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IOOF Investments Snapshot
31 March 2017
IOOF MultiSeriesIOOF MultiMixIOOF Cash ManagementIOOF Balanced Investor
IOOF InvestmentsInvestment management team
Our impressive investment capabilities are driven by our investment team and structure. Each asset class has a dedicated portfolio manager who enjoys strong support from a host of support staff including analysts, investment and marketing specialists.
Steve MerlicekChief Investment Officer
Dan FarmerPortfolio Manager, Australian Equities
Stanley YeoPortfolio Manager, Strategy and International Equities
Ray KingPortfolio Manager, Alternatives
Simon GrossPortfolio Manager, Property
Juanita EscobarPortfolio Manager, Cash
Osvaldo AcostaPortfolio Manager, Fixed Income
Angus KnapmanProperty Manager
Rhodri PaynePortfolio Manager, Implementation
Tim CooperPerformance Analyst
Charles KnealeNational Specialist, IOOF Multi-Manager Investment Solutions
1
IOOF Investments Snapshot | 31 March 2017
Contents
Market insights
Commercial office investments –
where to from here? 2
Strategic tilting update
Cash and fixed interest 3
International shares 3
Currency 3
IOOF MultiSeries
Summary 4
Underlying investment managers 5
IOOF MultiSeries diversified trusts
IOOF MultiSeries 30 6
IOOF MultiSeries 50 6
IOOF MultiSeries 70 7
IOOF MultiSeries 90 7
IOOF MultiMix
Summary 8
Underlying investment managers 9
IOOF MultiMix single sector trusts
IOOF MultiMix Australian Shares 10
IOOF MultiMix International Shares 10
IOOF MultiMix Diversified Fixed Interest 11
IOOF MultiMix Cash Enhanced 11
IOOF Trust
IOOF Cash Management 12
MultiMix wholesale single sector trusts
Property 13
Alternatives and Defensive equities 14
IOOF MultiMix diversified trusts
IOOF MultiMix Capital Stable 15
IOOF MultiMix Conservative 15
IOOF MultiMix Moderate 16
IOOF MultiMix Balanced Growth 16
IOOF MultiMix Growth 17
MySuper fund
IOOF Balanced Investor 17
2
Commercial office investments – where to from here?The current Australian commercial property market can broadly be broken into two categories: the first being the hot markets of Sydney and Melbourne and the second being the balance of the state capital cities which, for a range of reasons, are not experiencing such strong investor and tenant demand. So why are the Sydney and Melbourne markets so hot and, perhaps more importantly, where are they going to from here?
The Sydney and Melbourne commercial property markets both enjoyed and benefited from substantial tailwinds in 2016 and most of these factors have continued to influence the sector in early 2017.
A fairly unique combination of forces including improved tenant demand, falling vacancy rates, low interest rates, moderate new construction levels, removal of existing stock for redevelopment or alternate use, strong demand from international investors and a broad increase in investors’ allocation to the property sector have all influenced the market and has led to rising capital values and effective rental growth in the central business districts and many metropolitan locations.
Sydney in particular has benefited from the tightening market conditions. After an extended run of improving fundamentals, the Sydney commercial property market may be considered to be at or about the top of the current cycle. As a consequence, investment grade property is not cheap, however nor is it extremely expensive by historic or international standards.
In Melbourne, the CBD enjoyed the strongest quarterly absorption of commercial accommodation in the first three months of the year of any Australian capital city, resulting in a fall in vacancy from 8.1% to 7.5% for all grades of office space.
Looking forward, interest rates and the spread between bonds and property yields is on many property investors’ minds, however currently there is a generous spread between these two indicators and it is generally understood that the property market can absorb moderate increases in bond rates, if and as they eventuate over time. A moderate outlook for the
broad Australian economy suggests that the existing relatively low interest rate environment may persist for a considerable period.
Even if there is a gradual increase in global long-term bond rates, history illustrates that such a trend is not overly detrimental to investment property as it is to some degree a consequence of improving broad economic trends that in turn generally lead to greater demand for office space. Conversely a dramatic or unforeseen increase in rates may be detrimental to the sector as investors may look to reduce their allocation to property and create an imbalance if there is a large volume of buildings for sale with a reduced appetite from purchasers.
Investing in property should be a long-term strategy and experienced managers are able to identify and secure properties at any point in the cycle that will generate strong long-term investment returns. Either by unlocking hidden value, repositioning or enhancing existing assets or by identifying demographic, infrastructure or individual sector and location trends, savvy investors will continue to generate good returns from the Sydney and Melbourne commercial office market over the long term.
What is necessary throughout 2017 is the continued and diligent application of well-considered and successful strategies. Good managers will not lose focus of their investors’ risk profiles and expectations and will strictly follow their core investment strategies. The key fundamentals of prime location, building quality, proximity to infrastructure, social amenities, cultural and demographic trends have never been more important and the Sydney and Melbourne commercial office markets are well placed to meet investors’ needs moving forward.
