2nd quarter Deutsche Asset & Wealth Management real estate and infrastructure funds

Transcription

1 2nd quarter 204 Deutsche Asset & Wealth Management real estate and infrastructure funds

2 Introducing Deutsche Asset & Wealth Management real estate and infrastructure funds Deutsche Real Estate Securities Fund Class A RRRAX C RRRCX INST RRRRX S RRREX Invests in the equity securities of domestic REITs and real estate companies. Deutsche Real Estate Securities Income Fund Class A REFAX C REFCX INST REFIX S REFSX Invests in the equity securities of REITs and real estate companies. Also may write (sell) covered call options on its portfolio securities with the goal of generating additional income from premiums received in connection with the options. Deutsche Global Real Estate Securities Fund Class A RRGAX C RRGCX INST RRGIX S RRGTX Invests in the equity securities of global REITs and real estate companies. Deutsche Global Infrastructure Fund Class A TOLLX C TOLCX INST TOLIX S TOLSX Invests in the securities of global infrastructure-related companies of any market capitalization. Real estate and infrastructure securities investment teams Global and regional strategies implemented by experienced in-house teams, with the senior real estate and infrastructure securities leaders averaging more than 8 years of experience. John Robertson 25 Global head and portfolio manager Real estate securities John Vojticek 8 CIO and global portfolio manager Infrastructure securities Joe Fisher 0 David Zonavetch 8 Co-lead portfolio managers John Hammond 23 Lead portfolio manager Daniel Ekins 29 Chris Robinson 7 Co-lead portfolio managers Frank Greywitt 4 Manoj Patel Co-lead portfolio managers Americas Investment team: Andrew Johns Evan Rudy Martin Kollmorgen Tim McHugh Christian Schroeder Ryan Zaborske Europe Investment team: Frédéric Mathier Jon Consolo Barry McConnell New hire Asia Pacific Investment team: Eloise Blake Todd McFarlane Ole Moerk Lihui Chen Hiroshi Miyata Ivy Ng Global Investment team: Ellen Lyerly David Chiang Avi Feinberg Ryan Foelske 0 in Chicago 4 in London, Zurich in Hong Kong, Tokyo, Sydney 3 6 in Chicago Total years of experience # Average years of experience # Includes global head, and CIO. 2 Excludes new hire Source: Deutsche Asset & Wealth Management. Years with industry as of 2/3/3. Team as of 3/3/4. 2 Deutsche Asset & Wealth Management real estate and infrastructure funds

3 A prominent real estate and infrastructure manager The Deutsche Asset & Wealth Management alternatives platform offers access to broad resources including a direct infrastructure business (which has $.5 billion in direct infrastructure assets) as of 2/3/3 and real estate securities business (which has $8.8 billion in assets under management) as of 2/3/3. Leading alternatives business The global alternatives investment management business of Deutsche Bank s Asset & Wealth Management division US $27.6/ 94.2 billion in assets under management Over 700 employees in 30 offices worldwide Managing on behalf of over 475 institutional investors Delivers investment solutions to meet the objectives of governments, corporations, insurance companies, endowments and retirement plans worldwide Deutsche Asset & Wealth Management real estate and infrastructure team locations London Westborough Luxembourg Warsaw Seattle Chicago Paris Frankfurt San Francisco Costa Mesa New York Zurich Madrid Milan Glen Carbon Bethesda Dallas Atlanta Tokyo Seoul Shanghai Hong Kong Singapore Sydney Source: Deutsche Asset & Wealth Management as of 2/3/3. AUM represents the gross asset value (including leverage) of assets managed for third parties and the net asset value (excluding leverage) of proprietary positions. It excludes assets managed by the Australian team (HVP Plantations, Matariki Forests, Ulan Coal, Kestrel Coal and Crinum). Deutsche Asset & Wealth Management has also made principal investments in infrastructure assets, the management of which has subsequently been transferred to other areas of Deutsche Bank. Northern Gas Networks (NGN) is included in the Australian AUM as NGN is managed by the Australian team. Deutsche Asset & Wealth Management real estate and infrastructure funds 3

