0
Aviva Investors Index Opportunities Fund<br />April 2011<br />
2<br />Intended audience<br />This document is for investment professionals and/or qualified investors only. The content i...
3<br />We are proud to be a part of Aviva plc<br />Long-termsavings<br />General insurance<br />World’s sixth-largest insu...
Over £259 billion under management
Top 20 global asset manager**
Operations in 22 locations in 16 countries
c1,400 employees worldwide</li></ul>Source: Aviva Investors, * Based on gross worldwide premiums for the year ended 31 Dec...
4<br />We offer our clients expertise across all asset classes <br /><ul><li>Dedicated to building focused investment solu...
Innovative new products to meet client needs
Strong focus on corporate governance as a founding signatory to the UN Principles for Responsible Investment</li></ul>Sour...
Aviva Investors Index Opportunities Fund <br />
6<br />Why Aviva Investors to exploit index anomalies? <br />Absolute return product exploiting a transparent, easily unde...
A fund created from experience<br />
Quant investing requires a highly skilled, experienced and stable team<br />Ned Kelly <br />Index Fund Manager<br />(13, 1...
9<br />Index enhancement of UK portfolio prior to launch of Index Opportunities Fund<br />Performance of a sub portfolio t...
10<br />Key features of Aviva Investors Index Opportunities Fund<br />
The opportunity and our process<br />
12<br />Strong growth of index and ETF strategies <br />US: Index fund and ETF assets as a share of all long-term mutual f...
13<br />Impact on liquidity and price<br />Announcement Date – 09/12/09<br />Effective Date – 21/12/09<br />FTSE 100 Revie...
14<br />An absolute return strategy<br />Source: RBS as at 28 February 2010<br />
15<br />Passive<br />Active and passive<br />Active<br />Passive<br />Active and passive<br />Passive<br />Close out<br />...
16<br />Risk management is central to the process<br />Portfolio construction<br />Fund managers manage risk by:<br />Excl...
17<br />Performance since inception<br />
Appendices<br />
MSCI Rebalance – November 2010<br />
Lanxess share price 01 Sep 2010 to 15 Dec 2010<br />Source:  Bloomberg  <br />
Lanxess intraday performance – 30 Nov 2010<br />Source:  Bloomberg  <br />
Lanxess trading volumes at close  - 30 Nov 2010<br />Source:  Bloomberg  <br />
Bekaert intraday performance – 30 Nov 2010<br />Source:  Bloomberg  <br />
Bekaert trading volumes at close  - 30 Nov 2010<br />Source:  Bloomberg  <br />
Amadeus intraday performance – 30 Nov 2010<br />Source:  Bloomberg  <br />
Industrivarden intraday performance – 30 Nov 2010<br />Source:  Bloomberg  <br />
Stoxx 600 addition – January 2011<br />
Brenntag share price 01 Oct 2010 to 24 Jan 2011<br />Source:  Bloomberg  <br />
Eurostoxx performance 01 Oct 2010 to 24 Jan 2011<br />Source:  Bloomberg  <br />
Supporting information<br />
Index (beta)<br />Quant (alpha)<br />Index £4.7bn<br />£6.1bn<br />£10.2bn<br />£1.6bn<br />FWI £1.4bn<br />Index +<br />O...
32<br />Global opportunities<br /><ul><li>Additions:Stocks with market capitalisation higher than existing index members
Deletions: Stocks whose capitalisation has dropped below companies not in the index. </li></li></ul><li>33<br />Indices an...
Effective date: The date when stocks are officially in or out of the index and can officially be traded</li></li></ul><li>...
35<br />The opportunity is available across the world<br />Source: HSBC as at 28 February 2010<br />
Typical risk analysis<br />Rexel (Bloomberg ticker: RXL FP):  added to FTSE Europe, September 2010<br />Execution:<br /><u...
  Continuous monitoring of fundamental news flow and trading volumes during the trade lifetime
  Close out position and hedge on 13 September 2010</li></ul>Source:  Aviva Investors, 22 October 2010<br />36<br />
Hedging beta risk <br />Strategy success depends on effective hedging<br /><ul><li>Initial objective is to create market n...
If there are insufficient stocks to balance the portfolio, we hedge the mismatch with an appropriate future or ETF (depend...
Beta is monitored using our desktop risk package to ensure the portfolio has beta as close to zero as possible – both at t...
We monitor the “beta curve” of each stock and basket continuously – looking at beta horizons of 30 days out to two years. ...
38<br />Portfolio<br />Leverage / net exposure<br />Risk / return equation<br />Long portfolio<br />2.5% Alpha<br />(ungea...