By Simon Gross
IOOF Investments Portfolio Manager, Property
3
IOOF Investments Snapshot | 31 March 2017
Strategic tilting update
Cash and fixed interest
Position
For both MultiMix and MultiSeries, there is an overweight to cash/short duration strategies, underweight to fixed interest.
Rationale
Our view is that Australian and US Government bond yields are very expensive. The US 10 year Government bond yield as at end of March was 2.40% slightly down from 2.45% at the end of December. Despite the recent sharp jump in bond yields, we believe this may be the end of the bull market in fixed interest.
Current status
Since inception, the tilt to cash has underperformed as global bonds continue to produce positive returns. The underperformance, however, is somewhat mitigated by strong performance from the underlying cash managers, and strong returns from the IOOF Income Trust.
For MultiMix over the March quarter, the IOOF Income Trust returned 1.38% and the Henderson Cash Enhanced Fund returned 0.87% versus the diversified fixed interest strategic benchmark return of 0.96%.
For MultiSeries over the March quarter, the Metrics Credit Partners Diversified Australian Senior Loan Fund returned 1.09% and the Henderson Income Fund returned 1.53% outperforming the MultiSeries Fixed Income strategic benchmark return of 0.96%.
International shares
Position
For MultiMix, tilt towards unhedged international shares from Australian shares. Tilt only in place for IOOF MultiMix Growth Trust, and has been reduced for IOOF MultiMix Balanced Growth Trust.
Rationale
While both Australian and international shares looked cheap on various valuation metrics, we believed international shares showed better value, particularly in the US. In addition, the high Australian dollar made investing offshore more attractive. Unhedged international equities also provides for a natural hedge. If equity markets fall, the Australian dollar tends to fall with it (as it is considered a risk asset), thus providing a hedge to investors.
Current status
Since inception, the tilt to unhedged international shares has outperformed due to both the international equities market outperforming the Australian equities market, and a sharp decline in the Australian dollar.
For the March quarter, the unhedged international shares benchmark underperformed the Australian shares benchmark by 3.3% (1.4% versus 4.7%).
Currency
Position
For MultiMix, the hedged benchmark remains at 0% of the developed equities portfolio versus the strategic benchmark of 50%. For MultiSeries, the hedged benchmark is at 35% versus the strategic benchmark of 50%.
Rationale
The key reasons for this continued position are:
• The carry trade will fade rapidly as cash rates enter a strong uptrend in the US.
• Risks to the Australian economy are to the downside and to the US economy are to the upside.
• US dollar strength likely on the back of higher budget deficits under a Trump presidency. However, already rich valuations and limited scope for policy divergence will likely restrain the US dollar’s upside potential.
Current status
For the March quarter, the unhedged developed international shares benchmark underperformed the hedged developed international shares benchmark by 4.8% (0.9% versus 5.7%).
By Simon Gross
IOOF Investments Portfolio Manager, Property
4
IOOF MultiSeries Summary
Full details of the investment strategy, objectives and underlying managers for each Trust are provided in the trust profile which can be downloaded from www.ioof.com.au/investment-central
Trust APIR code Risk/return profile
Estimated management costs as at 4 October 2016 % pa*
Performance fee as at 4 October 2016 % pa^
Growth / Defensive
MultiSeries diversified
IOOF MultiSeries 30 IOF0253AU Low to medium 0.40 0.00
Growth 30%Defensive 70%
IOOF MultiSeries 50 IOF0254AU Medium 0.45 0.00
Growth 50%Defensive 50%
IOOF MultiSeries 70 IOF0090AU Medium to high 0.50 0.00
Defensive 30%Growth 70%
IOOF MultiSeries 90 IOF0255AU High 0.55 0.00
Growth 90%Defensive 10%
* This estimated fee currently includes the investment management fee and indirect costs. See pages 15 and 16 of the IOOF MultiSeries PDS for full details on fees and other costs.
^ Currently, there are no performance-based investment management fee arrangements in place with any of the underlying investment managers of the Trusts.
5
IOOF Investments Snapshot | 31 March 2017
Underlying investment managersOver the last quarter the following changes were made to our underlying investment manager line-up.
