Clarus' presentation on "Inside the Strategies" at the PensionSource Fund Man...
Blackrock's presentation on "Outcome Oriented Investing in Multi-Asset" at the PensionSource Fund Manager Conference 2012
1. Source Investment Conference
28 November 2012
Philip Brides, Director and Portfolio Manager
BlackRock Multi-Asset Strategies
For professional clients / qualified investors only
2. The Investment Backdrop is Challenging
Preparing for retirement is more challenging today than 5 years ago
YES
YES
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Have you started to plan and save for retirement?
NO
NO
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source BlackRock Survey 2012 November 2012. [Q31] How much do you agree or disagree with these statements about on retirement? Base: All respondents not currently
retired or semi-retired (n=8,699)
2
3. Rethinking the investment approach
Investors have traditionally looked to benchmark strategies or focused on straight-forward risk profiles
Emerging Equity
Market
Equities
Income
High Debt
Yield
Balanced
Corporate Property
Bonds Portfolio
Absolute Commodities
Government Return
Bonds
Cash Alternatives
3
4. Investors don’t know where to turn
Investors are at an inflection point – many simply don’t know what to do
10
8
Euphoria
What next?
6
4
2
0
?
-2
-4
-6 Panic
-8
1980 1985 1990 1995 2000 2005 2010
Credit
Black ERM Asian Eurozone
9/11 crunch
Monday crisis crisis crisis
begins
Source: Credit Suisse Global Risk Appetite Index, BlackRock. Data as at 30 June 2012
For professional clients / qualified investors only
5. Government bonds: Yields are Low … or Volatile
6%
5.2% 5.1% Average yield over
past 20 years
5% 4.8%
4.5% Yield at 30 Sep 2012
4%
3%
Government Bonds
2% 1.9% 1.7% Yields are too low or volatile
1.6%
for most income investors
1.4%
1% 0.8%
0%
Germany: 10yr Japan: 10yr US: 10yr UK: 10yr Gilts Ireland 10 yr
Bunds JGBs Treasuries
Source: BlackRock, DataStream, Bloomberg. Data as at 30 Sep 2012. All indices represented by 10-year government bonds for each country. Nominal yields.
For professional clients / qualified investors only
6. Equities: too risky for many conservative investors
What if you needed cash from your equity portfolio at the end of 2008?
160 40
28.6
140 25.5 30
20.3
Value of £100 invested in January 2000
19.6
20
120
12.7
6.5 7.5 6.9 10
Annual Return (%)
100
0
80 -1.9
-10
-8.8
60
-16.1 -20
40
-30
-29.1
20 -40
-38.5
0 -50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
European Equities: Annual Return European Equities
Source: BlackRock/Datastream. MSCI Europe Total Return Index, local currency. 1 January 2000 to 31 July 2012
For professional clients / qualified investors only
7. Correlations have increased, and spiked during crisis
Correlation of European and International Stocks
Correlation
0.99 Markets are
moving virtually
0.93 in tandem
0.89
0.81
0.73
1972-1981 1982-1991 1992-2001 2002-2011 Financial Crisis
(Sep '08-May
'09)
Source: BlackRock, DataStream, Bloomberg. Data as at 31 December 2011. European stocks represented by the MSCI Europe Index (total return),
International Stocks represented by the MSCI World Index (total return).
For professional clients / qualified investors only
8. Investors are turning to outcome oriented strategies
Diversified
Growth
Risk
Factor
Total
Solution Return
Volatility
Targeting
Income
Targeting
Tail Risk
Hedging
Multi
Strategy
Strategies are becoming more outcome oriented – clients are looking for solutions
9. What are the key building blocks of our investment philosophy?
Our Beliefs Our Approach
Asset allocation is the key driver of risk and return Dynamic asset allocation
• Asset class
Portfolios must be well diversified Diversify through: • Time horizon
• Investment vehicle
Outcome oriented • Downside management
Products must be aligned with client objectives
solutions: • Income targeting
9
10. Using Investment Opportunities to Achieve Product Solutions
BSF Euro Dynamic Diversified Growth Fund
Genuine multi-asset strategy 1 Diversification
Designed and implemented to be very market responsive 2 Flexibility
Targeting consistent real returns for euro-based investors 3 Growth
Accessing higher growth opportunities outside European markets 4 Global
For professional clients / qualified investors only 10
11. Delivering More Consistent Performance Through Dynamic
Asset Allocation
40
Credit Crunch Liquidity fuelled rally Risk on/ Risk off
September 2007 – March 2009 March 2009 – April 2010 April 2010 – Present Dynamic Diversified
30
Growth Strategy
20 Cash
10 Equities
Sep 2007 = 100
0
-10
-20
-30
-40
Sep 07 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12
Cash
100
Private Equity
Volatility Strategies
Property
Hedge Funds
50 Infrastructure
Commodities
Non-Government Bonds
Government Bonds
Emerging Market Equities
0
Developed Market
Equities
Source: BlackRock / Datastream. BIJF I share Class, weekly returns. Cash: UK Interbank 3 Month LIBID Total Return Index. Equities: FTSE All Share Total Return Index. From 1
September 2007 to 28 Sep 2012. Phase 1: 1 Sep 2007 – 27 February 2009. Phase 2: 27 February 2009 to 31 March 2010. Phase 3: 31 March 2010 – 28 Sep 2012. Performance is
cumulative. The Dynamic Diversified Growth Fund moved from weekly to daily pricing on 11 July 2012. Portfolio Positioning shown at September 2007, 2008, 2009, 2010, 2011 and
2012.
