David Millen, Director, Investment Communications, EMEA Investment Division, Russell Investments

Transcription

1 Multi-Asset Creating more efficient portfolios for multi-asset investors David Millen, Director, Investment Communications, EMEA Investment Division, Russell Investments EXECUTIVE SUMMARY: Multi-asset investing is the process of gaining exposure to a globally diverse mix of asset classes and styles in a single investment portfolio. As part of this process, allocating to multi-asset credit can offer valuable advantages. We believe that, by investing in a combination of credit strategies, investors can: 1. access a range of opportunities in the space between developed market government bonds and equities, featuring a variety of risk/return profiles and extensive potential to add value from specialist active management 2. generate long-term returns superior to government bonds and somewhat below equities, but with less volatility and downside risk than from equities 3. limit the risks from individual credit strategies and approaches, by diversification across a wide range of strategies and across multiple managers 4. add value through tactical allocations across credit strategies and managers, and 5. create more efficient multi-asset portfolios by including a customised allocation to multi-asset credit based on specific risk tolerances and return targets. This paper discusses the main features of Russell s multi-asset credit approach, and illustrates how this could help clients achieve their particular objectives. Specifically, it shows how this could achieve superior riskadjusted returns and create more efficient multi-asset portfolios through a complete outsourced solution for which Russell is accountable. Allocating to multiasset credit can offer valuable advantages. This paper discusses the main features of Russell s multi-asset credit approach, and illustrates how this could help clients achieve their particular objectives. Russell Investments // Multi-Asset APRIL 2015

2 1. Characteristics of a multi-asset credit portfolio 1.1 Dynamics of credit investing markets are huge and complex. With over $11 trillion of assets outstanding in the US alone*, credit markets now constitute a significant asset class alongside public equity and government bond markets, and offer a very wide spectrum of investment opportunity. At one end of the spectrum, agency credit (issued by organisations affiliated to or sponsored by governments) has very similar characteristics to government bonds. At the other end, higher risk corporate credits have high return potential and can be more volatile than equities. The valuation of credit securities ultimately rests on the issuers capacity to repay debt over time. Consequently, corporate debt and equity returns share some of the same performance drivers and exhibit related performance patterns. Typically equity holders can expect higher returns over time, but with higher risk. holders can mostly expect less downside risk and a more even return pattern, both because of the higher level of security provided by the underlying borrowers assets, and because of the relatively high proportion of returns derived from regular interest payments. Higher risk credits however can perform more like an equity proxy, but with lower equity beta. For multi-asset investors, the diversity of credit markets makes this a hybrid asset class offering valuable opportunity. This multi-asset credit class has exposure to the risk drivers of both interest rates and equities. Its component parts have very different performance characteristics, geared to different factors across business and consumer cycles. Also, some credit issues are specifically structured in different ways to appeal to different categories of investor. Hence an allocation to multi-asset credit provides an additional tool-kit to manage risk and reward in a multi-asset portfolio. Specifically, it can create exposure to a wide range of potentially attractive and differentiated return streams and more efficient multi-asset portfolios with lower volatility and higher Sharpe ratios. For multi-asset investors, the diversity of credit markets makes this a hybrid asset class that can help enhance returns and diversify risk. 1.2 Components of credit return The return on a portfolio of credit securities can be broken down into two components: the return on a portfolio of government bonds that has an equivalent duration, plus a spread to compensate for additional risks. Compared to safe haven government bonds, credit features two notable risks: credit risk - risk from default by the issuer. illiquidity risk - risk that the investor may not be able to trade credits readily, and/or may have to accept wider dealing spreads. Both government bonds and credits are also subject to term risk i.e. bonds with longer maturities have cash-flows extending further into the future. Investors face the risk of greater uncertainty of outcomes over this longer horizon. Understanding the drivers of added value is key to multi-asset credit investing. We construct multi-asset credit portfolios based on our strategic beliefs, which are derived from extensive research and practical experience of trading in markets. These strategic beliefs state that, as regards fixed income markets, investors will be rewarded over time for the additional risks embedded in credit spreads. Notably: Risk Premium - Russell believes that bonds with credit risk will generate higher returns than those of comparable high-quality government securities over a market cycle. Hence diversified portfolios of credit securities will over time generate superior returns to government bonds. Bond Illiquidity Premium - Russell believes that there is an illiquidity premium for bond securities via a price discount or excess return/yield offered by the security relative to a liquid security with otherwise equivalent characteristics. This can readily be seen in public bond markets, where a bond with $200m issued will have much lower liquidity than an equivalent bond with $1bn issued and so will normally offer a yield premium. *Source: Barclays Multiverse Index as at 31 March Barclays Multiverse for US including Treasuries was $17.6 trillion. Barclays Global Multiverse ex Treasuries was $22.0 trillion, and including Treasuries was $45.9 trillion. Equity comparison: MSCI All Countries World Index was $37.5 trillion as at 31 March 2015 and $19.3 trillion for US equities. The return on a portfolio of credit securities can be broken down into two components: the return on a portfolio of government bonds that has an equivalent duration, plus a spread to compensate for additional risks. We believe investors will be rewarded over time for the additional risks embedded in credit spreads, in longerterm and higher real yield credits, and in active manager skill. Russell Investments // Multi-Asset APRIL

