Ataa citywire april 2010
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Ataa citywire april 2010 Presentation Transcript

  • 1. Aviva Investors Absolute TAA Fund Luxembourg, 22nd April 2010 Gary Saidler, Client Portfolio Manager Katrin Ostermeier, Business Development Director
  • 2. This document is for investment professionals only. The content is not approved for use with retail investors or pension scheme members. 2
  • 3. Asset Allocation: Harder than it looks! N. America Asia Pac Property UK Credit Global FI Em Mkts Em Mkts Japan Em Mkts Em Mkts 29% 84% 11% 7% 17% 56% 26% 45% 33% 40% Europe Em Mkts UK Credit Property Property Asia Pac Property Em Mkts Asia Pac Asia Pac 25% 66% 10% 7% 10% 44% 19% 35% 30% 37% World Japan O/S Govt O/S Govt UK Credit World World Europe Europe World 25% 47% 8% 5% 9% 34% 15% 29% 22% 10% UK Credit Europe Cash Cash O/S Govt N. America Europe Asia Pac World Global FI 15% 37% 5% 4% 8% 30% 13% 27% 21% 9% UK Equity World Global FI Global FI Cash Japan UK Equity UK Equity Property N. America 14% 25% 3% 2% 3% 23% 13% 22% 18% 8% Global FI UK Equity Europe Em Mkts Em Mkts Europe N. America Property UK Equity Europe 50% 14% 24% -1% -2% -6% 21% 11% 19% 17% 7% Difference in 2007 Property N. America UK Equity Asia Pac Asia Pac UK Equity Japan World N. America UK Equity 12% 23% -6% -4% -14% 21% 11% 10% 7% 5% O/S Govt Property N. America N. America Japan Global FI Global FI UK Credit Japan Cash 9% 14% -12% -12% -19% 13% 9% 9% 7.35% 5% Cash Cash World UK Equity World Property Asia Pac N. America Global FI O/S Govt 6% 4% -13% -13% -20% 11% 7% -7% 7% 4% Japan UK Credit Japan World N. America UK Credit UK Credit Cash Cash UK Credit -9% 0.1% -20% -17% -22% 0.8% 7% 4% 4% 0.4% Asia Pac O/S Govt Em Mkts Europe UK Equity Cash O/S Govt O/S Govt UK Credit Property -9% -1% -31% -18% -23% 3% 5% 4% 0.8% -5% Em Mkts Global FI Asia Pac Japan Europe O/S Govt Cash Global FI O/S Govt Japan -25% -5% -36% -19% -32% 2% 4% -4% 0.7% -10% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Page 3
  • 4. Overview of tactical asset allocation strategies Dynamic strategy capturing short term opportunities across the asset spectrum Equities/bonds/currencies/other e.g. property UK, US, Europe, Japan and Asia Balanced portfolio of relative value and directional trades Diversified long/short positions in highly liquid and cost effective derivatives e.g. Equity/bond index futures Currency forwards Property swap The graph is for illustrative purposes only to demonstrate the types of asset classes that we may take positions in. The list is not exhaustive. Highly liquid strategy utilising a wide opportunity set Highly liquid strategy utilising a wide opportunity set 4
  • 5. Absolute Tactical Asset Allocation track record Ucits III Sicav launched 26 January 2006 AUM – over £700m High risk-adjusted returns** Fund return 10.9% p.a. net since launch Fund historical volatility of 8.1% p.a. since launch Process applied since 1999 Across a variety of mandates targeting different returns Achieved 94% target return since launch* *From 1 January ‘99 to 31 March ‘10. ** Source: Lipper as at 31 March 2010, volatility calculated from monthly returns sourced from Lipper/Hindsight. Performance shown net of fees for I share class. Past performance is not a guide to the future. High risk-adjusted returns High risk-adjusted returns 5
  • 6. Improved risk return profile Risk-return profile with TAA 1 Month Libor Risk-return profile -0.01 without TAA FTA All Stocks Return -0.05 Lehman Global Agg -0.09 FTSE World Europe ex UK -0.30 MSCI World Risk -0.37 FTSE All Share -0.30 Initial portfolio with optimised strategic allocation Improved return expectations for the same level of risk -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 Improved risk profile for an identical level of return A valuable additional source of returns Correlations uses quarterly ‘alpha’ performance data from UK pooled pension fund TAA Overlay (Q1’99-Q2’05) and standalone GTAA mandates (Q3’05-Q1’10). Index returns are in local currency. 6