For professional clients / qualified investors only 11
12. Using Investment Opportunities to Achieve Product Solutions
BGF Global Multi-Asset Income Fund
Solution Focus 1 Address life-cycle needs for income and capital appreciation
Targeted annual gross income of 4-6% with smooth pay-out
A Clear Outcome 2 available*
Breadth of Universe 3 Diversification by geography, asset class, traditional, alternative
Active Approach 4 Achieve tactical asset allocation and balance of risks
Specialist Skill 5 Access breadth of BlackRock’s income capabilities in one fund
*Targeted percentage and is not guaranteed
For professional clients / qualified investors only 12
13. Income Solution: BGF Global Multi Asset Income Fund
Fund Income Comparison (% current yield*) Underlying Yield Levels (%)
5.79 5.79 0 2 4 6 8 10
6
5.50 High Yield Debt 7.1
Investment Grade Bonds 5.1
5
Emerging Market Debt 7
Global Dividend Income Equities 3.8
4
Emerging Market Equities 3.7
% Yield
Preferred Stock 6.28
2.92 2.83 2.85
3
Loans 9.5
Italian Government Bonds 5.3
2.04
2 1.71 1.73 Equity Index Options Strategies 0.15
MLP 6.07
1 UK Commercial Property 8
Private Equity 7.06
0 Commodities 5.4
Q2 2012 Q3 2012 Oct 2012
Cash 0
BGF Global Multi Asset Income Fund Global Equities Global Bonds
Asset Allocation Equity Sleeves Bond Sleeves
Current Fund yield in excess of 5 percent. 26 percent of this comes from asset allocation
Source: BlackRock estimated. Global Equity market income: current dividend yield. Global equities: MSCI World AC Index USD.
Data as at 28 Sep 2012 Global Bonds: Barclays Capital Global Aggregate Bond Index USD Hedged Bond Income: Yield to
Inception: 28 June 2012 redemption. *Fund Yield level: BlackRock estimate. Annualised. Fund Inception: 28 June 2012.
For professional clients / qualified investors only 13
14. Partnering With Our Clients to Reach Investment Solutions
Have you started to plan and save for retirement?
NO
YES
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source BlackRock Survey 2012 November 2012. [Q31] How much do you agree or disagree with these statements about on retirement? Base: All respondents not currently
retired or semi-retired (n=8,699)
14
15. Disclaimer – BGF Global Multi-Asset Income Fund
BlackRock Global Funds (BGF) is an open-ended investment company established in Luxembourg which is available for sale in certain
jurisdictions only. BGF is not available for sale in the U.S. or to U.S. persons. Product information concerning BGF should not be published
in the U.S. It is recognised under Section 264 of the Financial Services and Markets Act 2000. BlackRock Investment Management (UK)
Limited is the UK distributor of BGF. Most of the protections provided by the UK regulatory system, and the compensation under the
Financial Services Compensation Scheme, will not be available. A limited range of BGF sub-funds have a reporting fund status A sterling
share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BGF are valid only if made on the basis of
the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our
website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain jurisdictions
where the Fund in question has not been authorised.
Charges from capital: Some or all of the Manager’s annual charge for the Fund is taken from capital rather than from income. Whilst this
increases the yield, it reduces the potential for capital growth.
Risk to Capital Growth through Distributions: The fund may make distributions from capital as well as income or pursue certain investment
strategies in order to generate income. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital
and the potential for long-term capital growth.
Credit Risk: The fund invests in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by
governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to the
fund.
Emerging market risk / Emerging European market risk: Compared to more established economies, the value of investments in developing
Emerging Markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic or
political instability.
Interest Rate Risk: The fund invests in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of
interest (also known as the ‘coupon’) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates
which will affect the value of any securities held.
High Yield Bond: The fund invests in high yielding bonds. Companies who issue higher yield bonds typically have an increased risk of
defaulting on repayments. In the event of default, the value of your investment may reduce. Economic conditions and interest rate levels
may also impact significantly the values of high yield bonds.
For professional clients / qualified investors only
16. Disclaimer – BSF Euro Dynamic Diversified Growth Fund
BlackRock Strategic Funds (BSF) is an open-ended investment company established in Luxembourg which is available for sale in certain
jurisdictions only. BSF is not available for sale in the U.S. or to U.S. persons. Product information concerning BSF should not be published
in the U.S. It is recognised under Section 264 of the Financial Services and Markets Act 2000. BlackRock Investment Management (UK)
Limited is the UK distributor of BSF. Most of the protections provided by the UK regulatory system, and the compensation under the
Financial Services Compensation Scheme, will not be available. A limited range of BSF sub-funds have a reporting fund status A sterling
share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BSF are valid only if made on the basis of
the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our
website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain
jurisdictions where the Fund in question has not been authorised.
Credit risk: The fund invests in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by
governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to
the fund.
Interest rate risk: The fund invests in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of
interest (also known as the ‘coupon’) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates
which will affect the value of any securities held.
Property/Commodity ETFs: The fund may invest in exchange traded funds which have exposure to property securities and commodities
(through an index). Property investments are subject to adverse changes in economic conditions, adverse local market conditions and
risks associated with the acquisition, financing and ownership and operation and disposal of real property. The underlying commodities
index may concentrate investment on selected commodity futures of multinational markets. This makes the exchange traded fund
extremely dependent on the performance of the commodity markets concerned. The Fund may invest more than 10% of its Net Asset
Value in the units of UCITS and/or other UCIs.
For professional clients / qualified investors only