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  • 1. Structured Investment Solutions Angelien Kemna
  • 2. <ul><li>Outline </li></ul><ul><li>ING IM </li></ul><ul><li>Fixed asset allocation </li></ul><ul><li>Dynamic asset allocation </li></ul><ul><ul><li>Protected Mix Fund </li></ul></ul><ul><ul><li>ING Volatility Fund </li></ul></ul><ul><li>Solutions for whom? </li></ul>Structured Investment Solutions
  • 3. ING Group & Asset Management Baring Asset Management Parcom ING Trust ING Real Estate ING AM platform Hubbell (Insurance Europe) Rinnooij Kan (Insurance Asia Pacific) Hubbell (Insurance Americas) ING IM Europe Angelien Kemna ING IM Asia Pacific Chris Ryan ING IM Americas Bob Crispin ING IM Global Board Regional CEO’s ING IM Global Board co-ordinates global ING IM activities.
  • 4. Top 30 global investment managers source: IPE; figures as per June, 2003 ING figures include ING IM, Baring Asset Management, ING Real Estate, ING Trust, Baring Private Equity Partners, ING Parcom AUM in €bn as per June 2003 State street Global Advisors 1 Allianz Dresdner 2 Fidelity 3 4 Deutsche Asset Management 5 Barclays Global Investors 6 Mellon Global Investments 7 Vanguard Group 8 Capital int. 9 JP Morgan Fleming A.M. 10 Citigroup Asset Management 11 ING Group 12 Morgan Stanley 13 Alliance Bernstein 14 Invesco Continental Europe 15 Pimco European Ltd 16 Merrill Lynch 1048 916 727 726 700 553 540 526 486 457 433 376 368 333 320 441 INGIM 17 301 AIG Global Investment 18 299 Wellington Management Co 19 Northern Trust 20 Goldman Sachs International 21 Credit Suisse 22 AXA 23 BlackRock 24 Franklin Templeton 25 Putnam 26 SG Asset Management 27 28 Prudential M&G, UK 289 288 286 269 268 260 246 239 234 222 29 Prudential, US 198 30 Generali, IT 198
  • 5. ING IM - Global Engine, Local Delivery Data as of 31 December 2003 <ul><li>Global presence </li></ul><ul><li>29 Countries </li></ul><ul><li>AUM U 286,2 bn </li></ul><ul><li>Total Investment professionals 642 </li></ul><ul><li>Total Employees 2263 </li></ul>Americas U 132,3 bn AUM 310 Investment Professionals Asia-Pacific U 43,1 bn AUM 156 Investment professionals Europe U 110,8 bn AUM 175 Investment Professionals
  • 6. Our asset base AuM increased with 6,3% to EUR 110,8 billion
  • 7. Our asset base
  • 8. <ul><li>A large part of the activities of ING IM is the management of (sub-categories of) different asset classes. </li></ul><ul><li>Examples: </li></ul><ul><ul><li>High-dividend equity </li></ul></ul><ul><ul><li>Emerging market debt </li></ul></ul><ul><ul><li>European small cap equity </li></ul></ul><ul><ul><li>Asset-backed securities </li></ul></ul><ul><ul><li>... </li></ul></ul>Building blocks for asset allocation
  • 9. <ul><li>Most widely used method of asset allocation. </li></ul><ul><li>Fixed weights, periodically rebalanced. </li></ul><ul><li>Based upon mean-variance optimisation, risk aversion, investment targets. </li></ul><ul><li>Used in both retail (model portfolios) and institutional portfolios. </li></ul><ul><li>Added value: </li></ul><ul><ul><li>Outperformance of building blocks </li></ul></ul><ul><ul><li>Outperformance of Tactical Asset Allocation </li></ul></ul>Fixed asset allocation
  • 10. <ul><li>Based on risk considerations: protection against severe shortfall. </li></ul><ul><li>Natural connection to asset management in correspondence with liabilities. </li></ul><ul><li>No fixed weights: allocation to different assets depends on market developments. </li></ul><ul><li>Building blocks are the same as before. </li></ul><ul><li>“ Structured Products”. </li></ul>Dynamic asset allocation
  • 11. <ul><li>Fixed maturity </li></ul><ul><ul><li>Zero + equity: > CPPI </li></ul></ul><ul><ul><li>Zero + (exotic) option: > CoCoNote </li></ul></ul><ul><ul><li>> ING LIRIC </li></ul></ul><ul><li>Infinite maturity </li></ul><ul><ul><li>Money market + portfolio of (call) options </li></ul></ul><ul><ul><li>> Continuous Click Fund </li></ul></ul><ul><ul><li>Bonds + equity + portfolio of (put) options </li></ul></ul><ul><ul><li>> Protected Mix Fund </li></ul></ul><ul><ul><li>> Horizon Matching Fund </li></ul></ul><ul><ul><li>Fixed income options + FX options </li></ul></ul><ul><ul><li>> Volatility Fund </li></ul></ul>Structured Products
  • 12. <ul><li>Building blocks: bonds, equity, and put options. </li></ul><ul><li>Floor is a fixed percentage (70%, 80% or 90%) of highest value reached, effective immediately. </li></ul><ul><li>For reference: 100% would correspond to a savings account. </li></ul><ul><li>Uses options to manage gap risk, and to make dynamic rebalancing more effective and efficient. </li></ul>Protected Mix Fund
  • 13. Protected Mix Fund Traditional Balanced Fund 30 70 59 40 Protected Mix Fund 70% 39 40 20 60 Dynamic Rebalancing Protection Level (=70) B B B B E E E E Option Option Option
  • 14. Protected Mix Fund Example: Protected Mix fund 80 (Korea) Protection Level NAV What goes up can never go down again!
  • 15. ING Volatility Fund <ul><li>Volatility as an asset class aims to earn total return from active bets in fixed income and currency option markets -that is, from the non-lineair risks gamma and vega </li></ul><ul><li>To be a separate asset class exposure to the underlying markets (delta), like duration, curve, swapspreads, FX etc. should be limited </li></ul><ul><li>Average delta is neutral, but may be considerable at any one point in time </li></ul>
  • 16. ING Volatility Fund <ul><li>Three basic volatility bets: </li></ul><ul><ul><li>trading implied volatility versus actual volatility. </li></ul></ul><ul><ul><li>trading ranges: is volatility part of a trend? </li></ul></ul><ul><ul><li>trading current implied volatility versus future implied volatility (vega). </li></ul></ul><ul><li>Next to that: relative value volatility bets: </li></ul><ul><ul><li>(FX and IR): short dated versus long dated volatility. </li></ul></ul><ul><ul><li>(IR) : volatility on short versus long rates. </li></ul></ul><ul><ul><li>skew trades: high/low strikes versus ATM forward. </li></ul></ul><ul><ul><li>cross-country: difference in volatility between currencies. </li></ul></ul><ul><ul><li>cross-product volatility (IR): for example treasury versus swap volatility. </li></ul></ul>
  • 17. ING IM Structured Products <ul><li>Solutions for whom? </li></ul><ul><li>Retail clients who </li></ul><ul><ul><li>want protection, </li></ul></ul><ul><ul><li>have specific investment targets. </li></ul></ul><ul><li>Institutional clients that </li></ul><ul><ul><li>have to comply with specific regulations, </li></ul></ul><ul><ul><li>aim to reduce risk through diversification, </li></ul></ul><ul><ul><li>have investment objectives related to their liabilities. </li></ul></ul><ul><li>ING group </li></ul><ul><ul><li>to protect solvency ratios. </li></ul></ul>

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