New inclusion in the trusts: Invesco (Australian shares)
Removal from the trusts: None
Manager Style
IOO
F M
ultiS
erie
s 30
, 50,
70
and
90
IOOF Investment Management Limited Short-term money market securities
Cash
and
sho
rt-
term
sec
urit
ies
Henderson Global Investors (Australia) Institutional Funds Management Limited
Australian fixed interest
Div
ersi
fied
fixed
inte
rest
Metrics Credit Partners Pty Limited Australian corporate loans
Western Asset Management Company Australian bonds
Legg Mason Brandywine Global Investment Management, LLC
Top-down, value-driven
Invesco Australia Limited International core fixed income
IOOF Investment Management Limited Core
Prop
erty
Macquarie Investment Management Limited True index (Australian and global property securities)
Acadian Asset Management (Australia) Limited Small companies
Aus
tral
ian
shar
esHenderson Global Investors (Australia) Institutional Funds Management Limited
Mid cap focused growth
Invesco Australia Limited Quantitative 130/30
IOOF QuantPlus Enhanced passive
Platypus Asset Management Pty Limited Quantitative/Quality momentum
State Street Global Advisors, Australia, Limited Enhanced passive
UBS Global Asset Management (Australia) Ltd Fundamental high conviction
Goldman Sachs International Multi-factor index
Inte
rnat
iona
l sha
res
Challenger Limited Index plus 0.5%
IOOF QuantPlus Passive
Neuberger Berman Australia Pty Limited Emerging markets
State Street Global Advisors, Australia, Limited Managed volatility
TT International Emerging and developed markets
Invesco Australia Limited Global targeted return
Alt
erna
tive
s
Macquarie Investment Management Limited True index (global infrastructure)
Metrics Credit Partners Pty Limited Secured Australian private debt
6
IOOF MultiSeries diversified trustsIOOF MultiSeries 30
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 na na na na na na
Growth 1.42 na na na na na na
Total 1.42 na na na na na na
Changes to portfolio
Within the Australian shares portfolio, Invesco Australian Equity Long / Short Fund was appointed in February. The inclusion of Invesco increases the expected return of the Australian shares portfolio and provides a further positive point of differentiation to other low cost multi-manager offerings.
Contributors and Detractors
Contributors to performance
• The fixed interest portfolio performed particularly well, with all managers outperforming, particularly Brandywine.
Detractors from performance
• The Australian shares portfolio underperformed its benchmark.
• The international shares portfolio also underperformed its benchmark.
• Lower hedging compared to the strategic benchmark detracted from value as unhedged international shares underperformed hedged international shares.
Actual versus target allocation
IOOF MultiSeries 50
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 na na na na na na
Growth 1.94 na na na na na na
Total 1.94 na na na na na na
Changes to portfolio
Within the Australian shares portfolio, Invesco Australian Equity Long / Short Fund was appointed in February. The inclusion of Invesco increases the expected return of the Australian shares portfolio and provides a further positive point of differentiation to other low cost multi-manager offerings.
Contributors and Detractors
Contributors to performance
• The fixed interest portfolio performed particularly well, with all managers outperforming, particularly Brandywine.
Detractors from performance
• The Australian shares portfolio underperformed its benchmark.
• The international shares portfolio also underperformed its benchmark.
• Lower hedging compared to the strategic benchmark detracted from value as unhedged international shares underperformed hedged international shares.
Actual versus target allocation
Actual allocation Target allocation
AustralianShares
Internationalshares
Property Alternatives Diversi�ed�xed
interest
Cash andshort-termsecurities
0
10
20
30
40
50
Actual allocation Target allocation
0
5
10
15
20
25
30
35
40
AustralianShares
Internationalshares
Property Alternatives Diversi�ed�xed
interest
Cash andshort-termsecurities
7
IOOF Investments Snapshot | 31 March 2017
IOOF MultiSeries 70
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 1.28 10.47 11.62 9.69 7.39 6.50
Growth 2.30 2.96 0.74 -8.11 -1.79 2.34 0.78
Total 2.30 4.24 11.20 3.50 7.91 9.72 7.28
Changes to portfolio
Within the Australian shares portfolio, Invesco Australian Equity Long / Short Fund was appointed in February. The inclusion of Invesco increases the expected return of the Australian shares portfolio and provides a further positive point of differentiation to other low cost multi-manager offerings.
Contributors and Detractors
Contributors to performance
• The fixed interest portfolio performed particularly well, with all managers outperforming, particularly Brandywine.
Detractors from performance
• The Australian shares portfolio underperformed its benchmark.
• The international shares portfolio also underperformed its benchmark.
• Lower hedging compared to the strategic benchmark detracted from value as unhedged international shares underperformed hedged international shares.
Actual versus target allocation
IOOF MultiSeries 90
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 na na na na na na
Growth 2.77 na na na na na na
Total 2.77 na na na na na na
Changes to portfolio
Within the Australian shares portfolio, Invesco Australian Equity Long / Short Fund was appointed in February. The inclusion of Invesco increases the expected return of the Australian shares portfolio and provides a further positive point of differentiation to other low cost multi-manager offerings.
Contributors and Detractors
Contributors to performance
• The alternatives strategies outperformed their benchmarks.
• The fixed interest portfolio performed particularly well, with all managers outperforming, particularly Brandywine.
Detractors from performance
• The Australian shares portfolio underperformed its benchmark.
• The international shares portfolio also underperformed its benchmark.
• Lower hedging compared to the strategic benchmark detracted from value as unhedged international shares underperformed hedged international shares.