4 Why domestic real estate? Real estate investment trusts (REITs) which are companies that own, and in most cases operate, incomeproducing real estate present a compelling opportunity to potentially capitalize on the real estate market. Potential benefits of domestic REITs include: Compelling performance: Over the past 20 years ending 6/30/4, the Morningstar Real Estate category has returned an average annual 0.62%, placing it in the top 0 of 83 total Morningstar categories over that period. Income opportunities: Because REITs pay out nearly all of their rental income to shareholders, they can potentially provide compelling dividends. Low correlations: Over the past 0 years ending 6/30/4, the Morningstar Real Estate category has a correlation of 0.20 to U.S. bonds. REITS have offered compelling annualized returns The MSCI U.S. REIT Index returned.5% for the 5-year period ending 6/30/4. That compares favorably to the S&P 500 Index (4.35%), the Nasdaq Composite Index (3.36%) and the Dow Jones Industrial Average (5.33%). REITS have offered appealing dividend yields (as of 6/30/4) 3.80% 2.3% MSCI U.S. REIT Index S&P 500 Index See back page for correlation definition. Source for text and upper callout: Morningstar as of 6/30/4. Source for lower chart: Bloomberg as of 6/30/4. Performance is historical and does not guarantee future results. Dividends are not guaranteed. Data is for illustrative purposes only and does not represent any Deutsche Asset & Wealth Management product. In the text above, U.S. stocks are represented by the S&P 500 Index and U.S. bonds are represented by the Barclays U.S. Aggregate Index. For the upper callout, returns for other time periods are as follows: For the five years ending 6/30/4, the MSCI U.S. REIT Index returned 23.84% vs. 8.83% for the S&P 500 Index, 9.6% for the Nasdaq Composite Index and 7.83% for the Dow Jones Industrial Average; for the 0 years ending 6/30/4, the MSCI U.S. REIT Index returned 9.63% vs. 7.78% for the S&P 500 Index, 7.97% for the Nasdaq Composite Index, and 7.63% for the Dow Jones Industrial Average. In the lower chart, REITs are represented by the MSCI U.S. REIT Index and U.S. stocks are represented by the S&P 500 Index. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index. See back page for index definitions. 4 Deutsche Asset & Wealth Management real estate and infrastructure funds

5 Why domestic real estate with a covered call strategy? Domestic REITs coupled with potential income generators, such as Canadian REITs, preferred securities and a covered call strategy, could potentially provide enhanced income potential compared to a REIT-only approach. Today s market is a compelling one for domestic REIT investments, as they are currently trading at discounts to their historical net asset values (NAV). In addition, a domestic REIT strategy with a focus on investments in North American REITs, preferred securities, a covered call strategy is used to: Seek income potential comparable to investment-grade corporate bonds Seek potentially lower volatility and higher yield than traditional REIT funds Seek a potential inflation hedge with negative correlation to bonds Covered calls explained Written options on a portfolio s long positions are typically used to help increase income potential. When you sell a call option, you are giving the buyer the right to buy your shares at a specific price for a specific period of time. In exchange, the call buyer pays you a premium. U.S. REITs are trading at discounts to direct property values (as of 6/30/4) 50% 30% 0% Average: 3.03% 0% 30% 50% 2/90 2/92 2/94 U.S. REIT valuations 2/96 2/98 2/00 Average U.S. REIT valuation 2/02 2/04 2/06 2/08 2/0 2/2 6/4 Source: Green Street Advisors as of 6/30/4. Past performance is historical and does not guarantee future results. U.S. REITs are represented by Green Street s coverage universe, which includes 3 REITs and other publicly traded real estate companies. Net asset value represents the value of an entity s assets less the value of its liabilities. A preferred security offers a class of ownership that has a higher claim on the assets/earnings than common stock. A long position is the buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value. Deutsche Asset & Wealth Management real estate and infrastructure funds 5

