ILIM discusses incorporating factor investing as a means of building effective portfolios positioned for growth. Leading experts discuss ILIM’s award winning strategies which are designed to help investors build equity portfolios which are protected against extreme draw down events.

3. EQUITY RISK CONCENTRATION
Source: Factset, ILIM

4. FACTORS EXPERIENCED LONG TERM
OUTPERFORMANCE
Source: Data from 1975 – 2015. Source: Factor Indexes in Perspective, Insights from 40 Years of Data, MSCI Research Insight

8. QUANT STRATEGIES GROUP (QSG) OVERVIEW
• ILIM Quantitative Investment team established in 1996
Quantitative Architecture integral to ILIM’s Investment Solutions
ACTIVE
PROCESSES
• Multi-Factor Active Equity
• Currency / Country Overlay
• Commodities
RISK CONTROL
STRATEGIES
PORTFOLIO MODELLING
SOLUTIONS
• Dynamic Share to Cash
• Low Volatility Equity
• Irish Life MAPS & Model Portfolios

9. ILIM: A UNIQUE FOCUS ON RISK CONTROL
Source: Factset, ILIM
Volatility is not the same as Risk

10. ILIM INSIGHTS – THREE KEY PILLARS TO
DRAWDOWN CONTROL
Objective: Reduce medium-term drawdown & preserve return potential
ASSET
DIVERSIFICATION
• Aligned with long-term goals
FACTOR
DIVERSIFICATION
• Improve portfolio efficiency
DYNAMIC EQUITY
ALLOCATION
• Capture drivers of asset risk

11. ASSET ≠ RISK DIVERSIFICATION
Asset Diversification offered limited protection during Global Financial Crises
Source: Factset, ILIM
May 07 to Feb 09

12. DIVERSIFICATION WITHIN YOUR
EQUITY PORTFOLIO
EQUITY PORTFOLIO

13. WHAT ATTRACTS INVESTORS TO
FACTOR INVESTING
Factor Portfolio Performance Characteristics
1990 – 2014 (Gross Returns USD)
Source: Factset, ILIM

14. IS THIS A FREE LUNCH?
CYCLICALITY IS A KEY DIMENSION
Relative Performance of Factor Portfolios – North America Feb 1990 to Dec 2014
Source: Factset, ILIM

15. ILIM’s MULTI-FACTOR EXPERIENCE
• ILIM Multi-Factor Fund Range launched in 2005
• Aims to deliver stable outperformance with low benchmark risk
*Global Composite IR = 1.0 from June 2005 to Dec
2014. Source: Factset, ILIM

16. ILIM’s GLOBAL LOW VOLATILITY EQUITY FUND
EXPERTISE • Extension of ILIMs multi-factor experience
OBJECTIVE • Deliver market return with reduced drawdowns and volatility
RESEARCH • Identified factors and sector tilts to reduce drawdown risk
RESULT • Reduces cumulative drawdown with no loss of return

17. PURPOSE • Reduce Equity drawdown while maintain long run return
ROBUST • Model tested across multiple markets and time periods
SYSTEMATIC • Systematic process based on range of factors monitored daily
RESULT • Reduces Equity drawdown while maintain long run return
ILIM’s DYNAMIC-SHARE-TO-CASH (DSC)

18. MODEL PORTFOLIO – CASE STUDY
Client Objective Deliver similar long run growth potential with lower risk
Strategic Allocation Decision What this means for our client?
*Expected outcomes calculated by ILIM using simulated portfolio outcomes
based on return, volatility and correlation assumptions for underlying assets **Historical Backtest window Dec98-Dec14

19. WHY NOW?
FOCUS NEEDED ON SMARTER RISK CONTROL
Rally now fourth largest since 1932 in
terms of both gain and length
Global Equities marginally above
historical average
Source: Factset, ILIM. *Top US Equity Rallies since 1932 Post 20% Correction Source: Factset, ILIM. *Global 12 month Forward Price/Earnings

20. IN SUMMARY
• Greater focus on drawdown control
• Diversification across both assets and styles appropriate
• ILIM risk control strategies addresses investor needs
• Prudent to consider approach given market gains