Actual versus target allocation
Actual allocation Target allocation
0
5
10
15
20
25
30
AustralianShares
Internationalshares
Property Alternatives Diversi�ed�xed
interest
Cash andshort-termsecurities
Actual allocation Target allocation
0
5
10
15
20
25
30
35
40
AustralianShares
Internationalshares
Property Alternatives Diversi�ed�xed
interest
Cash andshort-termsecurities
8
IOOF MultiMix Summary
Full details of the investment strategy, objectives and underlying managers for each Trust is provided in the trust profile which can be download from www.ioof.com.au/investment-central
Trust APIR code Risk/return profile
Total fee as at 30 June 2016 % pa1
Excluding performance fee as at 30 June 2016 % pa
Growth/Defensive
MultiMix single sectorIOOF MultiMix Cash Enhanced
IOF0091AU Low 0.35 0.35
Defensive 100%Growth 0%
IOOF MultiMix Diversified Fixed Interest
IOF0096AU Low/Medium 0.40 0.49
Defensive 100%Growth 0%
IOOF MultiMix Australian Shares
IOF0092AU High 1.47 0.80
Defensive 0%Growth 100%
IOOF MultiMix International Shares
IOF0098AU High 0.86 0.90
Defensive 0%Growth 100%
MultiMix diversifiedIOOF MultiMix Capital Stable
IOF0094AU Low 0.47 0.51
Defensive 85%Growth 15%
IOOF MultiMix Conservative
IOF0095AU Low/Medium 0.70 0.73
Defensive 70%Growth 30%
IOOF MultiMix Moderate
UFM0051AU Medium 0.85 0.80
Defensive 45%Growth 55%
IOOF MultiMix Balanced Growth
IOF0093AU Medium/High 1.06 0.91
Defensive 28%Growth 72%
IOOF MultiMix Growth
IOF0097AU High 1.17 0.96
Defensive 10%Growth 90%
Cash Management and Balanced InvestorIOOF Cash Management (Class A)
PIM0002AU Low 0.30 0.30
Defensive 100%Growth 0%
IOOF Balanced Investor
IOF0232AU Medium/High 0.50 0.50
Defensive 30%Growth 70%
9
IOOF Investments Snapshot | 31 March 2017
Underlying investment managersOver the last quarter the following changes were made to our underlying investment manager line-up.
New inclusion in the trusts: None
Removal from the trusts: None
Manager Style
IOO
F M
ulti
Mix
Gro
wth
Tru
st
IOO
F M
ulti
Mix
Bal
ance
d G
row
th T
rust
IOO
F M
ulti
Mix
Mod
erat
e Tr
ust
IOO
F M
ulti
Mix
Con
serv
ativ
e Tr
ust
IOO
F M
ulti
Mix
Cap
ital
Sta
ble
Trus
t
IOO
F M
ultiM
ix D
iver
sifie
d Fi
xed
Inte
rest
Tru
st
IOO
F
Mul
tiMix
Cas
h En
hanc
ed T
rust
Henderson Global Investors (Australia) Institutional Funds Management Limited
Enhanced cash
Cash
and
shor
t-ter
m
secu
ritie
s
IOOF Investment Management Limited Short-term money market securities
Henderson Global Investors (Australia) Institutional Funds Management Limited
Fundamental active
Div
ersi
fied
fixed
inte
rest
IOOF Investment Management Limited Income focusMetrics Credit Partners Pty Limited Australian corporate loansBlueBay Asset Management LLP Emerging market debtBrandywine Global Investment Management, LLC
Top down value driven
Macquarie Investment Management Limited Active short duration creditPIMCO Australia Pty Ltd Core plus, multi-strategyLegg Mason Western Asset Management Company
Global total return
Western Asset Management Company US bank loansFidante Partners Limited Broad cap core
Prop
erty
IOOF Investment Management Limited CoreLegg Mason Martin Currie Australia Limited Small capBT Investment Management (RE) Limited Active, value-driven, risk controlledCohen & Steers Capital Management, Inc. Core, bottom-upResolution Capital Limited High conviction,
benchmark-unaware
IOO
F M
ultiM
ix A
ustr
alia
n Sh
ares
Tru
st
AllianceBernstein Investment Management Australia Limited
Managed volatility
Aus
tral
ian
Shar
es
Acorn Capital Limited Micro-capsVinva Investment Management Limited QuantitativeHenderson Global Investors (Australia) Institutional Funds Management Limited
Bottom-up, growth
Legg Mason Martin Currie Australia Limited Dynamic valueOC Funds Management Limited Small cap
DNR Capital Growth/qualityBoutique Manager Portfolio Diversified Australian sharesDefensive Equities Trust Defensive equities
IOO
F M
ultiM
ix In
tern
atio
nal
Sha
res T
rust
EAM Global Investors LLC Emerging markets small caps
Inte
rnat
iona
l Sha
resState Street Global Advisors, Australia,
LimitedManaged volatility
Wellington International Management Company Pte Ltd
Growth
Antipodes Partners Pragmatic value, absolute returnLSV Asset Management Quantitative valueTT International Growth at reasonable price and
concentrated quality
We have a large number of underlying managers for our exposure to alternative assets. These managers are not listed separately due to the size of the list and the fact that the allocation to each manager is small.