  • 7. Key decision makers for this fund Adrian Jarvis The Asset Allocation Committee (AAC) uses experience and judgement to identify and weigh Fund Manager opportunities presented by our research Joined industry in 1990 With Aviva Investors since 2000 Able to draw on the talent and insight of the wider strategy team Steve Cleal All roles 100% dedicated to the management of Fund Manager asset allocation funds Joined industry in 1987 With Aviva Investors since 1987 Hassan Johaadien Head of Tactical Asset Allocation Research Joined industry in 1995 With Aviva Investors since 2005 Source: Aviva Investors 31 December 2009 An experienced and stable team An experienced and stable team 7
  • 8. Process supported by large team of specialists Fund Managers Helge Kostka Gary Saidler Steve Cleal* Adrian Jarvis* Head of CPM – Head of Asset Allocation Client Portfolio Investment Head of Strategy Manager – Asset Fund Management Solutions 20 years experience Allocation 22 years experience Strategic Asset Tactical Asset Analytics & Economics Strategy Implementation Allocation Allocation Research Hassan Niral Mirko Cardinale Haydn Davies Jonathan Stewart Robertson Johaadien* Shukla Head of Strategic Abrahams Senior Economist Head of Tactical TAA Modelling & Asset Allocation Head of MAF (UK & Europe) Asset Allocation Currency Strategist Performance Research Implementation Research Analyst David Hillier Sergio Anna Greaves Maulshree Saroliya Supriya Menon Carmen Magness Ferreira Senior Economist Strategic Asset Research Assistant MAF Asset Allocation Macro Strategist (Americas) Allocation Analyst Implementation Analyst Shamik Dhar Bruno Serdoura Ying Jiang Amien Johaadien Nichola Guinn Senior Economist Strategic Asset Asset Allocation MAF Allocation Analyst Analyst Systems Developer Asia Implementation Andrzej Pioch Sukh Sangha Strategic Asset MAF Allocation Analyst Implementation 8 * Member of the Asset Allocation Committee
  • 9. Investment process – key stages Investment Economic Optimal Forecasting Portfolio Portfolio scenario portfolio Implementation Implementation returns selection analysis analysis Combines the best of quantitative and qualitative inputs Combines the best of quantitative and qualitative inputs 9
  • 10. Forecasting returns Example scenarios: Return forecasts Two-Speed World 40% Economic fundamentals Equities Equities Profile for next 2 years for: Equities Liquidity Abounds Equities 15% GDP Inflation Bonds Bonds Interest rates Bonds Bonds Exports Recovery Corporate profits Currencies 20% Currencies etc Currencies Currencies Other Credit assets Policy Error Credit Credit 25% Credit Other Other Source: Aviva Investors 29 March 2010 Output: a set of asset return forecasts for each scenario Output: a set of asset return forecasts for each scenario 10
  • 11. Decision 15 September 2008: Adding value when our uncertainty is at its highest 50% 30% 20% Global hard landing Recovery Depression Idea 1: Expected impact: Expected impact: Expected impact: credit spreads +1.6% +3.4% -0.4% tighten Idea 2: Expected impact: Expected impact: Expected impact: interest rates +1.5% -1.4% +6.3% decrease Positions Expected impact: Expected impact: Expected impact: combined +3% +2% +6% We select portfolios to add value across all scenarios We select portfolios to add value across all scenarios Source: Aviva Investors as at September 2008 11
  • 12. Aviva Investors Asset Allocation – 07 April 2010 Implementation for ATAA Fund Libor +15% p.a. net target Relative risk-adjusted size of active positions Euro Stoxx 50 -45% DAX +10% TOPIX +20% S&P 500 +10% Equity Market Direction ASX 200 -10% 0% Others Equity Relative Value Hang Seng +5% 12% 18% KOSPI +5% Singapore +5% 10Y SONIA Swap -50% UK 10Y Bond +50% AU 10Y Bond -35% CN 10Y Bond -50% GE 10Y Bond +75% Currency IT 10Y Bond -60% 23% US 10Y Bond -80% JP 10Y Bond -40% GBP -5% Bond Market Direction SEK +20% 27% CHF +5% PLN +5% KRW +10% NZD -20% JPY -20% Bond Relative Value 20% EUR -40% CNY +15% AUD +25% CAD +5% UK IPD Swap +10% US 2Y Bond -100% Equities +0% Bonds -190% Currency +0% Other -90% Page 12