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Aviva index opportunities fund standard presentation - 310311

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Transcript of "Aviva index opportunities fund standard presentation - 310311"

  1. 1. Aviva Investors Index Opportunities Fund<br />April 2011<br />
  2. 2. 2<br />Intended audience<br />This document is for investment professionals and/or qualified investors only. The content is not approved for use with retail investors or pension scheme members<br />
  3. 3. 3<br />We are proud to be a part of Aviva plc<br />Long-termsavings<br />General insurance<br />World’s sixth-largest insurance group *<br />Assetmanagement<br /> 54,000 employees<br />50 m customers worldwide<br /><ul><li>Aviva’s “Third Pillar”
  4. 4. Over £259 billion under management
  5. 5. Top 20 global asset manager**
  6. 6. Operations in 22 locations in 16 countries
  7. 7. c1,400 employees worldwide</li></ul>Source: Aviva Investors, * Based on gross worldwide premiums for the year ended 31 December 2009, all other data as at 31 December 2010.**Pensions and Investments – top money manager 31 December 2009<br />
  8. 8. 4<br />We offer our clients expertise across all asset classes <br /><ul><li>Dedicated to building focused investment solutions for clients using all major asset classes
  9. 9. Innovative new products to meet client needs
  10. 10. Strong focus on corporate governance as a founding signatory to the UN Principles for Responsible Investment</li></ul>Source: Aviva Investors, all data as at 31 December 2010. <br />
  11. 11. Aviva Investors Index Opportunities Fund <br />
  12. 12. 6<br />Why Aviva Investors to exploit index anomalies? <br />Absolute return product exploiting a transparent, easily understood opportunity<br />Strategy managed by an experienced and stable team<br />Short term opportunity offers even more attractive risk adjusted return. <br />
  13. 13. A fund created from experience<br />
  14. 14. Quant investing requires a highly skilled, experienced and stable team<br />Ned Kelly <br />Index Fund Manager<br />(13, 10)<br />Jerome NunanClient Portfolio Manager<br />Richard Field Executive Director of Global Investment Solutions<br />Gary SaidlerClient Portfolio Manager<br />Dr. Iyad Farah Director of Quant Solutions<br />(15 yrs industry, 10yrs Aviva)<br />Russell Harris <br />Index Fund Manager<br />(26, 26)<br />Brad Beardsell <br />Index Fund Manager<br />(7, 3) <br />Richard SaldanhaQuant Fund Manager<br />(5, 3) <br />Ed Wiltshire <br />Quant Fund Manager<br />(16, 10)<br />Amelia SavoryQuant Fund Manager<br />(3, 3) <br />Ruy Alves <br />Quant Fund Manager<br />(17, 14)<br />Michael Cole <br />Quant Fund Manager<br />(13, 13)<br />Working together for a number of years at Aviva Investors<br />8<br />Experience data as at 31 December 2010<br />
  15. 15. 9<br />Index enhancement of UK portfolio prior to launch of Index Opportunities Fund<br />Performance of a sub portfolio targeting a return of 0.25% p.a. <br />This is the outperformance of an UK FTSE All Share index tracking sub portfolio, with NAV of over £5bn. The primary objective of the portfolio is to replicate the FTSE All Share. The outperformance enhancement is achieved using similar arbitrage techniques to those used in Aviva Investors Index Opportunities Fund<br />Information provided gross of fees<br />Source: Aviva Investors. Data as at 31 December 2009<br />
  16. 16. 10<br />Key features of Aviva Investors Index Opportunities Fund<br />
  17. 17. The opportunity and our process<br />
  18. 18. 12<br />Strong growth of index and ETF strategies <br />US: Index fund and ETF assets as a share of all long-term mutual fund and ETF assets (1993 through July 2009)<br />18<br />%<br />16<br />14<br />12<br />10<br />8<br />6<br />4<br />2<br />0<br />93<br />94<br />95<br />96<br />97<br />98<br />99<br />00<br />01<br />02<br />03<br />04<br />05<br />06<br />07<br />08<br />09<br />Index Funds<br />ETFs<br />Source: Investment Company Institute, Greenwich Associates, Empirical Research Partners Analysis and Estimate. <br />
  19. 19. 13<br />Impact on liquidity and price<br />Announcement Date – 09/12/09<br />Effective Date – 21/12/09<br />FTSE 100 Review, December 2009Addition - Aggreko<br />Deletion – Rentokil<br />Source: Bloomberg as at 31 December 2009.<br />