Alte
rnat
ives
10
IOOF MultiMix single sector trustsIOOF MultiMix Australian Shares
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 0.90 3.87 3.20 3.21 3.19 3.48
Growth 2.58 3.00 10.41 0.54 3.24 6.71 2.66
Total 2.58 3.90 14.29 3.74 6.45 9.90 6.13
Benchmark 4.71 9.88 20.24 4.44 7.50 10.83 7.20
Changes to portfolio
Investments in new portfolios, OC Micro Cap and Acorn Micro Cap, were made opportunistically over the quarter. Valuations in microcaps stocks have become more attractive compared to larger companies over the past few months.
Contributors and Detractors
Contributors to performance
• Performance of largest manager in the Trust, Vinva, very strong.
• Defensive manager AB Managed Volatility outperformed over a strong quarter.
• Value manager Martin Currie outperformed as stocks on lower valuations continued to rally.
Detractors from performance
• Overweight allocation hurt relative returns as smaller companies failed to match the strong returns of large companies over the quarter.
• Specialist small and mid-cap company managers, OC and Selector, produced only a small positive return over the quarter, significantly lower than the market return.
• Growth manager Henderson trailed the benchmark slightly over the quarter as high growth stocks generally trailed the market.
Investment manager allocation3
IOOF MultiMix International Shares
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 0.11 21.16 11.21 8.42 5.47 4.42
Growth 2.30 7.31 -4.47 -4.59 4.55 9.95 6.26
Total 2.30 7.42 16.69 6.62 12.96 15.42 10.68
Benchmark 1.38 8.43 15.86 5.00 12.25 15.32 10.90
Changes to portfolio
There were no changes over the quarter.
Contributors and Detractors
Contributors to performance
• An overweight to Emerging markets as Emerging markets outperformed developed markets by almost 5%.
• Wellington had the highest level of excess returns.
• TT Emerging Markets, Antipodes Global and SSgA Global Managed Volatility outperformed their respective benchmarks.
Detractors from performance
• Growth outperformed Value by 4.3% so value manager LSV underperformed.
• Antipodes Asia, EAM and TT Global underperformed their respective benchmarks.
Investment manager allocation3
DNR Capital 13.18%
Legg Mason Martin Currie Australia Limited 15.63%
OC Funds Management
Limited 14.54%
Boutique Manager Portfolio 15.19%
IOOF Investment Management Limited 0.22%
AllianceBernstein Investment Management Australia Limited 4.37%
Acorn Capital Limited 3.17%
Vinva Investment Management Limited19.33%
Henderson Global Investors (Australia) Institutional Funds Management Limited 14.35%
LSV Asset Management 13.86%
TT International 14.73%
EAM Global Investors LLC 5.27%
Antipodes Partners 19.51%
IOOF Investment Management Limited 0.34%
TT International 8.98%
State Street Global Advisors, Australia, Limited 18.49%
Wellington International Management Company Pte Ltd 18.83%
11
IOOF Investments Snapshot | 31 March 2017
IOOF MultiMix Diversified Fixed Interest
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.52 1.21 8.23 7.10 6.69 6.23 7.47
Growth 1.40 -0.51 -3.71 -4.08 -1.88 -0.65 -1.09
Total 1.91 0.70 4.52 3.02 4.82 5.58 6.38
Benchmark 0.96 -1.58 2.13 2.68 5.28 5.43 6.44
Changes to portfolio
The portfolio credit quality was improved from A+ to AA- which is expected to result in better risk-adjusted returns. We maintained a moderate overweight in high investment grade corporate credit and positioned the portfolio with an underweight duration in order to provide capital protection from the risk of rising yields.
Contributors and Detractors
Contributors to performance
• Sector and security selection in high investment-grade credit, US loans and emerging market in our portfolio was a strong contributor.
• Duration and curve positions were the primary contributor for this quarter’s performance as the market expectations for further Fed hikes in 2017 were priced-in during the quarter.
• Brandywine, PIMCO, BlueBay and Henderson were strong contributors to overall performance.
Detractors from performance
• No detractors to note.
Investment manager allocation3
IOOF MultiMix Cash Enhanced
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.60 1.03 2.59 2.64 2.85 3.48 4.10
Growth 0.09 0.13 -0.02 -0.11 -0.21 -0.05 -0.03
Total 0.69 1.16 2.57 2.53 2.64 3.44 4.07
Benchmark 0.44 0.88 1.94 2.08 2.29 2.64 3.28
Changes to portfolio
Outperformance was driven by sector allocation to credit and security selection to higher yielding, non-benchmark floating rate notes (FRNs) as credit spread tightened over the quarter.
Contributors and Detractors
Contributors to performance
• Allocation to Term Deposits, NCDs and cash notice accounts has contributed to the performance over the quarter.
• Allocation to higher yielding, non-benchmark floating rate notes (FRNs) and credit spread contraction added value.
Detractors from performance
• There were no significant detractors from performance.
