www.fandc.com The Adviser, the Multi-Manager and Income in the
new pensions world F&C MM - Authentic Multi-Solutions
Multi-Manager Forum May 2015
Slide 2
Learning outcomes At the end of the F&C session, you will
be able to describe: The important role that diversification plays
in building any long term investment solution and particularly one
focussed on consistent income generation Some of the important
considerations behind asset selection and monitoring as well as
blending different assets together How a natural income investment
approach can help protect against pound cost ravaging during income
drawdown The role that a suite of multi asset investment solutions
can play when outsourcing, and in retirement planning strategy The
importance of a consistent and stable investment team that has a
tried and tested history 2
Slide 3
The Adviser, the Multi-Manager and Income in the new pensions
world agenda Do the Pensions Changes suit the Advisor and
Multi-Manager markets? Does the Adviser as a G.P. model suit this
new world? A trip to the MM Hospital for some Income Replacement
Therapy A few words on markets, themes & trends Conclusion
3
Slide 4
Pensions the Lamborghini question Source: www.thisismoney.com
and Lipper from 01.01.2009 to 11.04.2014www.thisismoney.com 4
Slide 5
Do the Pensions Changes suit the Advisor and Multi-Manager
markets? Rising demand for advice Increase need/demand for risk
profiling/cash flow modelling Retirement will have different phases
determined by age, health and wealth Hybrid structures will need to
be developed to deliver the right mix of guarantees, flexibility
and access Increased interest in risk managed, multi-asset funds 5
Consequences of change: according to the FCA Source: Technical
connection
Slide 6
Multi-Asset funds are playing an increasing role in retirement
planning as part of a core-satellite approach and are seen as vital
by more than 2/3rds of advisers Survey information provided by
Technical Connection Do the Pensions Changes suit the Advisor and
Multi- Manager markets? Some Comments: 6 Henderson Global Investors
There has been a large increase in money invested in multi-asset
products over the past decade, rocketing from 21,5bn to 126.5bn.
The number of funds has also rocketed going from 263 in 2005 to
653. Source:Portfolio Adviser/Henderson Global Investors March 2015
FCA Multi-asset and diversified growth funds are expected to be
used to manage volatility and some investment risk for consumers
Advisers and providers are expected to use blended solutions which
cover differing consumer needs and wants such as an annuity to
cover living costs and drawdown exposing customers to investment
growth and risk. Source: MS14/3.2 Retirement income market study:
Interim Report December 2014
Slide 7
Do the Pensions Changes suit the Advisor and Multi- Manager
markets? In 2013 there was 1 drawdown sale for every 16 annuity
sales In 2013: Average pension pot used to buy an annuity = 20,000
.whereas the average pension pot used in drawdown = 80,700 DC
pension pots of 50% of those interviewed < 50K* 62% believe
their DC pot wont supply all the income they need in retirement
(more than 80% have at least one other source of income)* 50% of
(existing) retirees chose an annuity (15% chose drawdown)* 32% of
those approaching retirement say less likely to chose annuity.* Did
you know? 7 Source: Technical connection *GFK CONSUMER Research for
FCA DC Defined Contribution
Slide 8
The Adviser, the Multi-Manager and Income in the new pensions
world agenda Do the Pensions Changes suit the Advisor and
Multi-Manager markets? Does the Adviser as a G.P. model suit this
new world? A trip to the MM Hospital for some Income Replacement
Therapy A few words on markets, themes & trends 8
Slide 9
Advisor ? Top things patients want in a doctor 9 Empathy
Listening Skills Recommended Professional Dresser Multi-Manager ?
