GLOBGANIC ENGATMENT - The CF Canlife Total Return Fund

Transcription

1 For professional adviser use only GLOBAL MARKETS: A VIEW FROM THE US CF CANLIFE TOTAL RETURN FUND Bob Kea Co-Head of Global Asset Allocation, Putnam Investments and co-manager of the CF Canlife Total Return Fund Citywire Scotland, June 2015 INVESTMENT WITH VISION

2 IMPORTANT INFORMATION The CF Canlife Total Return Fund (the 'Feeder Fund') invests in the Putnam Total Return Fund (the 'Master Fund') through a master-feeder structure. All references to 'the Fund' in this presentation relate to the underlying Master Fund. CF Canlife Total Return Fund permanently invests at least 85% in value of its assets in the Master Fund. It will normally wholly invest in the Master Fund but may at times hold up to 15% in cash or near cash. The Master Fund is a sub-fund of Putnam World Trust, which is an umbrella unit trust and an undertakings for collective investment in transferable securities (UCITS) scheme established and organised under the laws of Ireland. Derivatives are used for investment purposes and to manage the risk profile of the master fund. Derivatives are complex instruments which may result in gains or losses that are greater than the original amount invested. 2

3 CANADA LIFE INVESTMENTS AN INTRODUCTION UK-based asset manager responsible for managing over 34 billion 1 Team of 46 experienced investment professionals based in the City Canadian parent Great-West Lifeco - one of the largest life assurance groups in Canada with 611 billion consolidated assets under administration 2 Canada Life Investments Assets under management Corporate structure Cash 1.3bn Mortgages 2.1bn Property 2.0bn Equities 2.4bn Bonds 26.2bn 1 As at 31/05/15 2 As at 31/12/14 3

4 ABOUT PUTNAM INVESTMENTS Founded in 1937, one of the oldest investment management firms in the US with 105bn in assets under management 1 Putnam Investments Global Asset Allocation (GAA) team are pioneers in multi-asset investing GAA team of 16 managing over 5bn in multi-asset strategies Total Return strategy was launched in 2006 Co-Heads of Global Asset Allocation team Robert Schoen Robert Kea James Fetch Jason Vaillancourt 1 As at 30/04/15 4

5 OPENING UP WHERE WOULD YOU INVEST AROUND THE WORLD RIGHT NOW? WHAT WOULD YOU INVEST IN? 5

6 FIXED INCOME EQUITY Underweight Small underweight Neutral Small overweight Overweight OUR CURRENT OUTLOOK ASSET CLASS US large cap US small cap US value US growth Europe Japan Emerging markets US government US tax exempt US investment-grade corporates US mortgage-backed US floating-rate bank loans US high-yield Non-US developed country Emerging markets COMMODITIES CASH As at Q Arrows in the table indicate the change from the previous quarter. 6

7 OUR CURRENT POSITIONING Global macro - US growth remains solid, but not immune to global developments - Continued US$ strength to cause stress in pockets of global financial system Fixed income - Global yields in a downtrend - US yields unlikely to meaningfully disconnect without global growth - High yield needs energy to stabilize Top-down equity - Momentum remains bullish, valuation is neutral Commodities - Outlook continues to be negative driven largely by momentum Regional allocation - Broadly neutral with a preference for developed vs. emerging 7

8 US ECONOMY MAY SOON BE READY FOR RATE HIKE The market anticipates lower rates than the FOMC Weaker economic data has likely caused the Fed to delay a rate hike Expect data bounce back in Q2 Fed could raise rates at any time if economic data supports it Fed Funds Futures (as of 31/03/15) FOMC Summary of Economic Projections midpoint Necessary to close gap between Fed s and market s view of future Source: Putnam 8

9 US EQUITIES REMAIN ATTRACTIVE The effect of a strong US dollar on corporate earnings is not clear cut Trajectory of US dollar will be on Fed s radar screen Currency strength has similar effects to tighter monetary policy Strong currency constrains growth but will not necessarily undercut earnings Shaded areas represent periods of significant US dollar strength outside of recessions Year-over year change in S&P 500 Index trailing 12-month earnings per share (LHS) Dollar exchange rate DXY Index (RHS inverted) Source: Putnam. The Bloomberg Dollar Spot Index (BBDXY) tracks the performance of a basket of leading global currencies versus the US dollar. The index represents both developed- and emerging-market currencies that have the highest liquidity in the currency markets and the biggest trade flows with the United States 9

10 ASSET CLASS CORRELATIONS TRENDING DOWN Historic equity-bond yield correlations Stock and bond correlations have been mostly negative since 2000 Spiked into positive territory following the taper tantrum of 2013 Commodities becoming more attractive as diversifiers The risk-on, risk-off environment is evolving Source: Bloomberg as at 15/05/15. Equities represented by the S&P 500, bonds represented by US Generic Government 10-Year Yield (USGG10YR). 10

