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Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012
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Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012

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Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012

Alliance Bernstein presentation on "TDFs: Default Strategies not funds" at the PensionSource Fund Manager Conference 2012

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  • 1. 28th November 2012 PensionSource: Fund Manager Conference AllianceBernstein Defined Contribution Investments TDFs: Default Strategies (not funds)This information is issued by AllianceBernstein Limited, 50 Berkeley Street, London W1J 8HA, a company registered in England under company number 2551144. AllianceBernstein Limited is authorised andregulated in the UK by the Financial Services Authority (FSA – Reference Number 147956). This information is directed at Professional Clients only. It is provided for informational purposes only and is notintended to be an offer or solicitation, or the basis for any contract to purchase or sell any security, product or other instrument, or for AllianceBernstein to enter into or arrange any type of transaction as aconsequence of any information contained herein. The views and opinions expressed in this document are based on AllianceBernsteins internal forecasts and should not be relied upon as an indication of futuremarket performance. Past performance is no guarantee of future returns. This information is not intended for public use.©2012 AllianceBernstein
  • 2. AllianceBernstein: Experience and Expertise Our Investment Management Credentials Our DC Expertise  Managing c. €326bn on behalf of clients globally  First provider of a flexible target-date service platform in the US, UK and Ireland  Managing assets since 1967  c.€20bn in DC assets under management globally  Providing asset allocation solutions for more than 40 years  Largest provider of flexible TDF solutions globally  Intense focus on achieving positive outcomes  In depth research into DC issues for our clients  Our target date funds are being used by more  Research is key to our clients’ success than one million participants globally A Trusted Partner for DC InnovationAs of 30th September 2012. AllianceBernstein.com 1
  • 3. Why Choose AllianceBernstein? Creating better member outcomes  Age-appropriate investment design  Portfolio managed solution – not an administrative mechanism  Greater investment sophistication  Volatility management to “smooth the ride” for members Significantly improved risk management  Accountable portfolio manager for asset allocation decisions  Strategies kept fresh through time A simpler way for members to save  “One fund for life” Target Date Funds (TDFs)  Intuitive communications Value for money  Low cost  High value An Age-Appropriate Diversified Growth Fund AllianceBernstein.com 2
  • 4. Typical Lifestyling Approach Has Its Limitations Typical Mechanistic LifestyleFund switches on individual basis Member Fund Accounts SwitchesReally difficult to communicate to membersEnd point sensitive – designed to mature on Global Equity a specific dayReal impediment to change DGF Costly and time consuming BondsA formula that has no market awarenessIntroduces operational risk Cash +1000s Investment Problem of Retirement Saving Requires an Investment Solution AllianceBernstein.com 3
  • 5. A Target Date Fund is a Single Fund for Life Member either elects or is automatically invested in the fund with their expected retirement year in its name 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059 to to to to to to to to to to to to to to to to to to to to 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061 Each fund is an age appropriate diversified investment fund that lasts a lifetime 15 Years before Today At the Target Date the Target Date Example: Retirement Fund 2029–2031 Equities Diversifiers Bonds/Cash An Investment Solution to an Investment ProblemSource: AllianceBernstein AllianceBernstein.com 4
  • 6. AllianceBernstein Retirement Strategies A range of investment funds suitable for individuals saving for retirement in or around the years stated in each fund’s name 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059 to to to to to to to to to to to to to to to to to to to to 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061 Objective of each fund is to:  maximise the savers potential retirement income having consideration to the remaining time to retirement over which any losses can be recovered; and  use their savings on retirement to provide for retirement income based on consideration of the whole range of options available at that time1 Performance expectation through time: CPI + 4% Benchmark: each fund has a specific benchmark made up of a composite of the indices from the underlying asset classes A Low Cost, High Quality Solution for Your Clients1 Including the purchase of an annuity from an insurance company or the alternative of pursing pension provision directly from the invested funds AllianceBernstein.com 5
  • 7. AllianceBernstein Retirement Strategies Funds (Euro): Proposed Allocations Young Savers Midlife Savers Pre-retirement Savers Current Strategy Target Years Money Market Instruments 100% Inflation Linked Euro Government Debt 80% Medium Duration Nominal Euro Govt Debt Long Duration Nominal Euro Govt Allocation 60% Debt Euro Corporate Bonds 40% Global Property Emerging Market Equities 20% Global Unhedged Equities Global Hedged Equities 0% 40 yrs 30 yrs 20 yrs 10 yrs 0 +10 yrs 2050 2041 2032 2023 2011 2002 to to to to to to 2052 2043 2034 2025 2013 2004 Key features  For  Packaged low cost range of funds (3 year vintages)  Trust based schemes and contract based market  Passive only (external managers)  Those who want an improved DC governance framework  Volatility Managed with Dynamic Asset Allocation  Those who may want a seamless transition to a customised  Can be white-labelled solution in future Available via the PensionSource Platform from Q1 2013 AllianceBernstein.com 6
  • 8. AllianceBernstein Target Date Funds Offer a Robust Strategy Creating better member outcomes with improved risk management  Robust age-appropriate de-risking “glidepath” which moves from growth assets to stabilising assets  Blend of asset classes and fund managers  Volatility management to smooth the ride for members  Daily portfolio manager oversight  Adapts to any future change Value for Money  Low cost  Passive managers with active asset allocation  Consistent investment approach with some of the largest DC schemes globally An Evolution Over Traditional Strategies AllianceBernstein.com 7