6 Why global real estate? Global REITs present a compelling opportunity to diversify by potentially capitalizing on the increased realestate-investing opportunities that may exist in the global real estate market. Potential benefits of global REITs include: Compelling performance: Over the past 0 years ending 6/30/4, the Morningstar Global Real Estate category has returned an average annual 7.54%. The category has captured 6% of the upside of the S&P 500 Index. Income opportunities: Because REITs pay out nearly all of their rental income to shareholders, REITs can potentially provide compelling dividends and global REIT dividend yields are attractive relative to both domestic REIT dividend yields and government bond yields. Low correlations: Over the past 0 years ending 6/30/4, the Morningstar Global Real Estate category has a correlation of 0.2 to U.S. bonds. Global REIT yields are favorable relative to government bond yields Income obtained from REITs exceeded income obtained from 0-year government bonds in all seven regions and countries listed as of 6/30/4. 5.5% 3.5% Australia 4.8%.5% Europe ex-united Kingdom 4.% 2.0% 3.3% 0.6% 5.6% 2.3% 3.2% Hong Kong Japan Singapore United Kingdom 3.6% 2.7% 2.5% United States REIT yields 0-year government bond yields See back page for upside/downside capture and correlation definitions. Source for text: Morningstar as of 6/30/4. Source for chart: Bloomberg and Deutsche Asset & Wealth Management as of 6/30/4. Performance is historical and does not guarantee future results. Data is for illustrative purposes only and does not represent any Deutsche Asset & Wealth Management product. In the text above, U.S. stocks are represented by the S&P 500 Index and U.S. bonds are represented by the Barclays U.S. Aggregate Index. In the chart, REIT yields are represented by FTSE EPRA/NAREIT Developed Real Estate Index and 0-year government bond yields are represented by the 0-year government bond for each country (for Europe ex-united Kingdom, a weighted average of European sovereign bond yields with weights based on the country weights in the FTSE EPRA/NAREIT). There is no guarantee that companies will continue to pay dividends due to economic as well as business-related reasons. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index. See back page for index definitions. There are special risks associated with an investment in real estate, including REITS. These risks include credit risk, interest-rate fluctuations and the impact of varied economic conditions. Fixed-income investments are subject to interest-rate risk, and their values will decline as interest rates rise. 6 Deutsche Asset & Wealth Management real estate and infrastructure funds

7 Why global infrastructure? Infrastructure consists of the permanent assets society requires to facilitate its orderly operations. The sector includes transportation, energy, communications and water assets. Examples of infrastructure assets include ports, toll roads, pipelines, transmission lines, cell phone towers, and water utilities. Why consider investing in infrastructure? Historical underinvestment, a growing population and global urbanization are creating demand for infrastructure. Meanwhile, global government deficits have created pressure to privatize assets. Infrastructure assets provide compelling investment characteristics, including high barriers to entry, inelastic demand, and stable cash flows, often with a potential inflation hedge. DeAWM seeks to invest in pure-play companies, which typically own or operate assets that naturally exhibit fundamental infrastructure characteristics, such as high barriers to entry and relatively inelastic demand. This has produced superior risk-adjusted returns over time, as the chart below illustrates. Three-year return and volatility of asset classes (as of 6/30/4) Return 25% 20% 5% 0% 5% 0% Listed infrastructure (6.75% return / 9.92% volatility) World stocks (.8% return / 3.76% volatility) Listed real estate (0.9% return / 6.53% volatility) 8% 0% 2% 4% 6% 8% 20% Volatility There are two other ways to invest in infrastructure. Core companies exhibit some characteristics of pure-play companies by virtue of regulation or contracted agreement, and many have loosely related infrastructure side businesses, but they typically have lower margins, are not capital intensive, and/or do not derive cash flows from long-duration contracts. Broad companies tend to own infrastructure-related businesses, such as construction companies and diversified communications providers, rather than direct infrastructure assets. Source for chart: Morningstar as of 6/30/4. Performance is historical and does not guarantee future results. Volatility is represented by standard deviation, which depicts how widely an investment s returns vary from the investment s average return over a certain period. The higher the standard deviation, the greater the volatility. World stocks are represented by the MSCI World Index, global bonds by the Barclays Global Aggregate Index, listed infrastructure by the DJ-Brookfield Global Infrastructure Index, listed real estate by the FTSE EPRA/NAREIT Developed Real Estate Index. Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses and it is not possible to invest directly in an index. See back page for index definitions. There are special risks associated with an investment in real estate. These risks include credit risk, interest-rate fluctuations and the impact of varied economic conditions. The values of equity investments are more volatile than those of other securities. Fixed-income investments are subject to interest-rate risk, and their values will decline as interest rates rise. Data is for illustrative purposes and does not represent any Deutsche Asset & Wealth Management product. Deutsche Asset & Wealth Management real estate and infrastructure funds 7