Investment manager allocation3
Henderson Global Investors (Australia) Institutional Funds
Management Limited 20.03%
PIMCO Australia Pty Ltd 24.31%
Legg Mason Western Asset Management
Company 5.94%
Brandywine Global Investment Management,
LLC 19.44%
IOOF Investment Management Limited (Cash) 0.50%
Henderson Global Investors (Australia) Institutional Funds Management Limited (Cash) 9.38%
IOOF Investment Management Limited (Income Trust) 12.35%
BlueBay Asset Management LLP 2.55%
Western Asset Management Company 5.51%
Henderson Global Investors (Australia) Institutional Funds
Management Limited 62.60%
IOOF Investment Management Limited 37.40%
12
IOOF TrustIOOF Cash Management
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Total 0.49 0.98 2.14 2.22 2.45 2.86 3.45
Benchmark 0.44 0.88 1.94 2.08 2.29 2.64 3.28
Changes to portfolio
The Trust maintains a significant allocation to cash notice accounts and TDs, which offers a significant yield premium compared to bank bills without compromising the overall liquidity.
Contributors and Detractors
Contributors to performance
• Allocation to Term Deposits, NCDs and cash notice accounts has contributed to the performance over the quarter, albeit these rates have significantly come down.
Detractors from performance
• There were no significant detractors from performance.
Allocation by Standards & Poors ratings3
TOTAL "A-1+" 53.0%
TOTAL "A-1" 18.9%
TOTAL "A-2" 28.2%
A-3 or below 0.0%
13
IOOF Investments Snapshot | 31 March 2017
MultiMix wholesale single sector trusts
Investment manager allocation3
Fidante Partners Limited 63.0%
IOOF Investment Management Limited 0.5%
Legg Mason Martin Currie Australia Limited 36.5%
Investment manager allocation3
BT Investment Management (RE) Limited 20.3%
Cohen & Steers Capital Management, Inc. 27.4%
IOOF Investment Management Limited 0.9%
Resolution Capital Limited 51.4%
Allocation by property type3
Industrial 31.00%Commercial 69.00%
Property
Property – Australian
Changes to portfolio
Our managers recognised the headwinds that are affecting some of the Australian retail REITs and increased their allocations to organisations with diversified development pipelines and strong internal management capabilities.
Contributors to performance • Allocation to Lend Lease.• Allocation to Peet & Co.• Allocation to Mirvac.
Detractors from performance • Allocation to Westfield.• Allocation to Vicinity Centres.• Allocation to Investa Office.
Property – International
Changes to portfolio
Due to a loss of momentum in the US REIT sector there were opportunities identified in other economies, including China, where sentiment strengthened.
Contributors to performance • Underweight allocation to Japan.• Underweight allocation to US retail.• Overweight position in Singapore and Hong Kong.
Detractors from performance • Future bond yield uncertainty.• US political concerns.• Ongoing volatility.
Property – Direct
Changes to portfolio
Having crystallised a substantial profit by selling a commercial office property in North Ryde late last year, the Trust is in the process of increasing its allocation to industrial property. An opportunity has been identified to acquire a brand new industrial asset in the tightly held Melbourne suburb of Altona North.
Contributors to performance • Market value increase at Glen Waverley property.• Reduced vacancy rate.• Successful tenant retention.
Detractors from performance • Rent incentives.• Short term capital expenditure.
14
AllianceBernstein Investment Management
Australia Limited 39.86%
Cash and short-term securities 0.73%
State Street Global Advisors, Australia, Limited 31.82%
Plato Investment Management Limited 27.59%
Private equity 45%
Cash and short-term securities 13%
Discretionary hedge 40%
Special situations 2%
MultiMix wholesale single sector trustsAlternatives and Defensive equities
Alternative – Growth
Changes to portfolio
During the March quarter the portfolio continued to reduce its allocation to hedge funds and these funds were used to allocate more monies to private equity and build up our cash holding. The benchmark produced a slightly positive return for the quarter.
Contributors to performance • Invesco GTR is the largest allocation in the portfolio and this slightly
outperformed the portfolio benchmark.
Detractors from performance • The appreciation of the Australian dollar (versus the $US and the Euro)
reduced the performance of our global managers.• Other than Invesco GTR, hedge fund managers continued their poor
performance with weak results for the last quarter.• Private equity managers were mixed but generally modestly negative
in their contribution.
Alternative – Defensive
Changes to portfolio
Cash holdings were increased in the quarter as redemptions from a hedge fund manager continued. Whilst performance remains strong relative to benchmark for the year to date, there was some underperformance in the March quarter.
Contributors to performance • Energy linked investments did well in the quarter.• Cash holdings were a modest contributor to performance.
Detractors from performance • The appreciation of the Australian dollar (versus the $US and the Euro)
reduced the performance of our global managers.• Private debt managers underperformed with no obvious reason.• Our special situations manager was slightly behind benchmark.
Investment manager allocation3
Investment manager allocation3
Infrastructure 19%
Subordinated debt 40%
Cash and short-term securities 28%
Credit opportunities (hedge fund) 13%
Discretionary hedge 0%
Investment manager allocation3Defensive – Equities
Changes to portfolio
There were no significant changes to the portfolio over the quarter.