  20. 20. 14<br />An absolute return strategy<br />Source: RBS as at 28 February 2010<br />
  21. 21. 15<br />Passive<br />Active and passive<br />Active<br />Passive<br />Active and passive<br />Passive<br />Close out<br />Monitoring<br />Implementation<br />Filter<br />Portfolio construction<br />Idea generation<br />Groundwork:<br /> index rules and stock price movement<br />Exclusions:<br />Stock specific catalysts, insufficient liquidity <br />Market neutral:<br />beta, sector, currency, region<br />Trading:<br />Putting on positions<br />Adjustment:<br />Volume, volatility, P&L<br />Trading:<br />Closing out positions<br />Investment process<br />Input<br />Combining multiple skills to generate returns <br />
  22. 22. 16<br />Risk management is central to the process<br />Portfolio construction<br />Fund managers manage risk by:<br />Exclusion of non-liquidity factors<br />Focus on short term beta and market neutral positioning<br />Balance across sectors and regions<br />Managing overall leverage and risk in line with confidence levels<br />Unwind when liquidity premium is exhausted<br />Performance<br />monitoring<br />Managers vary risk as shown below<br />Unwind<br />Normal<br />Low confidence in mis-pricing<br />High confidence in mis-pricing<br />Minimum<br />0% position<br />Maximum<br />+ 5% position<br />
  23. 23. 17<br />Performance since inception<br />
  24. 24. Appendices<br />
  25. 25. MSCI Rebalance – November 2010<br />
  26. 26. Lanxess share price 01 Sep 2010 to 15 Dec 2010<br />Source: Bloomberg <br />
  27. 27. Lanxess intraday performance – 30 Nov 2010<br />Source: Bloomberg <br />
  28. 28. Lanxess trading volumes at close - 30 Nov 2010<br />Source: Bloomberg <br />
  29. 29. Bekaert intraday performance – 30 Nov 2010<br />Source: Bloomberg <br />
  30. 30. Bekaert trading volumes at close - 30 Nov 2010<br />Source: Bloomberg <br />
  31. 31. Amadeus intraday performance – 30 Nov 2010<br />Source: Bloomberg <br />
  32. 32. Industrivarden intraday performance – 30 Nov 2010<br />Source: Bloomberg <br />
  33. 33. Stoxx 600 addition – January 2011<br />
  34. 34. Brenntag share price 01 Oct 2010 to 24 Jan 2011<br />Source: Bloomberg <br />
  35. 35. Eurostoxx performance 01 Oct 2010 to 24 Jan 2011<br />Source: Bloomberg <br />
  36. 36. Supporting information<br />
  37. 37. Index (beta)<br />Quant (alpha)<br />Index £4.7bn<br />£6.1bn<br />£10.2bn<br />£1.6bn<br />FWI £1.4bn<br />Index +<br />Outperformance range 0.25% to 1.5%<br />Assets under management <br />31<br />Source: Aviva Investors as at 31 December 2010. <br />
  38. 38. 32<br />Global opportunities<br /><ul><li>Additions:Stocks with market capitalisation higher than existing index members
  39. 39. Deletions: Stocks whose capitalisation has dropped below companies not in the index. </li></li></ul><li>33<br />Indices and rebalancing<br />Index Review / Rebalance Example<br /><ul><li>Announcement date:Occurs on a regular, predetermined (for each global index) date when index providers announce which stocks will be added to the index and which stocks will be deleted. Index managers have a number of days to align with new index positions and weightings
  40. 40. Effective date: The date when stocks are officially in or out of the index and can officially be traded</li></li></ul><li>34<br />Underlying strategy<br />Action: go long additions and short deletions<br />Action: go short additions and long deletions<br />Source: Bloomberg as at 31 December 2009<br />
  41. 41. 35<br />The opportunity is available across the world<br />Source: HSBC as at 28 February 2010<br />
  42. 42. Typical risk analysis<br />Rexel (Bloomberg ticker: RXL FP): added to FTSE Europe, September 2010<br />Execution:<br /><ul><li> Bought RXL FP on 31 August 2010, sold futures as hedge
  43. 43. Continuous monitoring of fundamental news flow and trading volumes during the trade lifetime
  44. 44. Close out position and hedge on 13 September 2010</li></ul>Source: Aviva Investors, 22 October 2010<br />36<br />
  45. 45. Hedging beta risk <br />Strategy success depends on effective hedging<br /><ul><li>Initial objective is to create market neutral baskets within the same country or currency – hedging longs (inclusions) with appropriate shorts (exclusions).