Image: http://en.wikipedia.org/wiki/Up_in_the_Air_(2009_film)
Slide 10
PensionsISACollectives Insurance Property (buy to let) Cash
VCTEISOther A Retirement fund might look a bit like this So where
do Multi-Solutions fit in with your clients needs? 10
Slide 11
Medium-term needs Current needs Long-term needs Short-term
bucket: Medium-term bucket: Long-term bucket: So where do
Multi-Solutions fit in with your clients needs? Income from all
provisions and/or investments: Low risk liquid assets Short dated
government bonds Natural income withdrawals from investments
Multiple assets could include: Fixed income Property Equity income
Multiple assets could include: Predominantly diversified equity
portfolio Potential for moderate holdings in other risk assets
11
Slide 12
F&C MM our Multi-solution range Source: F&C Management
Limited & Distribution Technology as at 31.12.2014 * Estimated
4 Navigator funds risk profiles - TBC by Distribution Technology
Q2/2015 RP= Risk Profile RP 7*/10 RP 6*/10 RP 5*/10 RP 4/10 Marc
Denney RP 7/10 RP 6/10 RP 5/10 RP 4/10 RP 3/10 12
Slide 13
Performance generated by the Multi-Manager team as constituted
from time to time for and on behalf of Credit Suisse from
10.08.2001 up to 28.02.2007. Performance of F&C MM Navigator
Funds from 01.10.2007 to 31.03.2015. Source LIM, % growth TR GBP
rebased Past performance should not be seen as an indication of
future performance. *TER: total expense ratio Absolute performance
vs sector averages for three of our funds with performance history
dating back to 2001 Team record vs IMA sectors net of full TER*
Consistent, steady returns over the long term Paul Green 13
Slide 14
19103 Days from 10.04.1962 to 31.03.2015. Source: LIM Calendar
dates indicate industry start dates. Light blue area indicates time
since team was formed F&C MM: team history and experience
Lipper 14
Slide 15
The Adviser, the Multi-Manager and Income in the new pensions
world agenda Do the Pensions Changes suit the Advisor and
Multi-Manager markets? Does the Adviser as a G.P. model suit this
new world? A trip to the MM Hospital for some Income Replacement
Therapy A few words on markets, themes & trends 15
Slide 16
A trip to the MM Hospital for some Income Replacement Therapy
16
Slide 17
Why is income replacement therapy necessary? Pound cost
ravaging: Impact of bad timing (2000) 0 20000 40000 60000 80000
100000 2005200320012007200920112013 5K initial6K initial8K
initial10K initial Impact of decumulation based on UK Equity Total
returns Given Levels of Starting Income Escalating at 2.5% p.a.
Initial starting income levels Source: Cazalet Consulting When Im
sixty-four as at September 2014 Value 17
Slide 18
Pound cost ravaging: 1) Using natural income (2007) Initial
investment of 200,000 on the 1 st October 2007 Natural income on
multi-asset income of around 5% per annum. Fund performance
reflects income paid out Comparable level of yield (2,500 per
quarter) taken from sector in the form of withdrawal of capital.
Sector performance includes dividends reinvested. Comparable income
marked contrasts in capital outcomes Source: Lipper and F&C to
31 January 2015. The illustration was created by F&C and every
effort was made to ensure the accuracy of the methodology. It is
however included for illustrative purposes only and is not meant to
serve as a recommendation nor should it be taken as advice for
investment purposes. IMA Mixed Investment 20-60% shares sector
F&C MM Navigator Distribution Fund Amount invested200,000
Income received72,50067,517* Capital Value168,818198,420
Total241,318265,937 * F&C MM Navigator Distribution Fund paid
first dividend on March 2008 and total paid in 2008 was 2.59%
18
Slide 19
F&C MM Navigator Distribution the income option % Growth
Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015
*Launch date: 01.10.2007 Lipper 19
Plastic surgery Smart Beta Risk Parity 21 A Controversial
Area
Slide 22
A trip to the MM Hospital for some Income Replacement Therapy
Start with a sensible industry sector Lowest (% returns) Highest (%
returns) Average (% returns) 5%+ returns (% of 1 year outcomes)
