ppi asset allocation strategy updated june 2009

8/14/2019 PPI Asset Allocation Strategy Updated June 2009

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AssetAllocationStrategyUpdated 24 June 2009


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Introduction

Section A: History & Theory Of Asset Allocation

Section B: PPI SolutionsSection C: Administration Of Services

Section D: How Is The Service Delivered?


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Section A:History & theory of asset allocation

Date Influence Nature of the influence Area of impact

1952 Harry Markowitz Diversification; efficient frontiers andmodern portfolio thinking

Diversification and riskmanagement

1991 Professor Brinson(and others)

The factors influencing portfolioperformance over time

Asset allocation

2002 Daniel Kahneman The psychological influence oninvestment decisions

Investor attitude to risk


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Markowitz

Modern Portfolio Theory

Understanding Markowitz is about recognising

that investors requirements revolve around

obtaining reasonable investment returns without

excessive volatility (Risk).

Its not about getting high returns!

Its all about blending different asset classes toproduce average to good results at a lower risk

(Volatility).


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Brinson

Asset allocation constitutes the most important

step in portfolio construction, accounting for

more than 90% of the variability in portfolioperformance over time1

1 G.P. Brinson, B.D.Singer, G.L. Bebower, Determinants of Portfolio

Performance II: An Update, Financial Analyst Journal, May-June 1991.


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Kahneman

The 2002 Nobel prize for Economics winner

Daniel Kahneman states that individuals are

more depressed with losses than they aresatisfied with equivalent returns.

The Sveriges Riksbank Prize in Economic Science


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Efficiency and asset allocation

Risk

Govts, IndexLinked

Emerging

Market Domestic

Govt. Bonds

DomesticEquities

Core Equities,

EM. MarketsSmall Cap

Global

Equities

CashCashCash

Alternative

Investments

AlternativeInvestments

Return

Govts, Index

Linked Emerging

MarketAlternative,

Fixed Income


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Asset class returns

Source: RMB Asset Management, Lipper, Historic figures are %p.a. January 1999 December 2008. Indices used for historic returns: Credit

Suisse Tremont Multi Strategy Hedge Fund, FTSE EPRA/NAREIT Global Property, JPMorgan Global Bonds, JPMorgan US

Bonds, LIBOR USD 3m, MSCI World, S&P 500, Credit Suisse High Yield Bonds.

Historic Returns over 10 years Expected Returns


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Section B: PPI Solutions

Risk Profiles Strategic vs Tactical

Accumulation vs Capital Regular Premium vs Lump Sum

Strategic Asset Allocation Models Third Party

Current Strategic and Tactical Allocations

Client Communication

Core & Satellite


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PPI Risk Profiles

Strategic Profiles

Conservative

Balanced

Growth

Alpha

Tactical Profiles

AggressivePre Retirement

Post Retirement

Income


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Risk profiles & objectives

Source: RMB Asset Management August 2007

Objectives : Long-term

capital growth.

Objectives : Capital

growth from investments,

low levels of income. High

potential for growth.

Objectives : Income and

capital growth from

investment. Medium

potential for growth.

Objectives : Steady

income from investments

and modest capital growth.

Some growth potential.

Investor suitability :

Investors who wish to

adopt an aggressive

approach, with the sole aim

of long-term capital growth.Medium-term losses should

be expected. The

allocation is almost entirely

biased towards equities

and other growth assets.


Investors who have a long

investment time horizon,

are interested primarily in

capital growth and arecomfortable with modest

short-term capital losses.

The allocation is biased

towards growth assets, but

still invests in a broader

range of assets than a

typical growth fund.


Investors with some time

until retirement who wish to

invest in a balanced

portfolio. The allocationinvests in a much broader

range of assets than a

typical balanced fund,

which will result in lower

potential for capital loss,

while at the same time

offering growth potential.


Investors primarily

interested in income and

modest growth potential

but who wish to remaininvested in a diversified

portfolio of assets. The

allocation is relatively

defensive but has a

modest exposure to growth

assets.

AlphaGrowthBalancedConservative

STRATEGIC


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Accumulation vs Capital

GENERIC ASSET ALLOCATION

Capital accumulationCapital accumulation Lump sum matricesCapital accumulated

Equity balancedEquity balanced EquityEquity Core & satellite1Core & satellite1

Link to matrices
http://www.ppi-advisory.com/home/inside_01.php?mid=17http://www.ppi-advisory.com/home/inside_01.php?mid=17http://www.ppi-advisory.com/home/inside_01.php?mid=17


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Current Strategic Asset Allocation1

2009Asset class Conservative Balanced Growth Alpha

Cash 24% 8% 0% 0%

Domestic Bonds 33% 22% 13% 9%

International Bonds 2% 3% 2% 1%

Alternative Fixed Income 7% 12% 20% 34%

Domestic Equities 10% 16% 20% 23%

International Equities 6% 10% 15% 11%

Fund of Hedge Funds 10% 16% 15% 11%

Property 8% 13% 15% 11%

100% 100% 100% 100%

Source: RMB Asset Management

1 24 June 2009


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Strategic Asset Allocation- with current tactical overlay