24. • Investors seek Equity Risk Premium with greater downside
protection
• Equity Market Risk major driver in multi-asset portfolios
• ILIM has undertaken extensive in-house research project
exploring methods to directly manage downside Equity risk
ILIM DYNAMIC SHARE TO CASH PROCESS (DSC)

25. ILIM DYNAMIC SHARE TO CASH PROCESS (DSC)
• A fully systematic process to manage equity
market risk
• Focus on medium-term absolute drawdown
• Equity weight is adjusted in response to
quantitative multi-factor risk measure
• Fundamentals
• Price movements
• Macro Economy
• Monitored and traded daily (as required)
WHAT IS DSC?
• Lower historical losses
• Superior Risk-Return profile
• Systematic re-entry avoids behavioural bias
• Signal live since Q4 2012, and incorporated
into retail MAPS funds in May 2013
• €1bn now tracking DSC process
PRODUCT HISTORY
PERFORMANCE OBJECTIVES

26. WHAT IS FREQUENCY OF 20% DDs?
…and 30% drawdowns every 9 years!
Historically these have happened once every 2-3 years…

27. VALUATION IS ONE MEASURE OF RISK
Expensive low yielding assets are prone to price correction as outlook changes
JAPAN PROPERTY
MARKET 1989
YIELD ~ 1% (cash 4%)
EQUITY 2000 YIELD ~ 2% (cash 3.5%)
IRISH PROPERTY 2007 YIELD ~ 2% (cash 3%)
These crashes prefaced by low absolute, and negative relative yields

28. MEDIUM TERM EQUITY LOSSES ARE NOT
RANDOMLY DISTRIBUTED
Example: How are 3 year negative outcomes distributed versus initial normalised earnings yield?
3 YEAR S&P 500 INDEX RETURNS EXCESS TO CASH

29. VALUATION AND MOMENTUM:
COMPLEMENTARY PROTECTION
• Valuation (E/P): a fundamental
measure of ability to deliver return
• Momentum (Moving Average)
 Serial correlation in markets is well
established
 Bad news emerges piece-meal
• Both factors provide drawdown
protection over many cycles (since
1900)
• Test: Reduce equity weight in linear
fashion when signal is negative
(100% US Equity Benchmark)

30. DYNAMIC SHARE TO CASH MODEL INPUTS
• Simple Valuation and Technical Factors offer drawdown protection,
independently, and over numerous market cycles
• Expand fundamental component beyond simple valuation
• Incorporate Macro Drivers that demonstrate drawdown protection

31. DSC – VARIABILITY IN MODEL WEIGHT
Model at full equity weight c.60% of the time Average Annual Turnover 66%; Highest
calendar year turnover is 202%
Model weight consistent with the view that equities represent a reasonable investment most of the
time, with concentrated periods of negative performance

32. DSC HISTORICAL DRAWDOWN PROTECTION
(GLOBAL EQUITY BENCHMARK)

33. DSC HISTORICAL DRAWDOWN PROTECTION
(GLOBAL EQUITY BENCHMARK)
• Drawdown reduced by an
order of magnitude
• No evident loss of return
• Increased long-run Risk /
Return Ratios

34. RECENT DSC SIGNAL EVOLUTION
• Process has kept funds at maximum equity exposure since inception,
through a strong bull market
• Closest to de-risking in October 2014 drawdown

35. CONCLUSION
• At times of market stress asset diversification offers limited protection
• The best risk objective is to limit drawdown, and protect capital
• A multi-factor approach sensitive to fundamental, technical and
macro risk is more robust than simple volatility measures
• ILIM DSC model demonstrated highly significant Equity downside
protection without giving up long run Equity return

38. Donie O’Brien

39. • Launched in July 2014
• Has grown to €709m AUM
• Integral part of our flagship MAPS range
• Delivering on its objective of similar returns to MCSI World with
lower volatility and reduced drawdowns
ILIM’s GLOBAL LOW-VOLATILITY
ACTIVE EQUITY FUND

40. WHY INVEST IN LOW VOLATILITY EQUITIES?
• Increased investor focus on volatility and drawdown management
• Cross-asset diversification offered limited protection through the 2008-09
financial crisis
• Yields on liquid defensive assets at historic lows
However: Low volatility stocks have delivered higher average returns than high volatility stocks