3 We also believe that investors in credit will over time be rewarded for the additional risks inherent in a number of other factors, notably: Term Risk Premium - Russell believes longer-term bonds will generate higher returns than comparable shorter-term bonds or cash. We believe that the term premium exists to compensate investors for the risk that inflation is higher than expectations over a given term. High Real Yield - Russell believes that bonds issued by sovereign countries with higher real (i.e. inflation adjusted) yields have a greater likelihood of outperforming those with low real yields. These higher returns result from real rate convergence and an inflation volatility premium. Countries with more volatile inflation rates will need to compensate investors with a steeper term premium due to the possibility that the nominal value of these bonds suffers higher inflation than is anticipated. Active Manager Skill - We believe that skilfully selected active managers can add value over passive investments. We believe that, in order to leverage these sources of added value and so make best use of credit strategies in a multi-asset portfolio, investors should seek to combine the widest possible range of credit opportunities. For investors with sufficiently long time-horizons, a multi-asset credit portfolio should also include illiquid investments such as private debt. Hence, an optimally-constructed multi-asset credit portfolio should aim to achieve attractive risk-adjusted returns through diversification at multiple levels: the widest possible range of strategies with different risk and return characteristics and liquidity profiles implementation via a diversified range of skilled specialist managers, consequently an extremely wide range of individual underlying credit securities. In this way investors have the opportunity to: capture the premium returns from credit whilst mitigating the risks add value from specialist managers skills, and create a more efficient multi-asset portfolio by incorporating a comprehensively diversified exposure to credit securities. We believe that investors should combine the widest possible range of credit opportunities. 2. What types of strategies comprise multi-asset credit? For maximum diversification, we target all aspects of the credit risk premium across the full spectrum of credit opportunities. These can be categorised across: personal balance sheets e.g. residential mortgage backed securities (RMBS), which can be structured in different ways, and may target differing qualities of residential borrower. Different tranches may have different seniority in the event of default, and so provide differing risk, liquidity and yield profiles corporate balance sheets including Loans / Collateralised Loan Obligations (CLOs), High Yield sovereign balance sheets - credit can include debt issued by governments with a relatively high default risk, such as Emerging Market Debt (EMD). EMD can be denominated in a hard currency, typically US dollars, or in the local currency of the issuing government. Local currency debt carries less credit risk, as the issuer can print their own currency and inflate away the real value of their debt, but correspondingly carries higher potential risk from adverse exchange rate movements. The following table shows the range of opportunity in multi-asset credit, and illustrates the very different characteristics, risk premia and geographies. These opportunities are best captured by specialist managers. We target all aspects of the credit risk premium across the full spectrum of credit opportunities: personal, corporate and sovereign balance sheets. Russell Investments // Multi-Asset APRIL

