Strategic Asset Allocation & Solutions Group

Transcription

1 Meet the Managers Strategic Asset Allocation & Solutions Group 4Q 2012 Fund Spotlight Multi-asset portfolio specialists with expertise in alternative strategies NYLIM s Strategic Asset Allocation & Solutions (SAS) Group invests tactically across the full span of global capital markets, designing comprehensive solutions for a variety of client needs. Managed assets include MainStay Asset Allocation and Retirement Funds, mandates for third parties, and a customized strategy for the New York Life General Account. The team often utilizes a multi-manager framework and has developed a proven track record in selecting and combining subadvisors. SAS also has expertise in using alternative strategies within the context of comprehensive investment solutions. Investment Philosophy Due at least in part to behavioral biases, financial markets often fail to set prices that accurately reflect economic realities, resulting in exploitable investment opportunities: Overreaction to financial and geopolitical events create temporary mispricings Failure to recognize long-term trends associated with technological, demographic, or cultural change Reluctance to invest in unfamiliar jurisdictions, security types, or strategies Portfolio Construction Portfolio construction demands robust risk/return estimation methodologies and the proper analytical toolkit. It can be further enhanced through: Explicitly addressing forecast estimation error An awareness and incorporation not just of conventional market factors (equity beta) and smart beta (momentum), but also of systematic non-market factors (deal risk) and manager contribution (alpha) Research Approach SAS analyzes these events and trends through: The use of, but not dependence upon, quantitative inputs A committee-based decisionmaking system Experience Through estimating fair or relative value and understanding the factors that will drive market prices either closer to or further away from that fair value, SAS believes they have the ability to capture competitive excess returns. Investment Process: MainStay Retirement Funds and MainStay Asset Allocation Funds The investment process SAS uses to manage MainStay Retirement Funds and MainStay Asset Allocation Funds includes a top-down macroeconomic view that drives the asset class decision, and a bottom-up Fund selection decision. The team tactically positions portfolios relative to the strategic benchmarks in response to current market conditions and perceived investment opportunities. Using risk management tools, they identify that set of Funds, drawn from the MainStay platform, believed to be most precisely representative of the targeted asset class allocation. The team manages the weighting assigned to those funds based on manager track record, portfolio characteristics, and other inputs. Page 1

2 Investment Process: MainStay Retirement Funds and MainStay Asset Allocation Funds (continued) Asset allocation and diversification do not guarantee a profit or assure against a market loss. Investment Process: MainStay Absolute Return Multi-Strategy Fund MainStay Absolute Return Multi-Strategy Fund is an actively managed absolute return-oriented mutual fund comprised of multiple distinct and complementary alternative investment strategies. The Fund s absolute return investment approach seeks to provide positive returns over a complete market cycle, and it is designed to complement a traditional portfolio of stocks and bonds. There is no assurance that the Fund s objectives will be met. As manager of this Fund, SAS allocates assets among the underlying strategies based on quantitative and qualitative factors, including market outlook, investment style, and past performance. Past performance is not indicative of future results. SAS also manages a portion of the Fund directly in an attempt to further diversify the Fund and to manage risks at the Fund level, such as currency risk, commodity price risk, or interest-rate risk. Page 2