41. WHAT IDENTIFIES LOW RISK STOCKS?
• Manageable debt
• Low leverage
• Low P/E
• High EBITDA/EV
• Low volatility
FACTORS
• Overweight defensive sectors
such as Utilities, Consumer
Staples and Pharma
• Underweight Technology,
Financials, Consumer
Cyclicals
SECTORS
Our findings are consistent across multiple regions and over
multiple time frames throughout the last 30 years

42. OUR APPROACH
Combine fundamental factor and sector tilts which
have demonstrated greatest cumulative
drawdown protection through multiple market
cycles
Construct portfolio by incorporating additional risk
control constraints (diversification, liquidity, size,
turnover, country deviations, etc.)
Control equity drawdown without foregoing long run return premia

43. OPTIMAL LOW RISK PORTFOLIO
CONSTRUCTION PROCESS
…Portfolio Construction maximises exposure to Low Risk Metric while minimising Volatility, accounting for
transaction costs and targeting desired Low Risk Sector Tilts
Stock buy list selected based on
Multi-Factor Low Risk Metric...
...Portfolio tilted toward drawdown
defensive sectors...

44. -60%
-50%
-40%
-30%
-20%
-10%
0%
Feb-87
Apr-88
Jun-89
Aug-90
Oct-91
Dec-92
Feb-94
Apr-95
Jun-96
Aug-97
Oct-98
Dec-99
Feb-01
Apr-02
Jun-03
Aug-04
Oct-05
Dec-06
Feb-08
Apr-09
Jun-10
Aug-11
Oct-12
Dec-13
MSCI World Global Low Volatility Active Equity
BACKTEST
PERFORMANCE
• Significant reduction in cumulative
drawdowns
• Reduced maximum drawdown
• Lower volatility
• Higher annualised returns
• Participate in most of the market
upside while significantly reducing
downside
0.9
9
Feb-87
Mar-88
Apr-89
May-90
Jun-91
Jul-92
Aug-93
Sep-94
Oct-95
Nov-96
Dec-97
Jan-99
Feb-00
Mar-01
Apr-02
May-03
Jun-04
Jul-05
Aug-06
Sep-07
Oct-08
Nov-09
Dec-10
Jan-12
Feb-13
PortfolioValue(Log-scale)
Cumulative Returns - Global Low-Volatility Active Equity
MSCI World Global Low Volatility Active Equity Alpha

45. ANNUAL RETURNS (BACKTEST)
-40%
-20%
0%
20%
40%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Annual Returns (1987 - 2014, in USD)
MSCI World Global Low Volatility Active Equity
• Significant improvement in bear markets
• While capturing most of the upside in bull markets

46. PORTFOLIO SNAPSHOT
*Risk forecasts based on 5 year covariance matrix

47. LIVE PERFORMANCE
• Launched in July 2014
• €709m AUM
• Integral part of our flagship MAPS range
• Delivering on its objective of similar returns
to MCSI World with lower volatility and
reduced drawdowns

48. CONCLUSION
Key differentiators of the ILIM Global Low Volatility Active Equity Fund:
1. focus on multiple factors
2. to minimise the cumulative drawdown
3. use of a 30 year history incorporating multiple market scenarios
We believe this is an excellent product for investors wishing to remain fully exposed
to the equity risk premium, while aiming to deliver lower volatility and reduced
drawdowns during market crashes.
If you would like to find out more, come and speak to us.

51. Irish Life Investment Managers Limited is regulated by the Central Bank of Ireland
Past performance, forecasts and simulated performance may not be a reliable guide to future performance
Investments may go down as well as up
Changes in currency exchange rates may have an adverse effect on the value, price or income of the product
This material is for information only and does not constitute an offer or recommendation to buy or sell any
investment and has not been prepared based on the financial needs or objectives of any particular person. It is
intended for the use of institutional and other professional investors
Irish Life Investment Managers, Beresford Court, Beresford Place, Dublin 1
Tel: (01) 704 1200 Fax: (01) 704 1918 Web: www.ilim.com