4 Exhibit 1: Diversified opportunity requires specialist skills SECTOR RISK PREMIA CHARACTERISTICS REGION High yield Corporate credit Some term premium Leveraged corporate issuers Fixed rate No special security US/Euro Loans Corporate credit Some illiquidity premium Leveraged corporate issuers Floating rate Secured better covenants US/Euro CLO Corporate credit Illiquidity and complexity premia Structured packages of loans Focus on subordinated tranches Floating Rate US/Euro Structured Personal credit Illiquidity and complexity premia Residential mortgage pools Structured Leveraged to house prices ABS/RMBS/CMBS Fixed and Floating US/Euro Hard EMD Sovereign credit Some term premium Fixed Rate sovereign credit. Issued in $ (mostly) and Euro (less so) Issued by sovereign countries classified as Emerging by the IMF Trades off of UST yield curve Emerging Local EMD Sovereign credit (manifests in term and FX) Issued in domestic currencies Issued by sovereign countries classified as Emerging by the IMF Trades off of local yield curve Emerging 3. strategies a source of potentially attractive risk-adjusted returns 3.1 Risk and return The chart below compares the risk and return characteristics of global equity (represented by the MSCI World Index) with credit strategies commonly used in multi-asset credit portfolios (US $ and High Yield and Loans, plus Local and Hard Currency EMD) from 2003 through During this particular twelve year period credit strategies have produced broadly comparable returns to global equities, but with less volatility. Over the last twelve years credit strategies have produced broadly comparable returns to global equity, but with less volatility. Exhibit 2: Return: Potentially attractive alternative to equities US HY US MSCI EMD EMD EURO EURO ($) LOANS WORLD $ LCCY HARD HY ( ) LOAN ($) HEDGED ($) ($) ( ) Return/Risk Annualised Return 9.4% 5.3% 8.8% 8.7% 9.2% 10.0% 4.5% Annualised Volatility 10.0% 7.5% 13.6% 11.9% 8.8% 11.7% 7.4% Source: Bloomberg 01/01/2003 to 31/12/2014 Russell Investments // Multi-Asset APRIL

5 3.2 Extra return from private debt Investors with a sufficiently long time horizon can incorporate private debt opportunities in their multi-asset credit portfolio. Typically a diversified programme of private debt investments requires an eight to ten-year horizon, and offers a potentially substantial excess return over public market investments. For pension funds in particular, there is often a strong case for an allocation to private debt as part of a multi-asset credit portfolio. Most of their cash needs are still a long way in the future for example, 70% of the value of a typical UK pension fund s liabilities fall due in over ten years time. Private debt markets enable longer-term investors to benefit both from the illiquidity premium and from enhanced returns from specialist managers skills. Private debt markets enable longer-term investors to benefit both from the illiquidity premium and from enhanced returns from specialist managers skills. 4. Multi-asset credit versus individual credit strategies 4.1 strategies - performance dispersion securities typically have a relatively high correlation to equity markets during periods of market turbulence, and exhibit a cyclical return pattern. Consequently investors need to accept that credit will exhibit higher levels of volatility than developed market government bonds, and that credit returns will vary over the course of a business cycle. In addition, the actual range of returns from different credit strategies differs widely over time. The chart below shows the returns from individual strategies over the calendar years The range from best to worst returning strategy in any individual year was only once less than 10% and at its widest was almost 70%. Exhibit 3: Percentage annual total returns by asset class top returning class, bottom returning class, and range of returns Total Return Top EMD Global Euro EMD Subprime Subprime Subprime EM Local EM Local Global HY Hard ABS Hard MBS MBS MBS Bottom Euro Global Euro Euro Subprime Global Subprime US EM Local EM Local ABS ABS ABS MBS MBS Loans Range The range of returns from different credit strategies differs widely over time. The chart at Exhibit 3 shows the returns from individual strategies over the calendar years Notes: Range contains: BofAML HY 2% Constrained (HW0C), USDH; CS Leveraged Loans; JPM EMBIG USD UH; JPM GBI-EM Global Diversified USD UH; Barclays Pan-European ABS ex AAA EURH; Barclays Global USDH; CS W. Europe Lev Loans EURH; Subprime MBS based on ABX indices since 2008; Russell 1000 USD UH; all TR. Source: Bloomberg, BofAML, Suisse, Russell calculations, as of 31-Dec Blending credit strategies A well-constructed multi-asset portfolio creates an efficient blend of the underlying credit strategies. The chart below shows the yield and duration of the principal strategies, together with an example range for an actual client multi-asset credit portfolio mix. As we discuss further in section 5 below, Russell designs, constructs and manages portfolios in line with both the specific needs of individual clients, and our forward-looking views on market conditions. The precise position of the example range in the graphic will therefore vary, depending on each client s preferred risk and return parameters, and on the relative attractiveness of current market opportunities. Russell Investments // Multi-Asset APRIL