3 Portfolio Managers Jae Sung Yoon, CFA CIO, Strategic Asset Allocation & Solutions Jae joined New York Life in 2005 and oversees the portfolio management of the MainStay and third-party asset allocation strategies. Jae and his team also perform economic analysis for New York Life, as well as provide economic and market updates to New York Life Agency. Previously, he was responsible for risk management efforts at New York Life Investments affiliate, MacKay Shields. Prior to joining New York Life Investments, Jae was Head of Quantitative Research, Analytics, and Risk Management at Western Asset Management. Previously, he was with Merrill Lynch Investment Managers where he served as the Head of Risk and Performance for the Pacific and European Regions in Tokyo and London, respectively. Jae also worked at JP Morgan Securities in Asia as regional head of Risk Management Control for Fixed Income and Equity Derivative Trading. Jae earned a BS in Electrical Engineering and a Master s in Operations Research at Cornell University. Jonathan Swaney Managing Director, Senior Portfolio Manager Jonathan joined New York Life in His current focus is on the management of the MainStay and third-party asset allocation strategies. Prior to assuming this position, Jon worked within several other units of New York Life Investments managing equity and asset allocation portfolios and providing investment product oversight. Jon began his career in financial services working on the fixed-income desk at the Vanguard Group after graduating from the College of William & Mary in He also spent several years with a hedge fund of funds before coming to New York Life. Poul Kristensen, CFA, CQF Senior Portfolio Manager & Economist Poul is a Portfolio Manager and Economist in the Strategic Asset Allocation & Solutions Group in New York Life Investments. He joined New York Life Investments in 2011 to focus on global macroeconomic trends and investment strategy. A mathematical economist by training, his expertise is investment management and asset allocation. Prior to joining New York Life Investments, he worked as senior investment strategist for Danske Bank (the largest bank in Denmark and a leading player in Scandinavia), where he advised major pension funds on asset allocation. Prior to that, his background includes roles as macroeconomic researcher for a broker-dealer and global macro strategist for an asset management company. Poul holds a Master's degree in economics from Aarhus University (in Denmark). He is also certified in quantitative finance (the CQF designation). Amit Soni, CFA Director, Portfolio Manager Amit joined New York Life Investments in 2013 and focuses on quantitative and macroeconomic investment research and portfolio management for the funds managed by the team. He has been in the investment industry since From 2008 to 2012, he worked as an Investment Associate in the Global Asset Allocation group at Putnam Investments. At Putnam, he was involved in quantitative research and portfolio management of large-cap equity and low-volatility equity funds, investing in the U.S. and developed international equity markets. In addition, he also conducted research on asset allocation strategies. He holds a Master s degree from the Massachusetts Institute of Technology in Computation for Design and Optimization and a Bachelor s degree from the Indian Institute of Technology, Kanpur (India) in Mechanical Engineering. Page 3

4 There is no guarantee that any strategy will make a profit or protect against losses. Page 4

5 Before you invest Alternative investments are speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment. MainStay Asset Allocation Funds All mutual funds are subject to market risk, including possible loss of principal. Before considering an investment in the Funds, you should understand that you could lose money. The Funds performance depends on the advisor s skill in determining the asset class allocations and the mix of underlying MainStay Funds, as well as the performance of those underlying Funds. The underlying Funds performance may be lower than the performance of the asset class that they were selected to represent. The Funds may invest more than 25% of their assets in one underlying Fund, which may significantly affect the net asset value of the Funds. The Funds are indirectly subject to the investment risks of each underlying Fund held. Principal risks of the underlying Funds are described below. Stocks and bonds can decline due to adverse issuer, market, regulatory, or economic developments. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, the Funds performance may suffer. The principal risk of investing in value stocks is that the price of the security may not approach its anticipated value or may decline in value. High-yield securities carry higher risks, and some of the Funds investments have speculative characteristics and present a greater risk of loss than higher-quality debt securities. These securities can also be subject to greater price volatility. Stocks of mid-cap companies may be more volatile and less liquid than the securities of larger companies. Stocks of small companies may be subject to higher price volatility, significantly lower trading volume, and greater spreads between bid and ask prices than stocks of larger companies. Small-cap companies may be more vulnerable to adverse business or market developments than large-capitalization stocks. Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. Foreign securities may be subject to greater risks than U.S. investments, including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information, and changes in tax or currency laws or monetary policy. When interest rates rise, the prices of fixed-income securities in the underlying Funds portfolios will generally fall. Conversely, when interest rates fall, the prices of fixed-income securities in the underlying Funds portfolios will generally rise. Floating rate funds are generally considered to have speculative characteristics that involve the risk of default on principal and interest and the risks associated with collateral impairment, non-diversification, borrower industry concentration, and limited liquidity. Short sales involve costs and risk. If a security sold short increases in price, the underlying Fund may have to cover its short position at a higher price than the short sale price, resulting in a loss. An underlying Fund may not be able to borrow a security that it needs to deliver, or it may not be able to close out a short position at an acceptable price and may have to sell related long positions prematurely and not be able to successfully implement its short sales strategy. When borrowing a security for delivery to a buyer, the underlying Fund also may be required to pay a premium and other transaction costs, which would increase the cost of the security sold short. Before making an investment in any of these Funds, you should consider all the risks associated with them and consult the prospectus or summary prospectus for more complete information. MainStay Retirement Funds The target date in a target date fund is the approximate date an investor plans to start withdrawing money. Target date funds are managed to specific retirement dates, and investors may be taking on greater risk if the actual year of retirement differs dramatically from the original estimated date. The investment allocations of these funds evolve over time and are designed to grow more conservative as each fund nears its target retirement date. While diversification and shifting to a more conservative investment mix over time help to manage risk, it does not guarantee earnings growth, nor is the fund's principal value guaranteed at any time, including at the target date. There is the potential to lose money in any investment program. Investors do not have the ability to actively manage the investments within target date funds. The portfolio managers control strategic asset allocation and selection of the underlying funds. Target date funds have different levels of risk depending on the investment allocation in the underlying funds. A fund with a longer time horizon to its target retirement date is likely to invest a greater portion of its assets in underlying funds that invest in equity securities and generally is more likely to experience the risks associated with equity securities than the risks associated with fixed-income securities. On the other hand, as a fund approaches its target retirement date, it is more likely to invest a greater portion of its assets in Page 5