Contributors to performance • The defensively positioned portfolio significantly outperformed cash and
bonds, and only slightly trailed equities in a very strong quarter for equity markets.
• Defensive manager AB Managed Volatility outperformed over a strong quarter.
Detractors from performance • Income focused managed Plato trailed the equity market slightly as its
quantitative stock selection approach failed to fully capture the market rally.• Low volatility manager SSGA trailed the market as its exposure to more yield-
sensitive stocks hurt performance.
15
IOOF Investments Snapshot | 31 March 2017
IOOF MultiMix diversified trustsIOOF MultiMix Capital Stable
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 1.02 6.22 5.32 5.70 5.61 6.24
Growth 1.82 0.82 0.07 -1.63 -0.76 0.22 -0.24
Total 1.82 1.84 6.29 3.68 4.93 5.83 6.01
Changes to portfolio
Investments in new Australian equities portfolios, OC Micro Cap and Acorn Micro Cap, were made opportunistically over the quarter. Credit quality in fixed interest was improved to AA-.
Contributors and Detractors
Contributors to performance
• The diversified fixed interest portfolio outperformed its benchmark due to Brandywine significantly outperforming its benchmark.
• An overweight to defensive equities also added value.
• An underweight allocation to cash also added value as cash underperformed other asset classes.
Detractors from performance
• None of significance.
IOOF MultiMix Conservative
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 1.16 6.84 8.10 7.49 6.49 6.70
Growth 1.52 1.44 0.87 -4.26 -1.67 0.48 -0.15
Total 1.52 2.60 7.71 3.84 5.83 6.97 6.54
Changes to portfolio
Investments in new Australian equities portfolios, OC Micro Cap and Acorn Micro Cap, were made opportunistically over the quarter. Credit quality in fixed interest was improved to AA-. Alternative defensive cash holdings were increased as hedge fund exposure was reduced.
Contributors and Detractors
Contributors to performance
• The diversified fixed interest portfolio outperformed its benchmark due to Brandywine significantly outperforming its benchmark.
• The international equities portfolio outperformed its benchmark.
• An underweight allocation to cash also added value as cash underperformed other asset classes.
Detractors from performance
• A zero hedge on international equities detracted the bulk of value as unhedged international shares underperformed hedged.
• The alternative defensive portfolio underperformed its fixed interest benchmark.
.Actual versus target allocation Actual versus target allocation
Actual allocation Target allocation
Alternative - defensive
Internationalshares
Australian shares
Property Cash andshort-termsecurities
Diversi�ed �xed
interest
0
10
20
30
40
50
Defensive Actual allocation Target allocation
Alternative International shares
Australian shares
Property Diversi�ed�xed
interest
Cash andshort-termsecurities
0
10
20
30
40
50
Defensive
16
Actual versus target allocation Actual versus target allocation
Actual allocation Target allocation
Alternative - growth
International shares
Australian shares
Property Diversi�ed�xed
interest
Cash andshort-termsecurities
0
5
10
15
20
25
30
35
Alternative - defensive
Defensive Actual allocation Target allocation
Alternative - growth
International shares
Australian shares
Property Diversi�ed�xed
interest
Cash andshort-termsecurities
0
5
10
15
20
25
30
Alternative - defensive
IOOF MultiMix diversified trustsIOOF MultiMix Moderate
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 1.09 9.08 6.77 5.80 5.27 5.39
Growth 1.75 2.35 0.59 -2.57 1.22 3.12 1.46
Total 1.75 3.45 9.67 4.20 7.02 8.39 6.85
Changes to portfolio
Investments in new Australian equities microcap portfolios were made opportunistically over the quarter. Credit quality in fixed interest was improved to AA-. Hedge fund exposure was reduced in the alternatives portfolios.
Contributors and Detractors
Contributors to performance
• The diversified fixed interest portfolio outperformed due to Brandywine significantly outperforming its benchmark.
• The international equities portfolio outperformed.
• An underweight allocation to fixed interest added value as fixed interest underperformed most other asset classes.
Detractors from performance
• A zero hedge on international equities detracted the bulk of value as unhedged international shares underperformed hedged.
• Both alternatives portfolios underperformed.
• An overweight to the Income Trust detracted value.
• Both the Australian and Defensive Equities portfolios underperformed the Australian equities benchmark.
IOOF MultiMix Balanced Growth
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 0.82 11.39 10.70 8.51 6.52 6.25
Growth 1.46 3.01 -0.47 -6.33 -0.41 3.62 1.53
Total 1.46 3.83 10.92 4.37 8.11 10.14 7.78
Changes to portfolio
Investments in new Australian equities microcap portfolios were made opportunistically over the quarter. A commercial property was sold. Hedge fund exposure was reduced in the alternatives portfolios.
Contributors and Detractors
Contributors to performance
• The international equities portfolio outperformed.• The diversified fixed interest portfolio outperformed as
Brandywine significantly outperformed its benchmark.• An underweight to diversified fixed interest added value as
fixed interest underperformed other asset classes.