6 Exhibit 4: Yield versus Duration March 2015 A well-constructed multi-asset portfolio creates an efficient blend of the underlying credit strategies. The chart in Exhibit 4 shows the yield and duration of the principal strategies, together with an example range for an actual client multi-asset credit portfolio mix. Notes: BofAML Global HY 2% Constrained (HW0C); CS Leveraged Loans; JPM EMBI Global; JPM GBI- EM Global Diversified; Barclays Global Agg ; Barclays Global Agg Treasuries; Barclays Pan- European ABS ex AAA; Non-Agency MBS based on ABX indices; Cash based on 3M LIBOR Source: Bloomberg, BofAML, Suisse, Barclays, Russell calculations, as of end-march Multi-asset credit portfolio design, construction and management 5.1 Design, Construct, Manage our process In Russell s portfolio management process, we design a strategic asset allocation targeting specific portfolio objectives, construct a real-world portfolio of strategies and exposures to execute that objective and manage the portfolio dynamically to seek to achieve targeted portfolio outcomes. For multi-asset investors, we believe we can create more efficient outcomes at every stage by an allocation to a multi-asset credit portfolio. By combining credit strategies with very different characteristics, we can create the potential for both effective diversification and customisation to different investors objectives. The following table lists a variety of credit strategies and the risk premia that they access, and compares their properties as components of a multi-asset portfolio. For example, it shows that loans are attractive diversifiers in terms of low correlation to interest rates but have less attractive liquidity. By combining credit strategies with very different characteristics, we can create the potential for both effective diversification and customisation to different investors objectives. Russell Investments // Multi-Asset APRIL

7 Exhibit 5: Risk Premia Long run portfolio construction properties ASSET CLASS High Yield Loans CLO Structured Hard EMD Local EMD RISK PREMIA Term + Currency VOLATILITY RETURN CORRELATION TO RISK SOURCE: RUSSELL INVESTMENTS. FOR ILLUSTRATIVE PURPOSE ONLY CORRELATION TO RATES LIQUIDITY More Attractive We have worked with clients and prospects to design multi-asset credit portfolios with very different risk and return parameters that reflect their desired outcomes and that are welladapted to their total portfolio mix. Average Less Attractive 5.2 Designing multi-asset credit portfolios for different objectives When we design a multi-asset credit portfolio, it is important to be clear about the characteristics that we need to achieve, as it is the combination of asset classes within the portfolio that dictates the potential-long term outcomes. We have worked with clients and prospects to design multi-asset credit portfolios with very different risk and return parameters, defined in different ways. For example, we can target a range of return outcomes from LIBOR or Government Bonds +1% through to +6%, with a corresponding range of expected volatilities. For investors seeking more conservative outcomes, bank loans are an excellent asset class with attractive Sharpe ratios and good diversification properties, and would normally feature in our portfolio mix. However, they are not expected to outperform high yield over the long run. Any strategy with a substantial allocation to bank loans is likely to underperform high yield on a long-term basis. So if a client is looking to maximise returns it may be more appropriate to make a larger allocation to higher-returning asset classes such as EMD. For longer-term investors we have the opportunity to add private debt strategies into the portfolio mix both to enhance returns and diversify risk. The very wide range of credit strategies available to us means we can create customised multi-asset credit portfolios that reflect our clients desired outcomes and that are well-adapted to their total portfolio mix. The chart below compares the return and volatility of a range of individual strategies over the most recent eight-year period and, based on this specific data, incorporates an example efficient frontier. This illustrates what the shape of the optimal portfolio mix would have been for a given range of desired returns and acceptable volatility. In our actual portfolio design process we incorporate our forward-looking views of each strategy s likely characteristics, based on the current yield environment, economic conditions and market outlook. In our portfolio design process we incorporate our forward-looking views of each strategy s likely characteristics, based on the current yield environment, economic conditions and market outlook. Russell Investments // Multi-Asset APRIL