  • 13. Independent, centralised risk management team Daily monitoring, analysis and control Value at Risk ensures regulatory limits met daily using proprietary model Value at Risk Stress testing to analyse impact of extreme events Contribution to risk broken out for individual asset and asset classes Daily monitoring and a formal monthly meeting with fund managers Stress Testing Event Date (*) 1 Day 1 Week 1 Month 1 Year Black Monday 19th October 1987 -1.76 -2.78 -3.27 3.30 Asian Crisis 2nd July 1997 -0.43 -2.06 -2.14 -31.34 Global Crash 27th October 1997 -1.09 -1.72 -1.34 -15.90 Contribution to Risk Russian Crisis/LTCM 31st August 1998 0.46 -0.36 1.18 34.31 Dot-Com 14th April 2000 -0.61 -2.31 -2.09 -18.67 Sep 11th 2001 (WTC) 11th September 2001 2.14 -1.86 -4.22 0.69 WorldCom/Enron 17th July 2002 1.14 0.12 2.65 -0.61 Global Credit Crisis (2007/08) 20th June 2007 1.06 0.70 2.84 3.03 Lehman Bros Bankruptcy 15th Sep 2008 0.26 0.97 -2.51 4.15 (*) Estimated event start date not always clearly identifiable. Source: Aviva Investors 3 March 2010 13
  • 14. Tactical asset allocation summary Fund design offers high risk-adjusted returns in any market environment Diversification benefits when mixed with conventional assets Scenario analysis offers capital protection across uncertain investment environment Team of dedicated asset allocation specialists offers depth of experience and breadth of skills 14
  • 15. Appendix
  • 16. Example: summary of return optimisation inputs Two-Speed Liquidity World Abounds Recovery Policy Error Weighted Weight: 40% 20% 20% 20% Obs: 2000 1000 1000 1000 UK eq 7.3% 14.5% 19.0% -17.0% 6.2% US eq 8.0% 16.0% 21.0% -19.0% 6.8% EU eq 3.0% 21.0% 21.0% -24.0% 4.8% JP eq 16.0% 24.0% 24.0% -29.0% 10.2% STI 14.5% 25.5% 40.5% -26.5% 13.7% HangSeng 13.4% 22.4% 35.4% -23.6% 12.2% KOSPI 14.0% 23.5% 46.5% -25.0% 14.6% TAIEX 15.3% 38.8% 41.3% -34.7% 15.2% Aust_SPI 9.0% 14.0% 27.5% -22.5% 7.4% IPD Swap 2012 10.3% 18.3% 28.8% -22.0% 9.1% EURJPY 2.5% 5.4% 7.2% -7.2% 2.1% UK 10y bo 3.8% 3.8% -7.9% 3.8% 1.4% US 10y bo 4.7% 4.7% -7.5% 4.7% 2.3% EU 10y bo 2.6% 2.6% -5.1% 2.6% 1.1% JP 10y bo 2.0% 2.0% -2.6% 2.0% 1.1% AU 10y bo 2.3% -1.0% -4.2% 2.3% 0.3% Source: Aviva Investors Strategy team, based on scenario returns The graph is for illustrative purposes only to demonstrate the types of asset classes that we may take positions in. The list is not exhaustive. 16
  • 17. Example: optimisation and portfolio selection Two-Speed Liquidity Returns Holdings Initial World Abounds Recovery Policy Error Blended Blended AAC Template Optimal Optimal Optimal Optimal Optimal Optimal Proposal Equities +84% +55% +69% -160% +64% +36% +15% +15% Govt Bonds -120% -60% +5% -302% -103% -283% -245% -190% -70% Other Returns Under Two-Speed World +6.2% +21.9% +17.4% +8.4% -12.9% +16.3% +20.2% +6.3% +0.1% Liquidity Abounds +6.1% +28.2% +38.9% +8.5% -21.1% +24.3% +26.6% +9.1% +3.0% Recovery +16.4% +24.4% +15.5% +53.2% -32.8% +41.0% +27.1% +22.3% +5.9% Policy Error -6.6% -27.8% -25.3% -22.9% +37.1% -20.4% -18.4% -6.2% +0.4% Weighted Average +5.0% +10.9% +9.5% +9.6% -5.6% +13.3% +12.9% +6.8% +1.8% Expected Volatility +12.4% +20.0% +20.0% +20.0% +20.0% +20.0% +20.0% +13.8% +1.4% Information Ratio 0.41 0.49 Source: Aviva Investors Strategy team, based on scenario returns The graph is for illustrative purposes only to demonstrate the types of asset classes that we may take positions in. The list is not exhaustive. 17
  • 18. Our credentials Experience Key decision makers with over 50 years combined experience in TAA Stable team of 20 dedicated asset allocation specialists Process Unique blend of quantitative and qualitative analysis Focus on capital preservation Performance No down years in 11 years Performance particularly strong in times of market stress 18
  • 19. Fund performance since launch Aviva Investors Absolute TAA Fund (GBP) Performance versus benchmark since inception to 31 March 2010 160 150 140 130 120 110 100 90 26/01/2006 13/03/2006 26/04/2006 09/06/2006 25/07/2006 07/09/2006 23/10/2006 06/12/2006 19/01/2007 06/03/2007 19/04/2007 04/06/2007 18/07/2007 31/08/2007 16/10/2007 29/11/2007 14/01/2008 27/02/2008 11/04/2008 27/05/2008 10/07/2008 25/08/2008 08/10/2008 21/11/2008 06/01/2009 19/02/2009 06/04/2009 20/05/2009 03/07/2009 18/08/2009 01/10/2009 16/11/2009 30/12/2009 12/02/2010 30/03/2010 Aviva Investors Absolute TAA I(MF) LIBOR GBP 1 Month (IN) 1 Month 3 Months 6 Months YTD 1 Year 3 Year 5 Year Since % % % % % % p.a. % p.a. Launch % Aviva Investors Absolute TAA 1.23 3.60 6.66 3.60 9.29 31.39 - 53.80 I(MF) LIBOR GBP 1 Month (IN) 0.05 0.13 0.26 0.13 0.62 11.51 - 18.09 Source: Aviva Investors/Lipper Hindsight as at 31/03/2010. Data is representative of share class I and is provided net of fees w ith gross income reinvested in GBP Figures do not take into account the costs incurred on the issue and redemption of shares. Past performance is not a guide to future performance. 19