8 Definitions The Barclays Global Aggregate Index tracks the performance of the global investment-grade, fixed-income market. The Barclays U.S. Aggregate Index tracks the performance of the broad U.S. investment-grade, fixed-rate bond market, including both government and corporate bonds. Correlation is a measure of how closely two variables move together over time. A.0 equals perfect correlation. A.0 equals total negative correlation. The Dow Jones (DJ)-Brookfield Global Infrastructure Index tracks the performance of companies in the infrastructure business. The Dow Jones Industrial Average tracks the performance of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The FTSE EPRA/NAREIT Developed Real Estate Index tracks the performance of developed-market REITs. The MSCI World Index tracks the performance of stocks in select developed markets around the world, including the United States. The MSCI U.S. REIT Index tracks the performance of equity REITs. The Nasdaq Composite Index tracks the performance of the more than 3,000 common equities listed on the Nasdaq stock exchange. The S&P 500 Index tracks the performance of 500 leading U.S. stocks and is widely considered representative of the U.S. equity market. Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses and it is not possible to invest directly in an index. Upside/downside capture ratio measures a portfolio s performance in up /down markets relative to the investment universe (with up/down markets defined as those that have a positive/negative monthly return); the higher/lower the upside/downside capture ratio, the better the portfolio performed during a market upturn/downturn. Important risk information Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. There are special risks associated with an investment in real estate, including REITS. These risks include credit risk, interest rate fluctuations and the impact of varied economic conditions. Stocks may decline in value. The funds may lend securities to approved institutions. Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Deutsche Real Estate Securities Income Fund may use derivatives, including as part of its covered call strategy. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. In using a covered call strategy, Deutsche Real Estate Securities Income Fund foregoes the opportunity to benefit from an increase in the price of the underlying security (but continues to bear the risk of a decline in the value), or in the case of an illiquid market, the fund may be unable to sell the underlying security until the option expires or is exercised. Dividends are not guaranteed. If the dividend-paying stocks held by Deutsche Real Estate Securities Income Fund reduce or stop paying dividends, the fund s ability to generate income may be adversely affected. Deutsche Real Estate Securities Fund, Deutsche Global Infrastructure Fund and Deutsche Real Estate Securities Income Fund are non-diversified and can take larger positions in fewer issues, increasing their potential risk. See the prospectus for details. Obtain a prospectus To obtain a summary prospectus, if available, or prospectus, download one from talk to your financial representative or call (800) We advise you to carefully consider the product s objectives, risks, charges and expenses before investing. The summary prospectus and prospectus contain this and other important information about the investment product. Please read the prospectus carefully before you invest. All investments involve risk, including potential loss of principal. Investment products: No bank guarantee Not FDIC insured May lose value Investment products offered through DeAWM Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc. Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries. Clients will be provided Deutsche Asset & Wealth Management products or services by one or more legal entities that will be identified to clients pursuant to the contracts, agreements, offering materials or other documentation relevant to such products or services. DeAWM Distributors, Inc. 222 South Riverside Plaza Chicago, IL service@db.com Tel (800) Deutsche Bank AG. All rights reserved. PM45689 (8/4) R RREEF-600