8 Exhibit 6: Return vs Volatility Aug-07 to Mar-15 Notes: BofAML HY 2% Constrained (HW0C); CS Leveraged Loans; JPM EMBIG JPM GBI-EM Global Diversified; CS W. Europe Lev Loans Source: Bloomberg, BofAML, Suisse, Russell calculations, for time period from Aug-07 to Mar-15. For investors focused on diversification, different credit asset classes can produce compounded returns that accumulate to different levels. Thus a multi-asset credit strategy could diversify an investor s exposure to the credit risk premium and minimise the risk of allocating to the wrong component. However, it is important to note that the strategy s shorter-term correlations will be more linked to equities than traditional fixed income. In times of market stress, investors may find credit returns are only moderately less volatile than equities, and do not provide the same diversification benefits as developed market government bonds. 5.3 Russell s portfolio construction approach We construct multi-asset credit portfolios by blending the asset classes together, with a view to capturing a balance between their characteristics in line with the individual client s desired outcomes. We approach this process from first principles, using sophisticated capital markets forecasting models to make explicit forecasts for the credit risk premium and credit spread volatilities. We implement our views using an open-architecture approach, incorporating specialist managers and strategies across all parts of the portfolio. In addition to our strategic beliefs, we employ a variety of further market insights to create fully-diversified multi-asset credit portfolios. For instance: Over a full cycle, the higher volatility sectors in this asset class offer the highest levels of return These assets are sensitive to market appetite for risk and so dynamic management through the cycle is important These sectors are best accessed via specialists, who often face capacity constraints (as we discuss further in section 7 below). Thus, a multiple manager approach makes sense. We approach the portfolio construction process from first principles, using sophisticated capital markets forecasting models to make explicit forecasts for the credit risk premium and credit spread volatilities. 5.4 Managing the multi-asset credit mix A well-constructed multi-asset credit portfolio diversifies across multiple approaches, and so reduces the volatility of individual strategies. It also provides the opportunity to manage the underlying mix of strategies on a tactical basis, tilting towards those offering the most attractive opportunities, and so enhancing returns. In particular, by altering the balance between fixed and floating rate strategies, we can modify the interest rate risk exposure of client portfolios. Russell Investments // Multi-Asset APRIL