11 RISK ALLOCATION IS WARRANTED IN A VOLATILE INVESTMENT ENVIRONMENT Sharpe ratios of equities, credit, commodities, and interest rates vary over time 5-year rolling period Sharpe ratios: 31/12/89 31/12/ Equity Credit Interest rate Inflation -1.0 Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance. Source: Putnam. Equity represented by S&P 500 Total Return, credit by Barclays U.S. Corporate High Yield Total Return, inflation by S&P GSCI Total Return, and interest rate by Barclays Intermediate Treasury TR USD. Indexes are unmanaged and do not incur expenses. You cannot invest directly in an index. 11

12 CF CANLIFE TOTAL RETURN FUND: DYNAMIC RISK ALLOCATION SEEKING EFFICIENT RETURNS Traditional 60/40 balance Asset allocation Bonds 40% Equities 60% Contribution to risk Equities 90% Bonds 10% Total Return Fund Deliver a more efficient risk/return profile than a traditionally balanced global portfolio through Dynamic risk allocation Drawdown control Actively allocate risk vs. static risk parity Actively implement strategies Base investment decisions on empirical research, validated by informed judgment 12

13 CF CANLIFE TOTAL RETURN FUND: SEEKS EFFICIENCY IN EACH ASSET CLASS Total Return Fund Static risk parity 1 Strategic policy portfolio 2 Dynamic allocation 3 Active implementation Active Passive 25% Equity 25% Rates 50% Equity Equity Rates Equity Rates 25% Inflation 25% Credit 17% Rates 17% Inflation 17% Credit Inflation Credit Inflation Credit For illustrative purposes only. 13

14 CF CANLIFE TOTAL RETURN FUND: PERFORMANCE Five year performance /10 05/11 05/12 05/13 05/14 05/15 Putnam Total Return Fund One-month LIBOR GBP Fund targets annualised cash + 5% over a full market cycle Delivered cash + 6.1% over 3 years Delivered cash + 7.0% over 5 years Positive rolling returns: 78 Negative rolling returns: 13 Calendar years (YTD) Fund (%) One-month LIBOR GBP (%) Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance. Capital is at risk and there is no guarantee of a positive return over any twelve-month period. Source: Morningstar, bid to bid, net income reinvested to 31/05/15. Performance is calculated in Pounds Sterling (net of tax and charges) and has been simulated based on the performance of the Class S Units of the Master Fund. The Feeder Fund invests into the Class S units of the Master Fund. Cash is represented by One-month LIBOR GBP. Positive and negative rolling returns are for a 12 month period since launch in November

15 WHY CHOOSE THE CF CANLIFE TOTAL RETURN FUND? Dynamically allocates risk and actively implements strategies in pursuit of better risk-adjusted returns over market cycles Seeks the most attractive mix of equity, credit, interest rate, and inflation risk to maintain diversified market exposure; so that each risk contributes, but no single risk dominates Provides an effective tool for increasing portfolio efficiency and diversification by taking a more thoughtful, active approach to allocating risk A way to reduce the equity risk within an investors overall portfolio without sacrificing return Senior team members have been in place since 2000, successfully managing risk allocation strategies since

16 CANADA LIFE INVESTMENTS CONTACTS Matthew Couzens Sales Director, Investments T M E matt.couzens@canadalife.co.uk Frank Maret Head of Distribution T M E frank.maret@canadalife.co.uk 16

17 APPENDIX

18 DYNAMIC ALLOCATION TO CAPTURE CHANGES IN MARKETS 50% Historical asset allocation from launch 40% 30% 20% 10% 0% Historical range Current allocation (as at 31/03/15) From July 2006 to March

19 Risk contribution (%) TOTAL RETURN FUND: DYNAMICALLY MANAGES RISK EXPOSURE 100 Contribution to risk since launch of strategy Equity Rates Inflation Credit 0 From June 2006 to March

20 GLOBAL ASSET ALLOCATION TEAM - DETAIL The senior team members have been in place at Putnam for more than a decade, managing asset allocation strategies since 1994, and managing dynamic risk strategies since James A. Fetch Co-Head of Global Asset Allocation Robert J. Kea, CFA Co-Head of Global Asset Allocation Robert J. Schoen Co-Head of Global Asset Allocation Jason R. Vaillancourt, CFA Co-Head of Global Asset Allocation Putnam since 1994 Putnam since 1989 Putnam since 1997 Putnam since 2000 Joshua B. Kutin, CFA Portfolio Manager Ryan J. Beaudoin, CFA Research Analyst Adrian H. Chan, CFA Research Analyst Brett S. Goldstein Research Analyst Putnam since 1998 Putnam since 2001 Putnam since 2003 Putnam since 2010 Portfolio associates John R. Murphy Sean M. McDonough Quantitative/qualitative analysis 3 Analysts Investment strategies Christian J. Galipeau Brendan T. Murray Jonathan M. Schreiber Seamus S. Young, CFA 20