Inflation 1 1.15.22.94.0 Cash 2 0.63.50.80.0 IMA sector average
-16.827.57.562.0 F&C MM Navigator Distribution
Fund-13.931.310.471.0 Lowest (% returns) Highest (% returns)
Average (% returns) Inflation 1 15.017.916.2 Cash 2 3.87.54.4 IMA
sector average8.055.432.8 F&C MM Navigator Distribution
Fund17.569.746.2 1. UK Consumer Price Index 2. Moneyfacts average
instant access 10,000 account Time periods from 01.10.2007 to
01.10.2014 Analysis of 1 year return IMA Mixed Asset 20-60% Equity
Sector Analysis of 5 year return IMA Mixed Asset 20-60% Equity
Sector 22
Slide 23
Sourcing income through broader asset classes Images:
http://upload.wikimedia.org; www.pixabay.com;
http://no.wikipedia.org;
http://www.mobilehomesabroad.org.ukhttp://upload.wikimedia.orgwww.pixabay.comhttp://no.wikipedia.orghttp://www.mobilehomesabroad.org.uk
For illustrative purposes only Fixed Income 32.3 UK Equity 23.7
Specialist Funds 18.7 European Equity 6.7 Non-correlated assets4.9
Asian Equity 4.8 Alternatives 3.5 Japanese Equity 2.2 GEM Equity
1.5 Cash 1.7 Sourcing income 23
Slide 24
Trip to the Multi-Manager Hospital: General Surgery Fund
selection Asset allocation Portfolio construction 24 Image:
https://s-media-cache-ak0.pinimg.com/236x/85/41/95/8541954b5fe1165fd3dc43f1efc66151.jpg
Slide 25
Trip to the Multi-Manager Hospital: A&E Assess Control
Adjust Communicate 25 Events out of normal control Images:
http://upload.wikimedia.org/wikipedia/commons/e/e3/P_Street_-_snow_removal.JPG;
https://www.flickr.com/photos/uclmaps/10667999425http://upload.wikimedia.org/wikipedia/commons/e/e3/P_Street_-_snow_removal.JPGhttps://www.flickr.com/photos/uclmaps/10667999425
Slide 26
Trip to the Multi-Manager Hospital: Tropical diseases
Contacting managers in region Portfolio response Communicating to
advisors 26
Slide 27
Trip to the Multi-Manager Hospital: Diagnostic Imaging Style
Research output of sample funds 27 For illustrative purposes
only
Slide 28
Trip to the Multi-Manager Hospital : Ear, Nose & Throat
28
Slide 29
F&C MM Navigator Distribution Fund 29 Current portfolio
yield 4.5%* 5.0%** 4.7%*** Data as at 31.03.2015. * Yield on a
historic basis (taking the last four payments into account as
declared on Lipper) as at 31.03.2015.** Gross yield on a historic
basis (taking the last four payments into account as declared on
Lipper) as at 31.03.2015. *** Prospective gross yield on the basis
of the portfolio invested as at 31.12.2014 assuming maintained
dividends by the underlying constituents as at 31.03.2015; this
figure is an estimate and is not guaranteed. Estimates and
forecasts are provided for illustrative purposes only. They are not
a guarantee of future performance and should not be relied upon for
any investment decision. Estimates are based on assumptions and
subject to change without notice. (prospective) Marc Denney Yield
from Anthony Willis Portfolio breakdown RegionSector %Fund holding
UK23.14Schroder Income Maximiser J O Hambro Capital Management UK
Equity Income Fund PFS Chelverton UK Equity Income Fund RWC
Enhanced Income Fund Ardevora UK Income Fund Majedie UK Income Fund
Fixed31.05Ashmore Emerging Market Total Return Fund Schroder
Strategic Credit Fund GCP Infrastructure Investments Limited GLG
Global Strategic Bond Fund PFS TwentyFour Investment Funds -
Dynamic Bond Fund Starwood European Real Estate Finance Limited
Carador Income Fund plc TwentyFour Income Fund Limited Legg Mason
Income Optimiser Fund P2P Global Investments Mutual Fund Henderson
Strategic Bond Fund Europe8.58Blackrock Continental European Income
Fund Standard Life Investments European Equity Income Fund
Japan2.37CC Japan Income & Growth Fund (JPY) CC Japan Income
& Growth Fund (GBP) Portfolio breakdown RegionSector %Fund
holding Asia5.00Schroder Asian Income Maximiser Prusik Asian Equity
Income Fund Specialist18.88Veritas Global Equity Income Fund Lazard
Global Equity Income Fund Artemis Global Income Fund Polar Capital
Financials Income Fund RWC Enhanced Global Dividend Fund SQN Asset
Finance Income Fund Emerging Markets1.39JPM Emerging Markets Income