T=Tactical (updated14/01/2009)

2009

Asset class Conservative Balanced Growth Alpha

Cash 24% 8% 0% 0%

Domestic Bonds 33% 22% 13% 9%

International Bonds 2% 3% 2% 1%

Alternative Fixed Income 7% 12% 20% 34%

Domestic Equities 10% 16% 20% 23%

International Equities 6% 10% 15% 11%

Fund of Hedge Funds 10% 16% 15% 11%

Property 8% 13% 15% 11%

100% 100% 100% 100%

T T T T

27% 13% 8% 6%

30% 17% 10% 7%

2% 3% 2% 1%

13% 21% 24% 37%

10% 16% 20% 23%

6% 10% 14% 10%

4% 7% 7% 5%

8% 13% 15% 10%

100% 100% 100% 100%


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Strategic Asset AllocationExpected % return, risk of loss, and actual returns

2009

USD based investor Conservative Balanced Growth AlphaExpected annual return 2.8% 3.5% 4.8% 6.4%

Expected annual volatility 4.1% 5.4% 7.7% 10.4%

Expected worst case scenario over any12 month period

-6.8% -9.0% -13.1% -17.8%

Probability of negative return 24.7% 25.6% 26.8% 27.1%

1 in X years 4.0 3.9 3.7 3.7


Conservative Balanced Growth Alpha

Expected upper range (99%) 12.5% 16.0% 22.7% 30.5%

Expected upper range (95%) 9.6% 12.3% 17.4% 23.4%

Expected lower range (5%) -4.0% -5.3% -7.9% -10.7%

Expected lower range (1%) -6.8% -9.0% -13.1% -17.8%

Actual returns 2006 % 10.6 13.2 15.2 15.8

Actual returns 2007 % 6.3 6.6 7.7 7.5

Actual returns 2008 % -10.5 -27.2 -30.1 -33.3

Link to archive Link to Harmony fact sheet
http://ppi-advisory.com/0_repository/asset_allocation/PPi_Harmony_Portfolios_Expected_Risk_Return_Profiles_MARCH_08.pdfhttp://ppi-advisory.com/0_repository/asset_allocation/harmony_factsheet.htmlhttp://ppi-advisory.com/0_repository/asset_allocation/harmony_factsheet.htmlhttp://ppi-advisory.com/0_repository/asset_allocation/harmony_factsheet.htmlhttp://ppi-advisory.com/0_repository/asset_allocation/PPi_Harmony_Portfolios_Expected_Risk_Return_Profiles_MARCH_08.pdfhttp://ppi-advisory.com/0_repository/asset_allocation/PPi_Harmony_Portfolios_Expected_Risk_Return_Profiles_MARCH_08.pdf


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Harmony USD BalancedRolling Asset Allocation

Harmony USD Balanced Rolling Asset Allocati

37%

26%21% 23%

24%

31% 41% 34%

15%

11%9%

5%

FoHF 16%

FoHF 16%FoHF 16%

FoHF 18%

Commodities 5%

Money Market 20%Commodities 8%

Commodities 12%

Money Market 3%Money Market 8%

Money Market 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

June 07 Dec 07 June 08 Jan 09

Equity Fixed Income Property FoHF Commodities Money Market



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Harmony USD Growth

Rolling Asset Allocation

Harmony USD Growth Rolling Asset Allocation

58%49%

35% 32%

7%15%

22%32%

10% 9%

6%

3%

FoHF 20%FoHF 16%

FoHF 22% FoHF 15%

Comm odities 5%

Comm odities 10%

Money Market 5%

Money Market 18%Comm odities 9%

Money Market 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

June 07 Dec 07 June 08 Jan 09

Equity Fixed Income Property FoHF Commodities Money Market



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Strategic asset allocationClient communication
http://www.harmonyportfolios.com/http://www.financial-partners.biz/index.php?option=com_content&task=view&id=98&Itemid=141


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Core & Satellite Strategy

Property Commodities

AlternativesManaged Forestry

The Core

Asset Allocation


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Section C: Administration Of Services

THE SERVICES

Matrices (Regular/ Menu Driven) Models (Lump Sum)

Asset Allocation Provided by RMB AssetManagement, London

Annual review Quarterly tactical overlay

Provided by RMB Asset Management,London

Annual review Quarterly tactical overlay

Fund Selection Menu driven: PPI InvestmentCommittee

Provided by RMB Asset Management,London

Due Diligence PPI Investment Committee. RMB Asset Management includingstyle bias analysis (value, growth,momentum, size)

PPI Investment Committee: In excessof 50 years combined experience infinancial services.


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Section D: How Is The Service Delivered?

Platform

Nominee Accounts

Investment Bonds

Savings Plans

Product Core

Multi-Asset Multi-Manager Portfolios: Harmony Portfolio Funds

Iveagh Wealth Fund

Product - Satellite

Niche Market Investments

PPI Approved Funds List

Interim/Strategic Reviews

Old Money vs New Money

Portfolio Re-balancing

ppi asset allocation strategy updated june 2009

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