Baring Asset Management Limited 155 Bishopsgate, London EC2M 3XY Tel +44 (0)20 7628 6000 Fax +44 (0)20 7638 7928 www.barings.com Authorised and regulated by the Financial Services Authority Andrew Cole Why Top Down Asset Allocation Matters New Model Advisers Conference January 2010
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Baring AssetManagement Limited155 Bishopsgate, London EC2M 3XY
Tel +44 (0)20 7628 6000Fax +44 (0)20 7638 7928
www.barings.com
Authorised and regulated by theFinancial Services Authority
Andrew Cole
Why Top Down Asset Allocation Matters
New Model Advisers Conference
January 2010
2
Barings Multi Asset Investing
Barings have been running Multi Asset Investment Solutions since 2000
£5bn aum, across Multi Asset Portfolios
Launched Multi Asset Fund in March 2009 for Retail Investors
Fund Manager Andrew Cole has 29 years of Investment experience
3
Strategic Asset Allocation
“Investing should be dull . . . it shouldn’t be exciting. Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas . . . it is not easy to get rich in Las Vegas . . . or at the local Merrill Lynch office.”
Paul Samuelson – Nobel Prize Laureate (Economics)
“The key is not to predict the future, but to be prepared for it.”
Pericles, 495-429BC
“It’s not what we don’t know that hurts us; it’s what we know for sure that just ain’t so.”
Mark Twain – Nobel Prize Laureate (Literature)
Source: Brainyquote.com – 11th January 2010
4
Can managers add value?
Information Ratio of Selected Asset Classes - 10 years to 30th September 2009
Over the long-run, even fourth quartile managers have added value in Asset Allocation
Source: Mercers MPA US$ universe, as at 30th November 2009
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
US Fixed
Euro Fixed
UK Fixed
Global Fixed
Asset Allocation
US Equity
Euro Equity
UK Equity
Global EM
Global Equity
1st Quartile Median 4th Quartile
5
Why bother with asset allocation? Equities outperform
Source: Barclays Equity Gilt Study - 2009
1980
UK Equity Annual Returns Gilt Annual Returns
-10
10
30
50
1984 1988 1992 1996 2000
%
6
-40
-20
0
20
40
60
1900
1904
1908
1912
1916
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
UK Equity Annual Returns
%
Gilt Annual Returns
They do, but it’s a bumpier road than you might desire
149
-50
Source: Barclays Equity Gilt Study - 2009
7
Lowering the risk profile
Source: Barclays Equity Gilt Study 2009, 1899 – 2008* Cumulative ~ Annual
Equity like returns with less risk
UK equity returns % (RHS)~UK Equity Nominal TR Index (LHS)*
UK Cash + 4% Index (LHS)*UK Cost of Living + 5% Index (LHS)*
Dynamic Asset Allocation Fund FTSE All Share LIBOR +4% Objective FTSE World
22
Current Portfolio & Themes (as at 31st December 2009)
Source: Barings as at 31st December 2009Risk = standard deviation of annualised return from asset allocation
Predicted Risk* 8.36%
Current portfolio themes:
Value in UK Equities
Inflation protection
Gold, Index Linked, Property
Asia Growth
Less value in credit
Sterling to weaken
23
Dynamic Asset Allocation Fund Track Record
Fund Inception date: 16th January 2007. Chart shows net returns for the Fund, the IMA Cautious Managed sector and the MSCI World Index from earliest available data on 19th Jan 2007 to 31st December 2009. All in sterling terms.
Baring Dyn Asset Alloc I GBP IMA OE Cautious Managed MSCI World Net Divs
Past performance is not a guide to future performance
24
Performance Chart of Multi Asset Fund
Past performance is not a guide to future performance
%
Nov 09
A
Apr 09 May 09 Jun 09 Jul 09 Sep 09Aug 09
20
15
10
5
0
-5
25
Oct 09 Dec 09
B
A – Baring – Multi Asset TR in GB (22.80%) B – UT Cautious Managed TR in GB (22.17%)
Source: Financial Express as at 31.12.09, Net returns, Bid To Bid.Fund inception date: 16th January 2007
25
Barings Multi Asset Fund
Barings have been running Multi Asset Investment Solutions since 2000
Launched Multi Asset Fund in March 2009
Cautious Managed Sector
Available via all major platforms
26
Biographies
Andrew is a member of the Targeted Solutions Portfolio Construction Group responsible for the management of multi asset portfolios. He is lead manager for the Baring Multi-Asset Fund and for a number of segregated portfolios. Andrew was appointed to the Strategic Policy Group (SPG), the company’s global macro research and asset allocation team in 2005. He is chair of the SPG Risk Sub Group and is a member of the Economic Group. Both groups provide key inputs to the debate of the monthly SPG meetings. Andrew joined the Fixed Income department at Baring Asset Management in 1986. He was appointed a Director in 1994 and joined the Multi-Asset portfolio team in 1995.