old mutual macrosolutions
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2
MACROSOLUTIONS
MacroSolutions is a focused, boutique asset manager which specialises in
building integrated, multi-asset class solutions
Focused
Unconstrained (AUM: R40bn)
Strategic asset allocation for life company
Complementary businesses: US$6bn international assets, R5bn listed property
Boutique: “As invested as you are”
Equity ownership
Alignment through bonus re-investment
Multi-asset class solutions
Client outcome driven by accountability and integration
4
DELIVERING TO OBJECTIVES
Real returns from inception to 31 December 2014
Source: Old Mutual Investment Group, MacroSolutions | ** Conservative fund = Optimised Defensive with Stable Growth Returns from July 2007
3.1% 3.7%
7.5%
8.5%
13.7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
OM Real Income OM Conservative Fund OM Balanced OM Flexible OM Maximum Return
CPI +2%
CPI +6%
CPI +5%
CPI +3%
5
BALANCED FUNDS AUM AS AT END DECEMBER 2014
Source: MacroSolutions
0
20
40
60
80
100
120
140
160
180A
llan
Gra
y
Co
ron
atio
n
Fo
ord
Inve
ste
c
Pru
de
ntia
l
SIM
Old
Mu
tua
l
Sym
me
try
Ma
cro
So
lutio
ns
Mo
me
ntu
m
STA
NLI
B
Ne
dg
rou
p
Bill
ion
s
6
BALANCED FUNDS AUM AS AT END DECEMBER 2014
Source: MacroSolutions
Fund size (R billions)
10 20 40 60 80 100
Mk
t c
ap
(R
billio
ns)
<#
of st
oc
ks>
5 <128> 2.0% 4.0% 8.0% 12.0% 16.0% 20.0%
10 <105> 1.0% 2.0% 4.0% 6.0% 8.0% 10.0%
20 <73> 0.5% 1.0% 2.0% 3.0% 4.0% 5.0%
50 <38> 0.2% 0.4% 0.8% 1.2% 1.6% 2.0%
100 <21> 0.1% 0.2% 0.4% 0.6% 0.8% 1.0%
Ownership level required to achieve a fund positioning of 1%
0
20
40
60
80
100
120
140
160
180A
llan
Gra
y
Co
ron
atio
n
Fo
ord
Inve
ste
c
Pru
de
ntia
l
SIM
Old
Mu
tua
l
Sym
me
try
Ma
cro
So
lutio
ns
Mo
me
ntu
m
STA
NLI
B
Ne
dg
rou
p
Bill
ion
s
7
PHILOSOPHY: WHAT DO WE BELIEVE IN?
Integrated Solutions
Active asset allocation & specialist selection
Theme & price
Unique philosophy: top down & bottom up
Accountability & teamwork
Product focused teams
Perspective
Long-term
Discipline
Process & measurement
8
INTEGRATED SOLUTIONS
ACCOUNTABILITY
ASSET ALLOCATION
SELECTION
CLIENT
OUTCOME
PORTFOLIO CONSTRUCTION
RISK MANAGEMENT
9
WHY US
Client
Portfolio manager
MacroSolutions
Old Mutual Investment Group
Old Mutual
Accountability
Team
Specialist
Trust
10
FEES: PREDICTABLE AND COMPETITIVE
Estimated immediate
reduction in contribution of fees to TER, incl. VAT
Unit trusts
Old Mutual Flexible Fund -1.5%
Old Mutual Balanced Fund -1.4%
Old Mutual Stable Growth Fund -0.7%
Life Funds
Old Mutual Edge28 Life Fund -1.5%
Old Mutual Flexible Life Fund -1.5%
Old Mutual Balanced Life Fund -1.3%
Old Mutual Stable Growth Life Fund -0.8%
Overall w/average -1.3%
Source: MacroSolutions
11
TEAMWORK, ACCOUNTABILITY & INTEGRATION
Graham Tucker John Orford
ASSET
ALLOCATION
EQUITY
SELECTION
Denzil Burger Rian Le Roux
John Orford
Aggressive Balanced
Peter Brooke
Alida Jordaan Warren vd Westhuizen
Arthur Karas Peter Brooke
Conservative
12
MACROSOLUTIONS TEAM
Alida Jordaan
Portfolio Manager (21 Yrs)
Warren vd Westhuizen Portfolio Manager
(14 Yrs)
Arthur Karas
Portfolio Manager (24 Yrs)
Evan Robins
Portfolio Manager
(15 Yrs)
Rian Le Roux
Chief Economist
(35 Yrs)
Johann Els Economist
(29 Yrs)
SA Equities Listed Properties Economics
Graham Tucker Portfolio Manager
(14 Yrs)
Urvesh Desai Portfolio Manager
(12 Yrs)
Denzil Burger Portfolio Manager
(31 Yrs)
Peter Brooke Boutique Head
(20 Yrs)
Khangwelo
Nemukongwe Property Analyst
(5 Yrs)
Gary Davids
Research Analyst (6 Yrs)
John Orford Portfolio Manager
(12 Yrs)
13
LEVERAGING SPECIALIST SKILLS
Property Alternatives Global 10 Subsidiaries
