Global Listed/Public Real Estate We Currently Favor Companies with Higher Growth and Lower Rate Sensitivity
Source: Goldman Sachs Asset Management. As of 31-Mar-2017. These examples are for illustrative purposes only and are not actual results. If any assumptions used do not prove to be true,
results may vary substantially.
Sector Hotels Self Storage Residential Industrial Office Towers/Data
Centers Retail Health Care
Typical
Lease Term 1 night 1 month 1 year 3-5 years 5-10 years 5-10 years 5-10 years 10+ years
DURATION OF LEASE
Shorter Longer
Higher Economic Sensitivity
Lower Rate Sensitivity
Lower Economic Sensitivity
Higher Rate Sensitivity
Constructive
• Hotels
• Apartments
• Select retail (ex malls)
US UK & Europe Asia-Pacific
Neutral
• Office
• Self-storage
• Tech real estate / other
Cautious
• Select retail (malls)
• Industrials
• Health care
Constructive
• Australia
• Japan (C-Corps)
• Singapore
Neutral
• New Zealand
Constructive
• Spain office and retail
• Dublin office
• Germany residential
Neutral
• France office
Cautious
• UK (particularly London office)
Cautious
• Hong Kong
ECONOMIC & INTEREST RATE SENSITIVITY
Real Assets Overview
14
Portfolio Positioning: Global Listed/Public Infrastructure
Source: Goldman Sachs Asset Management. Note: As of 31-Mar-2017. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation.
There can be no assurance that the forecasts will be achieved. Please see additional disclosures at the end of this presentation.
Real Assets Overview
Energy
Infrastructure
Infrastructure
Related
Transportation
Infrastructure
Selective: Structural bias against developers due to high cyclicality and unpredictable cash flows, but may
opportunistically add names levered to increase in U.S. fiscal spending.
Utilities Cautious: Regulated cash flows and inelastic demand create predictable but low-growth cash flows which make them
more exposed to rising interest rate risk.
Communications
Infrastructure Constructive: Stands to benefit from data-driven demand growth and rising penetration levels in developing markets.
Offers higher growth vs other sectors yet low economic sensitivity due to secular nature of demand.
Constructive: Energy production volumes poised to increase due to recovery in global commodity prices, improved
competitive position for U.S. producers, and favorable U.S. policy tailwinds (especially lower corporate taxes and less
regulation). Attractive relative valuations.
Neutral: Long lease terms and inelastic demand create predictable but low-growth cash flows which make them more
exposed to rising interest rate risk, but less so than utilities. Modestly overweight rail and toll roads, and underweight
airports.
Utilities Transportation Infrastructure Energy Infrastructure Communications
Infrastructure
Higher Growth
Lower Rate Sensitivity
Lower Growth
Higher Rate Sensitivity
We Currently Favor Companies with Higher Growth and Lower Rate Sensitivity
15
General Disclosures
This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.
Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up.
A loss of principal may occur.
THESE MATERIALS ARE PROVIDED SOLELY ON THE BASIS THAT THEY WILL NOT CONSTITUTE INVESTMENT ADVICE AND WILL NOT FORM A PRIMARY BASIS FOR ANY
PERSON'S OR PLAN'S INVESTMENT DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE
MATERIAL OR CONTENT HEREIN. PLAN FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL INVESTMENT COURSE OF ACTION.
This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
This material contains information that discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions. It also pertains to past performance
or is the basis for previously-made discretionary investment decisions. This information should not be construed as a current recommendation, research or investment advice. It should not be
assumed that any investment decisions shown will prove to be profitable, or that any investment decisions made in the future will be profitable or will equal the performance of investments discussed
herein. Any mention of an investment decision is intended only to illustrate our investment approach and/or strategy, and is not indicative of the performance of our strategy as a whole. Any such
illustration is not necessarily representative of other investment decisions.
This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research. . It was not prepared in compliance with applicable provisions
of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may
differ from the views and opinions expressed by Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult
with their financial advisors before buying or selling any securities. This information should not be relied upon in making an investment decision. GSAM has no obligation to provide any updates or
changes.
Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not
take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts
are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These
forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to
provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without
independent verification, the accuracy and completeness of all information available from public sources.
An investment in real estate securities is subject to greater price volatility and the special risks associated with direct ownership of real estate.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date
of this presentation and may be subject to change, they should not be construed as investment advice.
Goldman Sachs does not provide accounting, tax, or legal advice. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities
law, you may disclose to any person the US federal and state income tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses)
that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. Investors should be aware that a determination of the tax
consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively and investors are strongly urged to consult with
their own tax advisor regarding any potential strategy, investment or transaction.
16
General Disclosures
Index Benchmarks
Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce
returns. Investors cannot invest directly in indices.
The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on
industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein. The exclusion of “failed” or closed hedge funds may mean that each
index overstates the performance of hedge funds generally.
Confidentiality
No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee,
officer, director, or authorized agent of the recipient.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will
achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return
features, portfolio characteristics may deviate from those of the benchmark.
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