  • 20. Fund performance since launch Aviva Investors Absolute TAA Fund EUR hedged Performance versus benchmark since inception to 31 March 2010 125 120 115 110 105 100 95 90 85 80 28/08/2007 26/11/2007 22/02/2008 22/05/2008 20/08/2008 18/11/2008 16/02/2009 15/05/2009 13/08/2009 11/11/2009 09/02/2010 Aviva Investors Absolute TAA I EUR Hedge (MF) EURIBOR 1 Month (IN) 1 Month 3 Months 6 Months YTD 1 Year 3 Year 5 Year Since % % % % % p.a. % p.a. % p.a. Launch % Aviva Investors Absolute TAA 1.26 3.69 6.43 3.69 9.22 - - 21.00 I EUR Hedge (MF) EURIBOR 1 Month (IN) 0.04 0.11 0.22 0.11 0.62 - - 7.22 Source: Lipper Hindsight as at 31/03/2010. Data is representative of share class I and is provided net of fees w ith gross income reinvested in EUR. Figures do not take into account the costs incurred on the issue and redemption of shares. Past performance is not a guide to the future. 20
  • 21. Fund performance since launch Aviva Investors Absolute TAA 5 Fund (EUR) Performance versus benchmark since inception to 31 March 2010 110 108 106 104 102 100 98 96 06/12/2007 05/03/2008 03/06/2008 01/09/2008 28/11/2008 26/02/2009 27/05/2009 25/08/2009 23/11/2009 19/02/2010 Aviva Investors Absolute TAA 5 I EUR (MF) EURIBOR 1 Month (IN) 1 Month 3 Months 6 Months YTD 1 Year 3 Year 5 Year Since % % % % % % p.a. % p.a. Launch % Aviva Investors Absolute 0.30 0.95 1.93 0.95 2.36 - - 8.38 TAA 5 I EUR (MF) EURIBOR 1 Month (IN) 0.04 0.11 0.22 0.11 0.62 - - 5.95 Source: Lipper Hindsight as at 31/03/2010. Data is representative of share class I and is provided net of fees w ith gross income reinvested in EUR. Figures do not take into account the costs incurred on the issue and redemption of shares. Past performance is not a guide to the future. 21
  • 22. Aviva Investors Investment Strategy Team - investment scenarios and positioning – 07th April 2010 Scenarios focus on evolution of the global recovery Two-Speed World Liquidity Abounds Recovery Policy Error 15% 20% 25% 40% The sub-par recovery plods along in Variant of Two-Speed World – Global synchronised recovery gathers Policymakers have taken US/EU/UK. Financial system in Asia / EM policymakers refuse to pace. Past cycles show sharpest extreme measures to prevent a recovery with ongoing deleveraging, allow currencies to appreciate, upturns follow sharpest downturns – financial meltdown / global private credit weak, consumers wary. leading to excess credit creation. this was worst recession in 80 years depression. Asset markets could Risk of further US housing weakness. Bubbles develop in Asia / EM with largest output gap. be adversely affected through a Asia / EM enjoy strong cyclical Real Estate + Equities. Impact of policy stimulus leads to number of channels: recovery, driving global growth Risk of US Treasury bubble upside growth surprise in US. Withdrawal of QE - may forward. Strong mix of loose policy, driven by central bank recycling Employment recovers Q1, supporting cause bond market volatility. commodity strength, improving of savings. housing and consumption. domestic demand with no credit Interest rate hikes / overhang. Structural commodity story is still Global imbalances build – US current premature fiscal tightening - Equity boost from strong profits, esp. intact; combines with excess account deteriorates, EM economies may create fear of double where currencies cheap, but re-rating liquidity to push commodity resume export-led growth model. dip recession. phase over. complex still higher in 2010, Profits beat expectations; equity rally Protectionism - may trigger particularly for those with supply continues, albeit with sporadic sell- Support from QE/Banks/Investor trade war / geopolitical constraints. offs on rate hike fears. demand helps Treasury yields remain instability. range bound. Credit spreads narrow Risk of 2011 recession if oil Growing risk central banks behind the Risk aversion rises - equities, modestly. prices approach 2008 peak. curve on inflation; bonds sell off; $ / credit, bonds suffer; cash & gold US$ remains weak, with counter-trend commodities rally. provide safe havens. rallies. Yen vulnerable once Fed fund hikes in view.