  46. 46. If there are insufficient stocks to balance the portfolio, we hedge the mismatch with an appropriate future or ETF (dependent on region, country, currency or sector)
  47. 47. Beta is monitored using our desktop risk package to ensure the portfolio has beta as close to zero as possible – both at the implementation of the trade, and for its duration.
  48. 48. We monitor the “beta curve” of each stock and basket continuously – looking at beta horizons of 30 days out to two years. </li></ul>37<br />
  49. 49. 38<br />Portfolio<br />Leverage / net exposure<br />Risk / return equation<br />Long portfolio<br />2.5% Alpha<br />(ungeared)<br />Portfolio return<br />Gross exposure up to 200%<br />Portfolio<br />Beta<br />Alpha<br />5%<br />0%<br />5%<br />=<br />+<br />5%<br />Geared Alpha<br />Short portfolio<br />2.5% Alpha<br />(ungeared)<br />Annual volatility <br />(2.5%-7.5% range)<br />5%<br />Portfolio risk<br />Net exposure<br />0%<br />Beta<br />Alpha<br />Portfolio<br />0%<br />Beta returns<br />5%<br />0%<br />5%<br />=<br />+<br />Annual volatility<br />0%<br />Information ratio = 1<br />The target risk-return equation<br />
  50. 50. 39<br />MSCI World rebalance – May 2010<br />Source: Bloomberg and Aviva Investors as at 24 May 2010<br />
  51. 51. Biographies <br />
  52. 52. 41<br />Iyad Farah, Director of quant solutions<br />Joined Investment Industry in 1996<br />Main responsibilities<br />Overall responsibility for active quant process and management of Active Quant funds.<br />Experience and qualifications<br />Iyad joined Aviva Investors in 2000. <br />Iyad was previously a senior quantitative analyst at Union Bancaire Privee and prior to that, he was a quantitative analyst at NPI for three years. <br />He was a senior research associate at the University of Wales before beginning his investment career in 1996. <br />Iyad holds a BSc in Aeronautical Engineering from Technion in Israel, an MSc in Aeronautical Engineering from the University of Manchester and a PhD in Applied Mathematics from the University of Wales, Aberystwyth. Iyad is a member of the Institute of Investment Management and Research (IIMR) and holds the UKSIP Investment Management Certificate.<br />Iyad Farah – Director of Quant Solutions <br />
  53. 53. 42<br />Ned Kelly, Fund manager<br />Joined the investment industry in 1998<br />Main responsibilities<br />Index funds and futures execution<br />Experience and qualifications<br />Ned joined Aviva Investors in July 2001. <br />Previously, he worked for Legal & General Investment Management as an index fund analyst. <br />Prior to L&G, he was with Barclays Global Investors as a client accountant. <br />Ned holds a BA (Hons) in European Business Systems from London Guildhall University and the UKSIP Investment Management Certificate.<br />Ned Kelly – Fund Manager<br />
  54. 54. 43<br />Jerome Nunan – Client Portfolio Manager<br />Jerome Nunan<br />Client Portfolio Manager for Index Opportunities Fund. Jerome joined the financial services industry in 1998<br />Main responsibilities<br />To provide a primary link between investment and distribution teams through communication of investment messages, to support business development and product management in all areas related to Index Opportunities Fund and Securities Lending.<br />Experience and qualifications<br />Jerome joined Aviva Investors in August 2009. <br />Before joining Aviva Investors, Jerome spent 8 years at Deutsche Bank and 10 years in the British Army with the Royal Tank Regiment. <br />Jerome holds a BA (Hons) in Modern Languages from the University of East Anglia and a MBA from Cranfield University, School of Management. <br />
  55. 55. 44<br />Gary Saidler – Client Portfolio Manager<br />Gary Saidler, Client Portfolio Manager<br />Gary joined the investment industry in 2003.<br />Main responsibilities<br />To provide a primary link between investment and distribution teams through communication of investment messages, to support business development and product management related to Aviva Investors Asset Allocation and Index Opportunities strategies.<br />Experience and qualifications<br />Gary joined Aviva Investors in May 2007. <br />Gary graduated from the University of Glasgow with a BSc (Honours) in Statistics. Prior to Aviva Investors he worked in the investment consultancy industry. <br />Gary is a CFA charterholder and has completed the UKSIP Investment Management Certificate (IMC).<br />
  56. 56. Other quant capabilities <br />