Listed Commodities Equity
Direct Infrastructure Bonds
Private equity Cash
Hedge funds Alternatives
Fixed income
Cash
Bonds
Inflation linkers
Equity
Resources
Financials
Local industrials
MACROSOLUTIONS Asset allocation
Africa
Shared services Compliance Legal Trading Risk management IT
Global industrials
14
Buy lots Cheap
Expensive
Bo
tto
m U
p
Pric
e: V
alu
atio
ns
Reduce
Buy some
Sell all
Deteriorating theme
Improving theme
Top Down Macro Environment
“Integrating top
down & bottom up”
PHILOSOPHY: THEME AND PRICE
15
PRICE: LONG-TERM ASSET ALLOCATION VIEW
SA
Equity
Property
Bonds
Cash
Global*
Equity
Bonds
Cash
Real return View
5.0%
4.5%
2.5%
0.5%
5.0%
-1.0%
-1.0%
Neutral
Neutral
–
Neutral
+
–
–
More balanced outlook
Key risk is earnings delivery
More expensive but benefits from oil price
Lower inflation is very supportive
Better real returns but lacks leverage
Maintain diversification for
risk management
Best risk adjusted returns
Record low yields = low returns
Cash is trash
Source: Old Mutual Investment Group | NB: These are long-term, real returns expected over the next five years, as at 15 January 2015 * The international return expectations above are in US Dollar terms; any rand depreciation will add to returns in rands.
Comment
Neutral
+
16
THEMES
Oil price
Better global growth
Lower inflation
SA surprises
– Lower inflation & rates
– Stronger consumer
China transition
– Consumption > Investment
Low return world
– Dividend yield
17
OLD MUTUAL BALANCED FUND
Effective exposure as at 31 December 2014
Well diversified; small positive bias to growth
Source: Old Mutual Investment Group
SA Property 5%
Global Equities, 25%
SA Equities
40%
SA Money Market
12%
SA Nominal Bonds, 16%
SA Convertible Bonds, 1%
Global Bonds, 0%
Commodities, 1%
18
4.6%
4.7%
5.5%
5.6%
5.8%
5.8%
6.4%
6.5%
6.6%
10.9%
0% 2% 4% 6% 8% 10% 12% 14% 16%
MTN
Firstrand
Sasol
Steinhoff
Old Mutual
Investec
Nedcor
BAT
Richemont
Naspers
7.2
47.3
-13.1
35.2
10.4
33.2
23.6
17.8
2.1
38.7
-20% 0% 20% 40% 60%
SWIX:
15.4%
Tilt 12 Months % Total Return
0.4
-0.8
4.0
2.4
5.3
4.7
3.9
2.4
1.4
-3.7
OLD MUTUAL BALANCED FUND
Top ten shares as at 31 December 2014
Source: Old Mutual Investment Group
20
LONG TERM LESSONS
Equities for the long term
Cash is trash
Time is your friend
Inflation is the enemy
The power of compounding
Don’t put all your eggs in one basket
Asset allocation adds value
21
Annualised real return since December 1929 – December 2014
HISTORIC LONG-TERM REAL RETURNS
Source: Old Mutual Investment Group, MacroSolutions
24
CASH IS TRASH
SA cash has delivered a real return of 0.8% over last 90 years
Real wealth takes more than 80 years to double
Globally, real returns from cash have been negative
Investors have gone backwards in real terms
Historic performance of SA cash:
Best performing local asset class over calendar year: 16%
Worst performer over 10 years: 40%
Bottom line:
Rather own shares in a bank than save your money in the bank
27
THE VIRTUE OF PATIENCE
Source: Old Mutual Investment Group, MacroSolutions
1 day and 1 week: Rolling total returns, June 1995 to current
1 month to 10 years: Rolling total returns, January 1925 to current
28
MacroSolutions
Deliver multi-asset class solutions
Best of both worlds: Boutique model within a larger group
Unique philosophy of theme and price
In the size sweet spot
Long-term lessons
Inflation is the enemy
Require the appropriate level of growth assets
Within an actively managed, diversified portfolio
Patience is key
CONCLUSION
30
Dharmesh Dayal Business Development
MACROSOLUTIONS TEAM
Johann Els Economist
Evan Robins Portfolio Manager