Detractors from performance
• A zero hedge on international equities detracted the bulk of value as unhedged international shares underperformed hedged.
• The Australian equities portfolio underperformed as a result of the overweight allocation to small caps.
• The alternative growth portfolio underperformed its equities benchmark.
• An underweight to Australian equities detracted value.
17
IOOF Investments Snapshot | 31 March 2017
Actual versus target allocation Actual versus target allocation
Actual allocation Target allocation
Alternative - growth
International shares
Australian shares
Property Diversi�ed�xed
interest
Cash andshort-termsecurities
0
5
10
15
20
25
30
35
40
Alternative - defensive
Actual allocation Target allocation
Cash and short-term securities
Diversi�ed �xed
interest
Property Australian shares
AlternativesInternational shares
0
5
10
15
20
25
30
IOOF MultiMix Growth
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 0.65 15.60 11.43 8.87 6.54 6.01
Growth 1.72 3.91 -2.79 -6.51 0.33 4.82 2.26
Total 1.72 4.57 12.81 4.91 9.20 11.37 8.26
Changes to portfolio
Investments in new Australian equities microcap portfolios were made opportunistically over the quarter. A commercial property was sold. Hedge fund exposure was reduced in the alternatives portfolios.
Contributors and Detractors
Contributors to performance
• The international equities portfolio outperformed.• An overweight to international equities added value.• The diversified fixed interest portfolio outperformed as
Brandywine significantly outperformed its benchmark.• An underweight to diversified fixed interest added value as
fixed interest underperformed other asset classes.
Detractors from performance
• A zero hedge on international equities detracted the bulk of value as unhedged international shares underperformed hedged.
• The Australian equities portfolio underperformed as a result of the overweight allocation to small caps.
• The alternative growth portfolio underperformed its equities benchmark.
• An underweight to Australian equities detracted value.
MySuper fundIOOF Balanced Investor
Performance2
3 mths
%
6 mths
%
1 year
%
2 year
% pa
3 year
% pa
5 year
% pa
7 year
% pa
Distribution 0.00 1.23 3.82 4.18 3.80 na na
Growth 2.25 3.02 7.46 0.39 4.83 na na
Total 2.25 4.25 11.28 4.57 8.62 na na
Benchmark 2.61 5.18 11.85 4.77 8.56 na na
Changes to portfolio
Within the Australian shares portfolio, Invesco Australian Equity Long / Short Fund was appointed in February. The inclusion of Invesco increases the expected return of the Australian shares portfolio and provides a further positive point of differentiation to other low cost multi-manager offerings.
Contributors and Detractors
Contributors to performance
• The fixed interest portfolio performed particularly well, with all managers outperforming, particularly Brandywine.
Detractors from performance
• Lower hedging compared to the strategic benchmark detracted from value as unhedged international shares underperformed hedged international shares.
• The Australian shares portfolio underperformed its benchmark.
• The international shares portfolio also underperformed its benchmark.
18
Notes to the Snapshot
1. The total management costs are subject to change from time to time and may vary slightly from the estimated management costs (as detailed in the current PDS or any SPDS (if applicable)) depending on changes to the composition of the Trust’s underlying assets, changes in exposure to underlying investment managers and where any unusual or non-recurrent expenses are incurred. The total management cost listed includes any performance fees that may be charged by underlying investment managers. Please refer to the current PDS or SPDS for full details on fees and costs. Please refer to IOOF MultiMix, IOOF Balanced Investor Trust, IOOF MultiSeries PDS and the IOOF Cash Management Trust PDS for full details on fees and costs.
2. Performance is net of management costs and expenses. Performance is based on exit price to exit price for the period and assumes that all distributions are reinvested. Management costs and other expenses are accounted for in the exit price. Past performance is not a reliable indicator of future performance.
Full details of the benchmarks used are provided in IOOF MultiMix, IOOF Balanced Investor Trust, IOOF MultiSeries PDS and IOOF Cash Management Trust PDS.
3 Allocations may not sum to 100% due to rounding.
Important Note
Issued by IOOF Investment Management Limited (IIML) ABN 53 006 695 021, AFS Licence No. 230524, as Responsible Entity for IOOF MultiMix, IOOF Balanced Investor Trust, IOOF MultiSeries and the IOOF Cash Management Trust. IIML is a company within the IOOF group of companies which consists of IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate. IIML’s contact details can be found on www.ioof.com.au. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser. You should obtain and consider a copy of the Product Disclosure Statement available from us or your financial adviser, before you acquire a financial product. Past performance is not a reliable indicator of future performance. Information has been prepared in good faith and with reasonable care, with information believed to be accurate and reliable at the time of publication. However, IIML and their respective officers, employees, agents and associated entities disclaim and exclude all liability for any loss or damage suffered by any person acting on any information provided in, or omitted from this document. This document has been based on information believed to be accurate and reliable at the time of publication. W
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