9 We believe that the best opportunities to capture the credit premium generally come during the expansion and recovery phases of the business cycle. Hence a key objective is to increase risk as economies move from recessionary conditions into recovery. The chart below shows an example scenario of the evolution of a multi-asset credit mix. This illustrates a progressive shift from relatively less risky strategies towards a higher risk mix. Exhibit 7: Example scenario: progressive increase to higher-risk portfolio mix SOURCE: RUSSELL INVESTMENTS. FOR ILLUSTRATIVE PURPOSE ONLY Managing a multi-asset credit portfolio in this way requires resources and expertise beyond the capabilities of most investors. Russell brings to this task a truly global skill-set that integrates asset class and manager research, tactical insights from our strategists team, advanced risk monitoring tools, and expert in-house execution capabilities. Our portfolio management team bring all these skills to bear on managing the full range of credit exposures in real time. 5.5 Design, Construct, Manage an integrated capability Our portfolio design, construction and management processes therefore draw on the full range of Russell s skill-sets to provide a fully integrated capability. In particular, for our multi-asset credit portfolios, we combine: our understanding of risk premia in the markets our ability to model different strategic mixes and our tactical market insights, based on our return forecasts and on our assessment of relative attractiveness and opportunities across asset classes. This combination of skill-sets, insights and breadth across specialist areas is what distinguishes our approach to multi-asset credit investing. The combination of skill-sets, insights and breadth across specialist areas is what distinguishes our approach to multi-asset credit investing. 6. What characteristics should we look for in credit management? 6.1 Importance of specialist management To add value through skilful credit management, in all of the credit sectors we need to identify professionals with unique and not readily portable skill-sets. As a result, when researching credit strategies and selecting managers, it is important to find teams with real pedigree in the underlying building blocks and geographies. We focus on identifying actively managed sector specialists, with a high level of skill and expertise in security selection, clearly-defined and repeatable processes, and strong motivation. Finally, we want managers to be able to demonstrate strong relative value skills across asset classes with very different return shapes. Because of the lack of homogeneity in product structure in the market, benchmarking performance is not straightforward. We tend to look for managers who can deliver performance better than the sum of their underlying exposures. One way to do this is to look for enhanced Sharpe ratios relative to a naive blend of assets. In all of the credit sectors we need to identify professionals with unique and not readily portable skillset. It is important to find teams with real pedigree in the underlying building blocks and geographies. Russell Investments // Multi-Asset APRIL

10 6.2 Importance of global manager research In order to find the most compelling strategies and managers, and to create truly global multi-asset credit portfolios, it is also crucial to have a global research capability with a consistent methodology and deep insights built up over time. This is the essential component that Russell can bring to multi-asset credit selection and monitoring, as we show in the graphic below. Exhibit 8: Integrated manager research 7. Why employ multiple managers? It is rare to find that an asset management firm has all the various credit capabilities in one space. For example, there are few truly global high-yield specialists, with most firms having a regional bias either to the US or Europe. High yield and loan skills are frequently found at the same firm, but not alongside structured mortgages skills, which represent a completely different specialism. Consequently, managers tend to set up multi-asset credit strategies based on the resources they already have, rather than on clients specific objectives. This approach is logical from the managers point of view, because building additional capabilities in these highly specialised areas is extremely expensive. However it limits the amount of effective diversification single managers can accomplish, and it means that their product may not be well-aligned with your specific objectives. Capacity is important. Many credit sectors are capacity-constrained; it is hard to find compelling specialists with available capacity, and that capacity fills up quickly. Our multistrategy, multi-manager approach enables us to employ specialists across all of our chosen credit segments, and to replace capacity as it is needed, sourcing new managers continuously over time. Finding the right manager or combination of managers in these highly specialised areas is challenging, and being sure that a good performance record results from skill can be especially hard. It is preferable to find managers with a balance between sufficient assets to support expertise, but low enough to allow flexibility to move to less liquid parts of the market or change positioning efficiently. Clients that have limited resources and with less familiarity with credit sectors may find outsourcing manager selection and monitoring to experts the most logical conclusion. It is rare to find that an asset management firm has all the various credit capabilities in one space. Russell Investments // Multi-Asset APRIL