  • 23. Scenarios and Positioning – Current rationales 7 April 2010 Asset allocation stance reflects best positioning for next 6-9 months against all scenarios plus short-term timing opportunities Equity Market Equity Relative Bond Market Bond Relative Currency Other Direction Value Direction Value Moderate gains for Econ. fundamentals Short duration. Next Japanese nominal Highlights: Inflows support UK equities expected in more supportive of move for short rates is bonds are thematic commercial property; AUD, SEK - process H110 under first three Asian markets. up and phase of cycle is short given debt trap Long swap position favours rate hike scenarios driven by bond -ve. Low short and demographics. held. Europe least favoured currencies. profits, not re-ratings. rates & deleveraging given economic strains Italian BTP spread over Short US 2Y Notes; creating sovereign KRW – value, Asian Policy Error scenario and expensive euro. Bunds expected to market likely to start demand. appreciation. would be very negative Japan offers short-term widen should EU pricing in more rate for equities. opportunity given strong Yield risks on upside funding concerns EUR – still expensive, rises. flows and expected Yen from high issuance & resurface. poor econ. outlook, Short-term technicals Macro fund holds: weakness. specific sovereign- sovereign debt crises. show mkt is overbought. Swap spreads overly related credit concerns. -Long gold; inflation / Fund tilt towards pessimistic about risk of JPY – expensive, Neutral position for now. Offsetting demand from deflation hedge . markets that are more UK government default. potential for more QE. QE now ending. -Short Eurostoxx50 robust to Policy Error. Upside risks to AU + CN correlation; position for yields. greater stock selection End of QE + stronger in 2010. data to put upward pressure on US yields. 23
  • 24. Scenarios and positioning - summary of recent changes - 07 April 2010 Date Change (Global Macro) Rationale 10-Feb-10 Reduce size of Eurostoxx short by 30% Market oversold, risk that some relief on Greek deficit issues causes snap back. "Liquidity Abounds" from 20% to 15%, "Policy Error" from 20% to 25% China tightening and EU weakness changes the probability distribution. 15-Feb-10 Buy 12% S&P; sell 12% Eurostoxx Near term risks of a sharp relief rally in Europe have receded. Profits in US to exceed euro profits Sell 100% US 2yr bonds Rate rises in the US likely to exceed profile discounted by short rate curve Buy 15% AUD; sell 15% CAD AUD has fallen recently and has interest rate support and relatively strong economy Buy 6% EUR; sell 5% GBP; sell 1% JPY Reflect GBP's recent rise against the euro Buy 10% SEK; sell 5% NOK; sell 5% GBP Trade following currency model output 22-Feb-10 Sell 10% Eurostoxx, 10% S&P500 and 10% Australia SPI Markets up strongly over past few weeks and are no longer oversold Sell 5% NOK and 5% AUD; Buy 5% CAD and 5% PLN Trade following currency model output 24-Feb-10 Sell 60% BTP bonds; buy 15% German 10y and 15% UK 10y Italian bonds expected to suffer greater funding concerns than Germany and UK Buy 5% SEK and 5% CAD; sell 5% NOK and 5% GBP Trade following currency model output 01-Mar-10 Buy 5% SEK; sell 5% GBP SEK well supported by fundamantals. Concerns over minority government to weigh on GBP 02-Mar-10 Buy 10yr gilts; sell 10yr SONIA Swap spreads overly pessimistic about risk of UK government default 08-Mar-10 Buy 5% CAD and 5% SEK; Sell 5% NOK and 5% NZD Trade following currency model output Buy 5% AUD and 5% USD; Sell 10% JPY JPY is overvalued and could suffer if risk appetite increases 10-Mar-10 Buy 10% DAX & 15% FTSE100; sell 5% Taiwan & 5% TOPIX Temporary fix for Greek sovereign crisis, weak £ benefits UK, equity mix protects against Policy Error Buy 45% Bunds; Sell 15% Gilts & 50% Aus bonds & 50% Can bonds Upside risks to Aus, Can yields; use Bunds to fully offset BTP short now 22-Mar-10 Sell 5% Eurostoxx Lock in some profit following recent equity bounce Buy 10% USD; Sell 10% JPY USD fundamentlaly cheap vs JPY and supported by stronger economic momentum Buy 5% CHF; Sell 5% EUR Trade following currency model output 29-Mar-10 Buy 5% USD; Sell 5% JPY Trade following currency model output Buy 50% JP 10y, buy 15% Aus 10y and Eur 10y; Sell 80% US 10y End of QE to put upward pressure on US yields. Take profit on Jap and Aus short bond positions 06-Apr-10 Sell 10% FTSE100 Neutralise equity long after strong rally. UK market overbought Buy 10% TOPIX, Sell 10% Eurostoxx Japanese equities to receive support from weakening Yen. Market also relatively cheap 07-Apr-10 Buy 5% GBP; Sell 5% JPY Sterling very cheap and election likely to bring some fiscal realism Buy 5% CAD; Sell 5% EUR Canadian economy strengthening, rates likely to rise more quickly than in Europe Buy 5% SEK; Sell 5% NOK Trade following currency model output The % changes shown are on the template for funds targeting 15% p.a net outperformance (ATAA, GMAA and Global Macro). For our funds with other levels of target outperformance positions are scaled accordingly, e.g. ATAA5 changes are ¼ of these. Page 24