  57. 57. 46<br />Multi-factor quant<br />models<br />Multi-factor quant<br />models<br />Multi-factor quant<br />models<br />Multi-factor quant<br />models<br />Global income funds<br />Global income funds<br />Global income funds<br />Fundamentally weighted funds<br />Fundamentally weighted funds<br />Index opps fund<br />130/30 global funds<br />Minimum variance<br />Trend following<br />High Quality<br />Directors Dealing<br />Developing our Quant and Index proposition<br />The future for Quant Solutions<br />Quant research to lead us into new products<br />2006<br />2009<br />2010<br />2002<br />…building momentum…<br />INC<br />Long-short + long only<br />FWI<br />130/30<br />Trend Following?<br />Multi-factor quant<br />models<br />Research on call overwriting<br />Ind opps<br />+ Index Capability<br />Research on Fundamental Indexation<br />!<br />High Quality?<br />Minimum Variance<br />Index Capabilities<br />Directors’ Dealing?<br />Depth of research<br />Index team know-how on index rebalancing strategies<br />New research<br />!<br />Regional models and long-short expertise<br />!<br />Future HF long-short<br />Products designed for client needs<br />
  58. 58. 47<br />Important information<br />For further information on our services, or to discuss how we can help please contact:<br />Jerome Nunan<br />Client Portfolio Manager<br />Aviva Investors Global Services Limited <br />No, 1 Poultry <br />London, EC2R 8EJ<br />tel. +44 (0) 20 7809 8031 <br />mail: jerome.nunan@avivainvestors.com<br />
  59. 59. Important information (1)<br />Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (Aviva Investors) as at 31 March 2011.<br />Any opinions expressed are based on the internal forecasts of Aviva Investors and they should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors. No part of this document is intended to constitute advice or recommendations of any nature.<br />Performance figures sourced from Lipper Hindsight and illustrated on a bid to bid, gross income reinvested basis in the currency shown. Other information sourced from Aviva Investors. The value of an investment in the fund can go down as well as up and can fluctuate in response to changes in exchange rates. Past performance is not a guide to the future.<br />The distribution and offering of shares may be restricted by law in certain jurisdictions. This document should not be taken as a recommendation or offer by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. <br />For Germany: Copies of the Full and Simplified Prospectus together with the Report and Accounts of the SICAV are available free of charge from Aviva Investors Global Services Limited, Zweigniederlassung Deutschland - An der Hauptwache 7, 60313, Frankfurt am Main, Deutschland, or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />For Austria: The "RaiffeisenZentralbankÖsterreich AG", Am Stadtpark 9, 1030 Vienna, has been appointed by the Company as the paying agent within the meaning of § 34 InvFG. Accordingly, the redemption of shares can be made via the "RaiffeisenZentralbankÖsterreich AG", Am Stadtpark 9, 1030 Vienna. The prospectus, the articles of association, the last annual report and the semi-annual report, once published, are available at the office of the "RaiffeisenZentralbankÖsterreich AG", Am Stadtpark 9, 1030 Vienna or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />For Spain: Copies of the Full and Simplified Prospectus together with the Report and Accounts of the SICAV which are approved by and registered with CSSF in Luxembourg and CNMV in Spain are available free of charge from Aviva Investors Global Services Ltd, Sucursal en España, Calle Velázquez 47, 2 dcha, 28001 Madrid, España. NIF: W0069758D. Inscritos en la CNMV con el número 33, or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />
  60. 60. Important information (2)<br />For Switzerland: Fortis Foreign Fund Services AG, Rennweg 57, 8023 Zurich was authorised by the Federal Banking Commission as Swiss representative of the Fund and acts also as paying agent. Copies of the Full and Simplified Prospectus together with the Report and Accounts and articles of the SICAV are available free of charge from the head office of the Swiss representative or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />For Italy: Copies of the Full and Simplified Prospectus together with the Report and Accounts of the SICAV are available free of charge from Aviva Investors Global Services Limited, Corso Matteotti, 10, 20121 Milano, Italia or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />For Luxembourg; Norway: Copies of the Full and Simplified Prospectus together with the Report and Accounts of the SICAV are available free of charge from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />For UK, France: Copies of the Full and Simplified Prospectus together with the Report and Accounts of the SICAV are available free of charge from Aviva Investors Global Services Ltd, No. 1 Poultry, London EC2R 8EJ or from Aviva Investors Luxembourg, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708.<br />On 1 April 2008 the SICAV changed its name from Aviva Morley to Aviva Investors. Please read the current Prospectus for full details of the current fund range before investing. <br />Aviva Investors Global Services Ltd, registered in England No. 1151805. Registered Office: No. 1 Poultry, London EC2R 8EJ. Authorised and regulated in the UK by the Financial Services Authority and a member of the Investment Management Association. <br />Contact us at Aviva Investors Global Services Ltd, No. 1 Poultry, London EC2R 8EJ<br />11/SC0103<br />
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