Marietjie Jooste Technical Assistant
John Orford Portfolio Manager
Sathyen Mahabeer Chief Operating Officer
Khangwelo Nemukongwe Property Analyst
Arthur Karas Portfolio Manager
Peter Brooke Head: MacroSolutions
Denzil Burger Portfolio Manager
Melanie Vollenhoven Distribution Specialist
George Petje Research Analyst
Graham Tucker Portfolio Manager
Urvesh Desai Portfolio Manager
Rian le Roux Economist
Gary Davids Research Analyst
Alida Jordaan Portfolio Manager
Merrelyn Diale Business Development
Warren van der Westhuizen Portfolio Manager
31
REGULATORY INFORMATION
Old Mutual Investment Group (Pty) Limited
Physical Address: Mutualpark, Jan Smuts Drive, Pinelands, 7405
Telephone number: +27 21 509 5022
Old Mutual Investment Group (Pty) Limited (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance. The investment portfolios may be market-linked or policy based. Investors’ rights and obligations are set out in the relevant contracts. In respect of pooled, life wrapped products, the underlying assets are owned by Old Mutual Life Assurance Company (South Africa) Limited who may elect to exercise any votes on these underlying assets independently of Old Mutual Investment Group. In respect of these products, no fees or charges will be deducted if the policy is terminated within the first 30 days. Returns on these products depend on the performance of the underlying assets. Disclosures: Personal trading by staff is restricted to ensure that there is no conflict of interest. All directors and those staff who are likely to have access to price sensitive and unpublished information in relation to the Old Mutual Group are further restricted in their dealings in Old Mutual shares. All employees of the Old Mutual Investment Group are remunerated with salaries and standard incentives. Unless disclosed to the client, no commission or incentives are paid by the Old Mutual Investment Group to any persons other than its representatives. All inter-group transactions are done on an arms length basis. We outsource investment administration of our local funds to Curo Fund Services (Pty) Ltd, 50% of which is owned by the Old Mutual Investment Group. Disclaimer: The contents of this document and, to the extent applicable, the comments by presenters do not constitute advice as defined in FAIS. Although due care has been taken in compiling this document, Old Mutual Investment Group does not warrant the accuracy of the information contained herein and therefore does not accept any liability in respect of any loss you may suffer as a result of your reliance thereon. The processes, policies and business practices described may change from time to time and Old Mutual Investment Group specifically excludes any obligation to communicate such changes to the recipient of this document. Old Mutual Investment Group has comprehensive crime and professional indemnity insurance. For more detail, as well as for information on how to contact us and on how to access information please visit www.oldmutualinvest.com.
32
THE SANDTON SKYLINE FOR SA EQUITY
Source: Old Mutual Investment Group, MacroSolutions
December 1924 – December 2014
33
INVESTMENT CONCLUSIONS
Oil price
Overweight global equity
Overweight Europe & Japan; Africa pauses
Overweight Barrow Hanley
South Africa surprises
Overweight SA bonds; offshore pauses
Overweight SA inc.
Neutral property
Low return world
Overweight SA financials
Alternatives
34
GLOBAL BOND YIELDS ARE LOW COMPARED TO HISTORY
Source: Old Mutual Investment Group, MacroSolutions
1703 – 2014
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