  • 25. Aviva Investors Asset Allocation – 29 March 2010 Implementation for Absolute TAA 5 Fund Libor +3.75% p.a. net target Relative risk-adjusted size of active positions FTSE 100 +3% Euro Stoxx 50 -9% DAX +3% Equity Market Direction TOPIX +3% Others 5% S&P 500 +3% 13% Equity Relative Value ASX 200 -3% 13% Hang Seng +1% KOSPI +1% Singapore +1% 10Y SONIA Swap -13% UK 10Y Bond +13% AU 10Y Bond -9% CN 10Y Bond -13% Currency GE 10Y Bond +19% 21% IT 10Y Bond -15% US 10Y Bond -20% JP 10Y Bond -10% GBP -3% SEK +4% CHF +1% Bond Market Direction NOK +1% 27% PLN +1% KRW +3% NZD -5% JPY -4% Bond Relative Value EUR -9% 21% CNY +4% AUD +6% UK IPD Swap +3% US 2Y Bond -25% Equities +3% Bonds -48% Currency +0% Other -23% 25
  • 26. Long-term track record Founding client, target return contribution 1% p.a., 01/01/99 to 31/03/10 Long Term GTAA Quarterly performance Actual return 0.94% p.a., volatility 1.09% p.a., risk adjusted return 0.86* Long Term GTAA1.1%, information ratio of 0.85 Performance +0.94%, volatility Quarterly Performance +2.50 +2.00 +1.50 +1.00 Alpha % +0.50 -0.50 -1.00 -1.50 -2.00 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Actual quarterly GTAA strategy return Target per quarter Past performance is not a guide to future performance *Source: Aviva Investors. Alpha composite performance gross of fees. Composite relates to the AIPL Balanced Managed Overlay (Q4’98-Q1’05) and a standalone GTAA mandate (Q2’05-Q4’07), ATAA Fund Q108 to Q110. Scaled to 1% p.a. volatility and alpha target. GBP. Consistent returns over the long-term Consistent returns over the long-term 26
  • 27. ATAA monthly gross of fees attribution by decision Monthly Contribution to +20% Fund GOF Alpha by Decision 10.00% Return Target: UK 1M LIBOR GBP + 20% p.a Gross of Fees 8.00% 6.00% 4.00% Alpha Contribution 2.00% 0.00% -2.00% -4.00% -6.00% -8.00% 06 6 6 6 07 7 7 7 08 8 8 8 09 9 9 9 6 6 7 7 8 8 9 9 0 0 0 0 0 0 0 0 r-0 -0 -0 r-0 -0 -0 r-0 -0 -0 r-0 -0 -0 b- n- g- b- n- g- b- n- g- b- n- g- ec ec ec ec ct ct ct ct Ap Ap Ap Ap Fe Ju Fe Ju Fe Ju Fe Ju Au Au Au Au O O O O D D D D Equity Beta Equity Market S.T.I.R. (<5 Yrs) L.T.I.R. Beta L.T.I.R. Market Currency Other Source Aviva Investors Strategy Team as at end of December 2009. Short term interest rates (STIR), Long term interest rates (LTIR). 'Other' relates to the volatility trade (Vix future), CDS and UK commercial property swap. Attribution shown in GBP. 27
  • 28. Risk management is integral to our process Fund managers manage market risk by: Scenario Testing Ensuring portfolios perform well across scenarios Ensuring portfolio maintains good balance across six main asset risk categories Sizing trades according to projected risk and level of conviction Portfolio Managing overall leverage and risk level Diversification AAC varies risk as shown below Total portfolio Normal volatility Current Low High confidence in confidence in mis-pricing mis-pricing Minimum Maximum 0% volatility + 30% volatility 28
  • 29. Historic Value at Risk (VaR) within the Fund Source: Aviva Investors as at 31 March 2010 29
  • 30. Model positions - gross exposure by asset class Aviva Investors Absolute TAA Fund (I Class) M odel Positions - Gross Exposure By Asset Class 900% 800% 700% 600% 500% % 400% 300% 200% 100% 0% May-06 May-07 May-08 May-09 Nov-06 Mar-07 Nov-07 Mar-08 Nov-08 Mar-09 Nov-09 Jul-06 Sep-06 Jan-07 Jul-07 Sep-07 Jan-08 Jul-08 Sep-08 Jan-09 Jul-09 Sep-09 Gross Equities Exposure Gross Bond Exposure Gross Currency Exposure Gross Portfolio Exposure Gross STIR Exposure Gross CDS Exposure Gross Other Source Aviva Investors Strategy Team as at 31 December 2009. NB STIR = short-term interest rates that include EURO$, EUROSCHATZ, and TIPS positions. NB CDS = 5 year CDS on Itraxx super senior tranche (22% - 100%). Positions shown as % of NAV. 30
