EFFECTIVE DIVERSIFICATION WITHOUT ACTIVE SPECULATION

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1 EFFECTIVE DIVERSIFICATION WITHOUT ACTIVE SPECULATION Tareno EQUITIES/BONDS/REAL ASSETS

2 Let us begin with some unpleasant facts for you as an investor: Even supposedly riskless assets, such as government bonds, bank deposits, cash or real estate, are not safe at all. Nobody, not even highly paid financial experts, can predict future investment returns with certainty. Most actively speculating investment managers achieve in the long run only lower returns than financial markets. The economist Eugene Fama recently received the Nobel price for a theory that implies these very facts. The same essential insights are also supported by the Austrian School of Economics (Ludwig von Mises, Friedrich Hayek). Ludwig von MISES ( ) was the most important economist of the Austrian school Eugene FAMA (born 1939 in Boston) was awarded the economics Nobel prize in 2013

3 Many investors ignore these realities and, as a result, become disappointed again and again: Sooner or later they incur unexpected losses from assets, which they considered safe, but turned out not to be safe at all. They pay high fees for financial products based on useless predictions. They incur the high expenses of active investment managers and receive in the long run only returns below the market index. On the other hand, investors taking these realities into account can achieve higher returns with Lower cost and less risk: They do not invest most of their assets in a few categories wrongly assumed to be safe, but rather they reduce their risk through broad diversification among many different asset classes. They do not pay high fees for investment funds with active managers trying to beat the market, but low fees for index funds passively tracking specific markets. They incur lower costs and achieve higher returns than most active investment managers by adhering to a fixed allocation with broad diversification among many different asset classes. However, Individual investors, who try to implement this realistic investment approach on their own, face significant difficulties for the following reasons: It is not easy to define an initial allocation among many asset classes of equities, bonds, and real assets that will do reasonably well even under extreme scenarios (e.g. hyperinflation). Extensive research is required to select the best index fund for each category of the chosen allocation. Investors need extraordinary discipline to maintain a fixed allocation over a long time, disregarding emotions and following only logic, buying what most others sell and selling what most others buy, even through periods with significant overall losses. A minimum investment volume of several million Euros is required to carry out occasional re-investments ( rebalancing ), necessary to maintain the desired fixed allocation, without reducing returns by incurring high transaction costs. Aiming to give every investor a chance to overcome these difficulties, we have issued the TARENO EQUITIES/BONDS/REAL ASSETS.

4 The TARENO EQUITIES/ BONDS/ REAL ASSETS enables individual investors to invest their assets with the following portfolio structure: REAL ASSETS (25%) Lower portfolio risk (low correlation with equities) Best inflation hedge 45 ASSET CLASSES 25 % Best hedge against inflation Effective diversification among 45 classes of equities, bonds, and real assets Investment only in physically replicating, low-cost index funds by leading providers such as Vanguard, Dimensional Fund Advisors, ishares Investor protection through strict European UCITS regulation Management with low transaction costs based on fixed allocation with occasional rebalancing Low correlation with equities 37,5% other SILVER GOLD precious metals PLATINUM real estate EUROPE PALLADIUM AMERICA LONGTERM ASIA RESOURCES ENERGY HIGH YIELD AGRO LARGE BLEND LARGE VALUE EMERGING EUROPE SMALL BLEND SMALL VALUE DEVELOPED LARGE BLEND LARGE VALUE SMALL BLEND AMERICA USD SHORTTERM CHF EUR SMALL VALUE SMALL BLEND LARGE VALUE SMALL VALUE LARGE BLEND Asia Competitive management fee of maximum 0,9% p.a. (in share class A with minimum investment) Expected higher long-term performance than most funds with comparable risk (confirmed by historical back testing) BONDS (25%) Lower portfolio risk (low correlation with equities) Best deflation hedge (but vulnerable to inflation) EQUITIES (50%) Highest long-term returns (but highest short-term risk) Partial inflation hedge

5 A simulation of the last eight years shows the superiority of a realistic investment approach with effective diversification without active speculation: 200 BACK TESTING TARENO DII EQUITIES/BONDS/REAL ASSETS HYPOTHETICAL GROWTH OF FUND VALUE ( = 100) Tareno DII* Index** Average of all funds in the Morningstar category: EUR Aggressive Global The Tareno DII Equities/Bonds/Real Assets would have outperformed more than 90% of all global mixed funds with comparable risk. The increase in value from to would have been higher than the increase in the index, and much higher than the average increase of actively managed funds with comparable risk: Tareno DII (back tested) +48,1% Index 70% MSCI World NR & +38.6% 30% Barclays Global Aggregate TR Average EUR Aggressive AlloCation - Global +11,4% * With annual rebalancing and TER 1,5% ** 70% MSCI World NR & 30% Barclays Global Aggregate TR Source: Morningstar Deutschland

6 You can do without the high costs and modest returns of most active investment managers. Instead, Rely on the reality of financial markets and the logic of diversification: Invest through the TARENO FUNDS DIVERSIFIED INDEX INVESTING EQUITIES/BONDS/REAL ASSETS in a portfolio of index funds offering effective diversification among 45 asset classes. Even for investors who are satisfied with their active portfolio manager because of higher-than-average returns in the past, there is no guarantee that this good performance will continue in the future. Therefore, we recommend that you invest a part of your portfolio in the TARENO FUNDS EQUITIES/BONDS/ REAL ASSETS and compare the performance of your actively managed portfolio with the fund s return as a benchmark. Trust is good, control is better. If you are afraid that this moment in time may turn out to be unfavorable for investment, divide your total investment volume into 4 to 8 equal amounts and invest the same amount every three months. INformation For further information please visit our website or contact: Dr. Matthias Kelm (matthias.kelm@tareno.lu) Marc Wagener (marc.wagener@tareno.lu) disclaimer This presentation was produced by Tareno (Luxembourg) S.A. The contents of this presentation do not constitute an offer or invitation to buy or sell financial products or securities. Tareno (Luxembourg) S.A. shall not be liable for any errors or omissions. Copyright 2013 Tareno (Luxembourg) S.A. This presentation may not be copied, reproduced or distributed, in whole or in part, without the prior consent of Tareno (Luxembourg) S.A.

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