Irish Life Investment Managers presentation on "Approaching Absolute Return Investing" at the PensionSource Fund Manager Conference 2012

1. Irish Life Investment Managers
Approaching Absolute Return Investing
Eunice Dreelan – Irish Life Investment Managers
Irish Life Investment Managers is regulated by the Central Bank of Ireland
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2. Agenda
• Why Invest in Absolute Return Strategies?
• Key Considerations for Absolute Return Investing
• Identifying Appropriate Absolute Return Strategies
• ILIM – Research Project
• Absolute Return Risk/Return Characteristics
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3. Why Invest in Absolute Return Funds
1. Reduced drawdown experience
2. Deliver positive return through any economic cycle
3. Deliver a lower correlated return experience
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4. Key Considerations for Absolute Return Investing
• Invest with Proven Skilled Managers
o Manager skill is a greater determinant of return compared with traditional equity fund returns
• Invest across a number of complementary Absolute Return Strategies
o Diversification & Lower Correlation to Traditional Assets
• Invest with fund managers with robust operational foundations
• Cost efficiency and fund liquidity should be a key criteria
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5. Absolute Return Providing Better Risk / Return Characteristics
Hedge Fund of Funds Global Equities
(HFRI) (FTSE World Index)
Return (p.a.) -2.3% 0.2%
Volatility (p.a.) 6.4% 16.3%
Maximum Drawdown -22.2% -47.6%
Average Positive Month 1.1% 3.5%
Average Negative Month -1.7% -3.9%
Correlation Level 0.47 0.08
Pro Forma Returns from November 2007 – September 2011, Actual returns from October 2011 onwards
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6. ILIM – Researching Our Absolute Return Direction
• Irish Life Investment Managers commenced a project in 2010 researching absolute return options
Options Considered
1. Build an in-house solution
2. Buy into an existing absolute return fund
3. Appoint and work with an independent expert to ensure robust manager, strategy and
operational research and due diligence
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7. Leveraging from Absolute Return Specialists
ILIM work in conjunction with Aksia Advisory Services to ensure
• Manager Operational Due Diligence
o Managers are rated based on the quality and strength of their investment and operational processes
• Manager Investment Strategy Ratings
o Investment strategy, Risk Management and investment team reviews
• Strategy Allocations and Rotation
o Select strategies cognisant of our clients other assets
o Forward looking views across strategies
• Risk Analysis
o Quantitative Analysis of returns
o Look through to managers positions
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8. Enhancing Absolute Return Risk / Return Characteristics
ILIM Absolute Absolute Return Index Global Equities
Return Project (HFRI) (FTSE World Index)
Return (p.a.) 7.0% -2.3% 0.2%
Volatility (p.a.) 4.4% 6.4% 16.3%
Maximum Drawdown -8.0% -22.2% -47.6%
Average Positive Month 1.2% 1.1% 3.5%
Average Negative Month -0.8% -1.7% -3.9%
Pro Forma Returns from November 2007 – September 2011, Actual returns from October 2011 onwards
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9. ILIM– Absolute Alpha Fund
• Expert and independent manager and strategy research
• Expert and independent operational due diligence
• Clear return and volatility targets
o Return objective of Cash + 4%
o Volatility target of 4%-8%
• Manager diversification - currently 20
• Significant strategy and sub-strategy diversification
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10. Absolute Alpha Fund: Fund Structure
Absolute One
Davidson
Alpha Pyramis Blackrock York GMO Canyon Pensato Brigade Allen Renaissance William AQR Obsidian Bramshott PIMCO MKP
Kempner
Two Sigma Winton Lynx Meru
Fund Street
FI Arbitrage - Rates     
FI Arbitrage - IG Credit    
FI Arbitrage - High Yield   
FI Arbitrage - Structured    
Equity Market Neutral  
Credit Market Neutral    
Capital Structure Arbitrage  
Convertible Arbitrage  
Volatility Arbitrage  
Discretionary Global Macro   
Systematic Global Macro   
CTA - Trend     
CTA - Contrarian  
Commodity      
Merger Arbitrage     
Credit Long/Short  
Distressed Credit     
Special Situations    
Self Originated Lending   
European Equity L/S   
US Equity L/S  
Global Equity L/S  
EM Equity L/S  
Equity Sector Focus  
Equity Style Focus  
Short Bias  
Broad Market    
Diversification across 27 Strategies and 20 Managers
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11. Irish Life Investment Managers Limited is regulated by the Central Bank of Ireland
Past performance, forecasts and simulated performance may not be a reliable guide to future performance
Investments may fall as well as rise
Changes in currency exchange rates may have an adverse effect on the value, price or income of the
product
Irish Life Investment Managers
Beresford Court
Beresford Place
Dublin 1
Tel (01) 704 1200
Fax (01) 704 1918
Web: www.ilim.com
Email: info@ilim.com
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