  • 31. Model positions – net exposure by asset class Aviva Investors Absolute TAA Fund (I Class) Model Positions - Net Exposure By Asset Class 400% 300% 200% 100% % 0% May-06 May-07 May-08 May-09 Mar-06 Nov-06 Mar-07 Nov-07 Mar-08 Nov-08 Mar-09 Nov-09 Jan-06 Jul-06 Sep-06 Jan-07 Jul-07 Sep-07 Jan-08 Jul-08 Sep-08 Jan-09 Jul-09 Sep-09 -100% -200% -300% Net Equities Exposure Net Bond Exposure Net Currency Exposure Net STIR Exposure Net CDS Exposure Net Other Source Aviva Investors Strategy Team as at 31 December 2009. NB STIR = short-term interest rates that include EURO$, EUROSCHATZ, and TIPS positions. NB CDS = 5 year CDS on Itraxx super senior tranche (22% - 100%). Positions shown as % of NAV. 31
  • 32. Example Sept 2008: Credit offered great long-term value, but not robust on its own Opportunity: buy senior tranche of European investment grade credit Credit spreads high. Looking to profit from market views & distortions Massively inflated income for lowest risk CDS tranche due to liquidity crisis Historic analysis plus worst case defaults showed huge over-compensation Very high confidence to expiry, but material risk under ‘Depression’ scenario Itraxx Europe 22-100% Tranche Premium 100 80 60 40 20 0 Nov -05 M ar-06 Jul-06 Nov -06 M ar-07 Jul-07 Nov -07 M ar-08 Jul-08 Source: Aviva Investors / Itraxx, data as at September 2008 32
  • 33. Example Sept 2008: High interest rates offering attractive value and hedge Opportunity: receive fixed, pay floating European interest rate Sticky inflation expectations, reticent ECB and European slowdown denial Way of making money out of interest rate expectations versus market views Natural and convincing hedge for ‘Depression’ scenario High confidence to expiry, but material risk under ‘Recovery’ scenario EONIA 15/09/08 5 4 3 2 Swap Curve 1 Our Forecast 12 Month Average Difference 0 -1 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Oct 09 Dec 09 Feb 10 Apr 10 Jun 10 Aug 10 Oct 10 Source: Aviva Investors as at September 2008 33
  • 34. Fund range overview Fund Name Absolute TAA Fund Absolute TAA 5 Fund Legal structure Luxembourg domiciled SICAV Luxembourg domiciled SICAV UCITS compliant Yes Yes Currency GBP EUR Performance target Benchmark +15% net of fees Benchmark +3.75% net of fees Benchmark 1 month GBP LIBOR 1 month Euribor Expected average volatility Under 20% p.a. Under 5% p.a. Liquidity Daily Daily Minimum investment (Institutional GBP 500,000 EUR 500,000 share class) Launch date 26-Jan-2006 06-Dec-2007 Annual management charge 0.85% 0.55% (Institutional share class) Performance Fee 20% of returns over benchmark 10% of returns over benchmark Different solutions for different objectives Different solutions for different objectives 34
  • 35. Bios
  • 36. Gary Saidler Gary Saidler Client Portfolio Manager – Asset Allocation Gary joined the investment industry in 2003. Main responsibilities To communicate Aviva Investors tactical asset allocation and strategic asset allocation expertise to clients and prospects. Experience and qualifications Gary joined Aviva Investors in May 2007. Gary graduated from the University of Glasgow with a BSc (Honours) in Statistics. Prior to Aviva Investors he worked in the investment consultancy industry. Gary is a CFA charterholder and has completed the UKSIP Investment Management Certificate (IMC). Page 36
  • 37. Adrian Jarvis Adrian Jarvis Director of Strategy Adrian joined the investment industry in 1990. Main Responsibilities Adrian chairs the Asset Allocation Committee, responsible for establishing the asset mix of Aviva Investors balanced fund mandates and is ultimately responsible for monitoring performance and risk control measures across portfolios. Experience and qualifications Adrian joined the firm (as Norwich Union Investment Management Ltd (NUIM)) in 2000 as Senior Quantitative Analyst with responsibility for developing NUIM’s quantitative research capabilities. He has held the position of Head of Strategy, responsible investment strategy, quantitative research and quant funds leading the team of economists, strategy and index fund managers and derivatives specialists since February 2000. Prior to joining NUIM Adrian spent three years at NPI Asset Management, during which time he was promoted from Director of Strategy & Quantitative Analysis to Head of Global Asset Allocation. Previously he gained extensive investment experience at CIN Management as Assistant Director of Global Asset Allocation and Shell International as Senior Quantitative Analyst. Adrian holds a BSc and MSc in Economics from the London School of Economics, and studied Investment Management at the London Business School. 37