21 GLOBAL MACRO AND ASSET CLASS TEAMS - A COLLABORATIVE PROCESS GLOBAL MACRO 1 Asset class teams collaborate with the Global Macro team PORTFOLIO CONSTRUCTION AND RISK MANAGEMENT 2 Asset class teams responsible for active allocation and implementation recommendations 3 Portfolio construction and risk management verify recommendations and allocate risk 21

22 METHODOLOGY FOR THE COMPOSITION AND CALCULATION OF THE POLICY PORTFOLIO There are 11 underlying asset classes in the policy portfolio. Index data is used to represent them in the simulation The following table summarizes the indices and weights used to create the policy portfolio: Asset Class Static Weight Current weight* Comment Net cash % % 3 month U.S. Treasury Bill U.S. equity Russell 3000 index International equity MSCI EAFE Index U.S. investment-grade bond Barclays Aggregate Bond Index Global high-yield bond JP Morgan High Yield Developed Index REITs MSCI REIT Index Global inflation linked bonds Barclays TIPS Index Non-U.S. government bond Citi WGB ex US Index Commodities GSCI Index Emerging-market bond JPM EM Global Bond Index Emerging-market equity MSCI Emerging Markets Index *As at 31/03/15. Indices are unmanaged and do not incur expenses. You cannot invest directly in an index. The investment team may use non-financial leverage via derivatives to enhance the fund s risk/return profile. As a result, the capital allocation will generally be more than 100%. 22

23 IMPORTANT DISCLOSURES The Fund is a subfund of Putnam World Trust, an umbrella unit trust domiciled in Ireland. The trust is established as an undertaking for collective investment in transferable securities pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, LIBOR is the London Interbank Offered Rate (LIBOR) 30-Day Rate, and is the British Bankers Association (BBA) fixing of the London InterBank Offered rate. It is based on offered interbank deposit rates contributed in accordance with the instructions to BBA LIBOR contributor banks. The securities holdings of the Fund may differ materially from those of the Sterling LIBOR 1-month used for illustrative purposes. This is not an invitation to subscribe for units in the Fund and is by way of information only. Subscriptions will only be received and units issued on the basis of the current Prospectus or Simplified Prospectus for the Fund. These can be obtained from Putnam Investments Limited. Units in the Fund are not available for sale in any jurisdiction in which the sale would be prohibited. Accordingly, this document is not available for distribution in any jurisdiction where the Fund has not been approved for sale. Read the Prospectus carefully before you invest or send money. Fund units may not be offered or sold to citizens or residents of the United States of America or in any other country, state or jurisdiction where it would be unlawful to offer, solicit to offer for or sell the units. It is the responsibility of the dealer to ensure that the offering and sale of fund units comply with the relevant national law. Switzerland: The Fund has not been and is not intended to be approved for distribution to non-qualified investors in or from Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). Accordingly, units of the Fund and this document and any other document or offering material relating to the Fund and/or the units in the Fund may only be distributed in or from Switzerland to qualified investors as defined in the Federal Act on Collective Investment Schemes of 23 June 2006 and its implementing ordinances, as amended from time to time, and the most current practice of the FINMA and the competent courts. Risks: Global investing involves certain risks, such as currency fluctuations, economic instability, and political developments. The Fund invests some or all of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Lower rated bonds may offer higher yields in return for more risk. The Fund may have a significant portion of its holdings in bonds. The use of derivatives involves special risks and may result in losses. Mutual funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Diversification does not assure a profit or protect against loss. It is possible to lose money in a diversified portfolio. Approved and issued in the United Kingdom by Putnam Investments Limited. Putnam Investments Limited is authorised and regulated by the Financial Conduct Authority (FCA). This material is directed exclusively at professional clients and eligible counterparties (as defined under the FCA Rules) who are knowledgeable and experienced in investment matters. Any investments to which this material relates are available only to or will be engaged in only with such persons, and any other persons (including retail clients) should not act or rely on this material. Furthermore this material is only intended for the client receiving it directly from Putnam Investments Limited and should not be forwarded to, or relied upon by, the recipient s underlying clients. Putnam Investments Limited Cassini House St James s Street London SW1A 1LD United Kingdom Tel: +44 (0) Putnam Investments Putnam.com 23

24 IMPORTANT INFORMATION Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance. Capital is at risk and there is no guarantee of a positive return over any twelve-month period. The information contained in this document is provided for use by professional advisers and is not for onward distribution to, or to be relied upon by, private investors. The views expressed in this document are those of the fund manager at the time of publication and are subject to change at any time without notice. No guarantee, warranty or representation (express or implied) is given as to the document s accuracy or completeness. This document is issued for information only by Canada Life Investments. This document is intended to be used as a sales aid and does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at Data Source Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no ), Canada Life Limited (no ) and Canada Life European Real Estate Limited (no ) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. ID 6118/0615R Expiry September