Fund Alternatives2.913i Infrastructure plc Blue Capital Global
Reinsurance Fund Limited Non- correlated assets4.30Darwin Leisure
Property Fund MedicX Fund Limited Cash2.36 100.00
Slide 30
And over the long term, time IN the market matters more than
TIMING the market matching pension savings needs 30 Source:
Business Insider / Morningstar 05.01.2015 1000% 100 %
Slide 31
Trying to win by not losing Source: Lipper hindsight TR GBP
01.10.2007 31.12.2014 F&C Navigator Distribution has
historically outperformed the FT All Share Index 31
Slide 32
Trying to win by not losing Bear market period FT All Share (%)
F&C MM Navigator Distribution (%) Outperformance (%) 1st
October 2007 - 28th October 2008-38.8-22.5+16.3 6th April 2010 -
1st July 2010-15.4-5+10.4 5th July 2011 - 4th October
2011-17.8-9.4+8.4 15th March 2012 - 1st June 2012-10.6-2.5+8.1 22nd
May 2013 - 24th June 2013-11.3-3.8+7.5 4th September 2014 - 16th
October 2014 -9.7-2.6+7.1 Average-17.3-7.6+9.6 Source: F&C
Investments 32
Slide 33
Trip to the Multi-Manager Hospital: Neurology Liquidity Beta
Tracking Error 33 Risk management
Slide 34
Correlation analysis: vital component for income 34
Correlations from 31.12.2012 to 31.12.2014 Source: Lipper as at
31.12.2014 0.5 to 1 Negative correlation 0 to 0.5
Slide 35
Trip to the Multi-Manager Hospital: Neurology Liquidity Beta
Tracking Error Correlation VaR Active Volatility Soft factors
Ultimately about avoiding loss of capital 35 Risk management
Slide 36
Trip to the Multi-Manager Hospital: Morgue Fund closures
Company mergers 36
Slide 37
Trip to the Multi-Manager Hospital: Maternity Unit No track
record New home? Resources? Woodford? 37 Assessing new issues
Slide 38
Trip to the Multi-Manager Hospital: Maternity Unit 38 Source: %
Growth Total Return, Tax Default, in GBP. Source: LIM as at
31.03.2015
Slide 39
Trip to the Multi-Manager Hospital: Maternity Unit 39 Source: %
Growth Total Return, Tax Default, in GBP. Source: LIM as at
31.03.2015
Slide 40
Trip to the Multi-Manager Hospital: Transplants Squad system
Timing Tracking and learning 40 Fund switches Images:
https://farm9.staticflickr.com/8167/7273444248_bba8c111f5_o.jpg
Slide 41
Trip to the Multi-Manager Hospital: Urology 41 Fair value
Slide 42
Trip to the Multi-Manager Hospital: Intensive care Daily
intensive management 8 people 140 years experience 42 All of the
above, carry out diligently
Slide 43
F&C MM Navigator Distribution the income option % Growth
Total Return, Tax Default, in GBP. Source: LIM as at 31.03.2015
*Launch date: 01.10.2007 Lipper 43
Slide 44
*Performance of F&C MM Navigator Distribution Fund from
30.05.2008 up to 31.12.2014. Source: Lipper, % growth TR GBP
rebased. Distribution represents F&C MM Navigator Distribution
A Acc. ** 82 months from 30.05.2008 to 31.03.2015. % Growth Total
Return, Tax Default, in GBP. Source: Lipper as at 31.03.2015. 5
Years of 5%+ Income We have been extremely consistent with our
results Graph = Lipper Rankings/spliced data = Paul Green / Anthony
Willis 44
Slide 45
The Adviser, the Multi-Manager and Income in the new pensions
world agenda Do the Pensions Changes suit the Advisor and
Multi-Manager markets? Does the Adviser as a G.P. model suit this
new world? A trip to the MM Hospital for some Income Replacement
Therapy A few words on markets, themes & trends Conclusion
45
The Adviser, the Multi-Manager and Income in the new pensions
world agenda Do the Pensions Changes suit the Advisor and
Multi-Manager markets? Does the Adviser as a G.P. model suit this
new world? A trip to the MM Hospital for some Income Replacement
Therapy A few words on markets, themes & trends Conclusion
47
Slide 48
The Adviser, the Multi-Manager and Income in the new pensions
world conclusion Do the Pensions Changes suit the Advisor and
Multi-Manager markets? - YES Does the Adviser as a G.P. model suit
this new world? - YES A trip to the MM Hospital for some Income
Replacement Therapy TAKE THE QUARTERLY DISTRIBUTION COURSE A few
words on markets, themes & trends POSITIVE BUT WARY Conclusion
CHECK THAT YOUR CHOSEN CLIENTSS SOLUTIONS ARE AUTHENTIC 48 The