  • 38. Steve Cleal Steve Cleal Asset Allocation Fund Management Steve joined the investment industry in 1987. Main responsibilities As a member of Aviva Investors Asset Allocation Committee, Steve helps formulate the House Strategy for investment markets. He is also responsible for Managing Aviva Investors range of asset allocation mandates. Experience and qualifications Steve joined the firm (as Norwich Union Investment Management) in 1987. Prior to being appointed Head of Asset Allocation Fund Management in 2009, Steve had a number of roles including managing multi-asset funds and generating the firm's view on the UK and North American economies. He has worked closely with a number of internal and external clients, providing guidance on investment and strategic issues. Steve holds a BA (Hons) from Keele University and the UKSIP Investment Management Certificate. 38
  • 39. Hassan Johaadien Hassan Johaadien Head of TAA Research Hassan joined the investment industry in 1995. Main responsibilities To develop and apply Aviva Investors process for Tactical Asset Allocation to create better benchmarks for client funds and identify special opportunities. Also to develop Aviva Investors TAA models and use them to propose tactical trades for Asset Allocation Committee for which Hassan is a member. Experience and qualifications Hassan joined Aviva Investors in July 2005. Previously he worked for Shell Pensions as Head of Research. Hassan holds a BSc in Statistics, Computing and Economics from University College London. He also holds the UKSIP Investment Management Certificate. 39
  • 40. Introduction to Aviva Investors
  • 41. We are part of Aviva plc Long-term Asset General savings management insurance Asia Europe North America UK World’s fifth-largest insurance group and the largest insurance services provider in the UK* 50 million customers worldwide** 54,000 employees** Committed to building Aviva brand worldwide Strength and stability Strength and stability *Based on gross worldwide premiums for the year ended 31 December 2008. ** As at 30 June 2009 41
  • 42. Aviva Investors is a global asset manager Over £249 billion under management % AuM by asset class across all asset classes Real Estate 10% Over 1,300 employees at Aviva Investors Other 4% Significant growth potential Liquidity Fixed Income 10% 54% Enhanced capability available to clients across borders Equity 22% Breadth and depth of resources Breadth and depth of resources Data as at 31 December 2009 42
  • 43. Operating in 16 countries Europe Headcount: 1,008 UK France Poland Luxembourg Germany Romania Spain Asia-Pacific Headcount: 78 Eire Italy Australia China Singapore Taiwan UAE North America Headcount: 215 US Canada Global scale, local knowledge Global scale, local knowledge 43 Data as at 31 December 2009.
  • 44. Important information (1) Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (Aviva Investors) as at 28 February 2010. 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. 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. 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. 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, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708. For Austria: The "Raiffeisen Zentralbank Österreich 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 "Raiffeisen Zentralbank Österreich 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 "Raiffeisen Zentralbank Österreich 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. 44
  • 45. Important information (2) 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. 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, Aviva Investors Global Services Limited, Zweigniederlassung Deutschland - An der Hauptwache 7, 60313 Frankfurt am Main or from Aviva Fund Services, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708. 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. 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 Global Services Limited, 34 avenue de la Liberté, 4th floor, L-1930 Luxembourg. R.C.S. Luxembourg B25708. For UK: 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. 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. 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. Contact us at Aviva Investors Global Services Ltd, No. 1 Poultry, London EC2R 8EJ 10/0332/300610 45