11 8. Why Russell? Russell provides a total outsourced capability in designing, constructing and managing bespoke multi-asset credit portfolios. Our key differentiators include: First principles approach Using an open architecture approach helps to develop a thought process around why one invests in multi-asset credit and how the various building blocks interact. We utilise the building blocks to harvest the credit risk premium in its different forms, but recognise that this premium is cyclical in nature and thus allocate accordingly when we see value. Specialisation We believe that there are few asset managers who have best-inclass capabilities through all the credit sectors available within multi-asset credit. The diversity between High Yield, Loans, Structured, Mortgages and Emerging Market Debt is significant, and is compounded by regional differences. specialists are generally fragmented to cover some of the sectors and geographies, but rarely all of them. This fragmentation means that multi-asset credit lends itself to an open architecture approach, where we can assemble a matrix of regional and specialist managers. Longevity of strategy Extended credit sectors are generally labour intensive and contain some level of illiquidity. This means that single manager strategies operating in this market are very capacity constrained and so their performance can deteriorate when they absorb too much cash-flow, as many successful managers do. An open architecture approach is well positioned to adapt to this challenge, constantly looking for new skilled strategies with capacity. Governance Russell is responsible not just for researching and selecting good specialist investment managers. We are responsible for the initial strategic allocation across strategies and managers, and for ongoing dynamic and tactical management on a daily basis to reflect our preferred positioning, which is informed by our capital markets and manager research groups. Most importantly, we are accountable for delivering the overall portfolio s target return. Our portfolio managers are compensated based on investment results, and so their incentives are aligned with those of our clients. Investment experience Managing money using this process requires a specific skill-set, experience and implementation capability. Russell has built these capabilities whilst managing money on behalf of pension schemes in a delegated capacity for over 30 years. We have integrated our portfolio management process with our research process, thus having thoughtful manager selection combined with an assessment of alpha potential, portfolio return properties and market timing. As such, we are unique in being able to provide this type of portfolio management service, which has been tried and tested over many market cycles. Russell provides a total outsourced capability in designing, constructing and managing bespoke multi-asset credit portfolios. Central to our outsourced solution, Russell is accountable for the total portfolio outcome, and provides real-time management of both risk and reward through diversification across a custom-designed mix of credit strategies. 9. SUMMARY KEY POINTS An allocation to multi-asset credit offers multi-asset investors the opportunity to achieve superior riskadjusted returns and to create more efficient portfolios. Russell can provide a complete governance solution at every stage of our portfolio design, construction and management process. Central to our outsourced solution, Russell is accountable for the total portfolio outcome, and provides real-time management of both risk and reward through diversification across a custom-designed mix of credit strategies. Russell Investments // Multi-Asset APRIL

12 ABOUT RUSSELL INVESTMENTS Russell Investments provides strategic advice, world-class implementation, state-of-theart performance benchmarks and a range of institutional-quality investment products, serving clients in more than 35 countries. Russell provides access to some of the world s best money managers. It helps investors put this access to work in defined benefit, defined contribution, public retirement plans, endowments and foundations and in the life savings of individual investors. FOR MORE INFORMATION: Call Russell at +44 (0) or visit Important information This material is not intended for distribution to retail clients. This material does not constitute an offer or invitation to anyone in any jurisdiction to invest in any Russell product or use any Russell services where such offer or invitation is not lawful, or in which the person making such offer or invitation is not qualified to do so, nor has it been prepared in connection with any such offer or invitation. Unless otherwise specified, Russell Investments is the source of all data. All information contained in this material is current at the time of issue and, to the best of our knowledge, accurate. Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and, unless it relates to a specified investment, does not constitute the regulated activity of advising on investments for the purposes of the Financial Services and Markets Act 2000 within the UK, nor the regulated activity of "advising on financial products or credit" for the purposes of the Regulatory Law 2004 under Dubai law. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Any forecast, projection or target is indicative only and not guaranteed in any way. Any past performance figures are not necessarily a guide to future performance. Any reference to returns linked to currencies may increase or decrease as a result of currency fluctuations. Any references to tax treatments depend on the circumstances of the individual client and may be subject to change in the future. Issued by Russell Investments Limited. Company No Registered in England and Wales with registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone Authorised and regulated by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. Russell Investments Limited is regulated in the United Arab Emirates by the Dubai Services Authority as a Representative Office at: Office 4, Level 1, Gate Village Building 3, PO Box , DIFC, Dubai, UAE. Telephone First used: April 2015 MCI Russell Investments // Multi-Asset APRIL