secret of life is honesty and fair dealing. If you can fake that,
youve got it made. - Groucho Marx
Slide 49
Appendix
Slide 50
F&C have tried & tested multi-asset solutions F&C
MM Navigator Distribution: Delivering consistent income, capital
growth & preservation Capital and Income Returns F&C MM
Navigator Distribution Fund A Acc 1 Year3 Years5 Years Capital
Return Only % Growth* -0.19%13.10%6.40% Cumulative Income Only -
Total Received (based on 200,000 invested)
9,493.0833,966.2954,714.49 Total Cumulative Returns Name 1 Year3
Years5 Years Total Return F&C MM Navigator Distribution Fund A
Acc 4.60%31.87%39.29% IMA Mixed Investment 20-60% Shares
4.77%23.45%31.40% Source: Lipper as at 31.12.2014, *F&C MM
Navigator Distribution Fund A Inc 50
Slide 51
Learning outcomes At the end of the F&C session, you will
be able to describe: The important role that diversification plays
in building any long term investment solution and particularly one
focussed on consistent income generation Some of the important
considerations behind asset selection and monitoring as well as
blending different assets together How a natural income investment
approach can help protect against pound cost ravaging during income
drawdown The role that a suite of multi asset investment solutions
can play when outsourcing, and in retirement planning strategy The
importance of a consistent and stable investment team that has a
tried and tested history 51
Slide 52
Past performance should not be seen as an indication of future
performance. The value of investments and income derived from them
can go down as well as up as a result of market or currency
movements and investors may not get back the original amount
invested. The information, opinions estimates or forecasts
contained in this document were obtained from sources reasonably
believed to be reliable and are subject to change at any time.
F&C Group Companies may from time to time deal in investments
mentioned herein on behalf of their clients. The source of
information in all graphs is F&C unless otherwise stated.
F&C Management Limited is a member of the F&C Group. The
F&C Group is wholly owned by BMO Global Asset Management
(Europe) Limited, which is itself a wholly owned subsidiary of the
Bank of Montreal. (1) Authorised and regulated in the UK by the
Financial Conduct Authority. (2) F&C REIT Property Asset
Management Plc is a wholly owned subsidiary of F&C REIT Asset
Management LLP and is Authorised and regulated by the Financial
Conduct Authority. (3) Regulated in the Netherlands by the
Autoriteit-FM. (4) Regulated in Portugal by the CMVM and the Bank
of Portugal. CM: 05257 Global reach. Regional expertise United
Kingdom F&C Management Limited (1) Exchange House, Primrose
Street London EC2A 2NY Tel: +44 (0) 20 7628 8000 F&C Management
Limited (1) 80 George Street Edinburgh EH2 3BU, Scotland Tel: +44
(0) 20 7628 8000 Thames River Capital LLP (1) Exchange House,
Primrose Street London EC2A 2NY Tel: +44 (0) 20 7628 8000 F&C
REIT Property Asset Management Plc (2) 5 Wigmore Street London W1U
1PB Tel: +44 (0) 20 7499 2244 Europe Germany F&C Management
Limited (1) Oeder Weg 113 60318 Frankfurt Germany Tel: +49 (0) 69
597 9908-0 Germany F&C Management Limited (1) Theatinerstrasse
11 80333 Munich Germany Tel: +49 (0) 89 71042 2033 Germany F&C
REIT Property Asset Management GmbH & Co. KG Oberanger 34-36,
80331 Mnchen Germany Tel: +49 (0) 89 61 46 51 0 Ireland F&C
REIT Property Asset Management plc (2) Block 5, Harcourt Centre,
Harcourt Road Dublin 2 Ireland Tel: +353 (0) 1 436 4000 Netherlands
F&C Netherlands B.V. (3) Jachthavenweg 109 e 1081 KM Amsterdam
Netherlands Tel: +31 (0) 20 582 3000 Portugal F&C Portugal,
Gesto de Patrimnios, S.A. (4) Rua de Campolide, 372 1st floor,
1070-040 Lisboa Portugal Tel: +351 (0) 21 003 3200 Switzerland
F&C Management Limited (1) Claridenstrasse 40 8002 Zurich
Switzerland Tel: +41 43 344 51 45 F&C is now part of BMO Global
Asset Management, which has offices in Canada, United States,
Luxembourg, Abu Dhabi, China and Australia. Full details are
available at www.bmo.com/gamwww.bmo.com/gam