6 underlying funds that invest in fixed-income securities and is more likely to experience the risks associated with fixed-income securities than the risks associated with equity securities. The Fund may, from time to time, invest more than 25% of its assets in one underlying fund. Changes in the value of the underlying funds may have a significant effect on the net asset value of the Fund. Investing more than 25% of its assets in a single industry or economic sector may also adversely impact a Fund. Fixed-Income Securities Risk Credit Risk Foreign Securities Risk Interest-Rate Risk High Portfolio Turnover High-Yield Bond Risk Liquidity Risk Market Risk Maturity Risk Mortgage- and Asset-Backed Security Risk U.S. and International Equity Securities Risk Foreign Securities Risk Growth Securities Risk High Portfolio Turnover Leverage Risk Market Risk REIT Risk Short Sales Risk Smaller Company Risk Value Securities Risk Please consult the prospectus for a description of these principal risks and other risks associated with the underlying funds. MainStay Absolute Return Multi Strategy Fund All mutual funds are subject to market risk, including possible loss of principal. Before considering an investment in the Funds, you should understand that you could lose money. The Fund seeks to have low correlation to traditional equity and fixed income markets. However, the Fund s performance may be correlated with traditional equity or fixed income markets over short- or long-term periods. The Fund s absolute return investment approach seeks to provide positive returns over a complete market cycle. However, the Fund s returns may be negative during certain periods within or over a complete market cycle. Loss of Money Risk: Before considering an investment in the Fund, you should understand that you could lose money. Market Changes Risk: The value of the Fund's investments may change because of broad changes in the markets in which the Fund invests, which could cause the Fund to underperform other funds with similar objectives. From time to time, markets may experience periods of acute stress that may result in (i) increased volatility; and (ii) increased redemptions. Such conditions may add significantly to the risk of volatility in the net asset value of the Fund's shares. Management Risk: The investment strategies, practices and risk analyses used by a Subadvisor may not produce the desired results. Multi-Manager Risk: The Fund s performance relies on the skill of the Manager in selecting and monitoring the Subadvisors. The Fund s performance also is dependent upon the Manager s skill in determining strategic allocations of the Fund s assets among the Subadvisors and the Subadvisors skill in implementing their respective strategy or strategies. The Subadvisors investment strategies may not always be complementary to one another and, as a result, the Subadvisors may make decisions that conflict with one another, which may adversely affect the Fund s performance. For example, a Subadvisor may purchase an investment for the Fund at the same time that another Subadvisor sells the investment, resulting in higher expenses without accomplishing any net investment result. Alternatively, several Subadvisors could purchase the same investment at the same time, causing the Fund to pay higher expenses because they did not aggregate their transactions. The multimanager approach may also cause the Fund to invest a substantial percentage of its assets in certain types of securities, which could lead to large beneficial or detrimental effects on the Fund s performance. The Manager may influence a Subadvisor in terms of its management of a portion of the Fund s assets, including hedging practices, investment exposure and risk management. The Subadvisors may underperform the market generally and may underperform other subadvisors that the Manager could have selected. One or more Subadvisors may have limited or no experience in managing assets of a registered investment company, which is subject to daily inflows and outflows of investor cash and certain legal and tax-related restrictions on its investments and operations. Equity Securities Risk: Investments in common stocks and other equity securities are particularly subject to the risk of changing economic, stock market, industry and company conditions and the risks inherent in the portfolio manager's ability to anticipate such changes that can adversely affect the value of the Fund's holdings. Opportunity for greater gain often comes with greater risk of loss. Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns. Monte Carlo Simulation is a problem solving technique used to approximate the probability of certain outcomes by running multiple trial runs, called simulations, using random variables. Smart Beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization based indices. For more information about MainStay Funds, call 800-MAINSTAY ( ) for a prospectus or summary prospectus. Investors are asked to consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus or summary prospectus contains this and other information about the investment company. Please read the prospectus or summary prospectus carefully before investing. New York Life Investments engages the services of federally registered advisors to subadvise the Funds. MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, (effective April 8, 2016, the address will be 30 Hudson Street, Jersey City, NJ 07302), a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a member FINRA/SIPC MS87q-08/15 Page 6