  • 9. Your AllianceBernstein Team – Client Relations Tim Banks APMI Director, Head of Sales and Client Relations AllianceBernstein Defined Contribution Investments 50 Berkeley Street London W1J 8HA Office: +44 (0) 207 959 4783 Mobile: +44 (0) 7900 324918 Email: tim.banks@alliancebernstein.com Katie Weber Director—Client Relations AllianceBernstein Defined Contribution Investments 50 Berkeley Street London W1J 8HA Office: +44 (0)20 7959 4948 Mobile: +44 (0)79 17263 525 Email: katie.weber@alliancebernstein.com AllianceBernstein.com 8
  • 10. AppendixAllianceBernstein.com 9
  • 11. Flexible TDFs vs. Lifestyling: Simplicity for MembersBy using Target Date Funds as the delivery mechanism:  Communication is simpler to understand  Operational changes are easier to implement  Members see one fund for life Flexible TDFs Lifestyle  Manager changes require no member communication / consent    Glidepath changes require no member communication / consent    No legacy asset issues    Low operational risk during changes    Changes seamless for member   An Evolution Over Mechanistic LifestylingSource: AllianceBernstein AllianceBernstein.com 10
  • 12. Flexible Target Date Funds vs. Lifestyling: In practice… Quarterly TDF Member Statement Quarterly Lifestyle Member Statement The Objective is in the Fund NameSource: AllianceBernstein. Example – for illustration purposes only. AllianceBernstein.com 11
  • 13. Volatility Management: Aims to Smooth the JourneyOur Objective is to Rein in Extreme Outcomes Our Approach Tends to Reduce Peak Volatility Whilst maintaining long-term returns Simulated Historical Portfolio Volatility 2008-2010 Fund 30% Dynamic Asset Allocation Risk Capacity Realised Portfolio Volatility (pa) 25% Dynamic Management Fixed Asset 20% Fixed Management Conventional Allocation Asset AllocationFrequency 15% Fewer Fewer Large Large Losses Gains 10% 5% 0% Lower Returns Higher 82 85 88 91 94 97 00 03 06 09 Year Avoiding the default failing to meet its objectives and bad  Our dynamic approach is applied across approx. €20bn member behaviour of buying high and selling low or of client portfolios globally ceasing contributions altogetherSource: Alliance Bernstein through to 31 December 2010 – Historical Information provided for illustrative only.Analysis is simulated based on the current strategic asset allocation strategy of the AllianceBernstein Retirement Strategy Funds combined with a simulation of our dynamic asset allocationtoolset, this was not a live client strategy for the majority of this period. Please read “Note on Simulation Results” in back of presentation for important additional information. Volatility is measuredin relative terms to a benchmark which is blended over the period from being 100% cash when the fund is 25 years from retirement to 25% cash and 75% bonds matching the annuity purchasedwhen the fund reaches its target date. AllianceBernstein.com 12
  • 14. Notes on Simulation ResultsThe asset-allocation framework discussed in this presentation is a new strategy for which actual data were not available. The portfolios and their performance are hypothetical and do notrepresent the investment performance or the actual accounts of any investors. The securities in these hypothetical portfolios were selected with the full benefit of hindsight, after theirperformance over the period shown was known. The results achieved in our simulations do not guarantee future investment results.The model performance information in this presentation is based on the back-tested performance of hypothetical investments over the time periods indicated. “Back-testing” is a process ofobjectively simulating historical investment returns by applying a set of rules for buying and selling securities, and other assets, backward in time, testing those rules, and hypotheticallyinvesting in the securities and other assets that are chosen. Back-testing is designed to allow investors to understand and evaluate certain strategies by seeing how they would haveperformed hypothetically during certain time periods. It is possible that the markets will perform better or worse than shown in the projections; that the actual results of an investor who investsin the manner these projections suggest will be better or worse than the projections; and that an investor may lose money by investing in the manner the projections suggest.The projections assume the reinvestment of dividends and include transaction costs of 0.6% for purchases and sales of equities and bonds and 1.0% for real estate investment trusts (REITs).For equity and bond derivatives, we assume total one-way transaction costs and cost of financing of 0.5%. We assume no deduction for advisory fees, and that assets are allocated in themanner the projections suggest for nearly 40 years and are rebalanced monthly.Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. While back-testing results reflect therigorous application of the investment strategy selected, back-tested results have certain limitations and should not be considered indicative of future results. In particular, they do not reflectactual trading in an account, so there is no guarantee that an actual account would have achieved the results shown. Back-tested results also assume that asset allocations would not havechanged over time and in response to market conditions, which might have occurred if an actual account had been managed during the time period shown. AllianceBernstein L.P. may have adifferent investment perspective and maintain different asset allocation or other recommendations from those shown here.Dynamic Asset Allocation is AllianceBernstein’s proprietary tool which aims to: Manage short term volatility; Reduce portfolio risk dynamically; Focus on one-year time horizon, updated daily; Generate early warning of changes in return and risk environment through the use of high-frequency data; Select the short-term asset-allocation tilts that best balance current conditions with longer-term goals of target date funds. AllianceBernstein.com 13
  • 15. Disclosures and Important InformationA Word About RiskMarket Risk: The market values of the investments may rise and fall from day to day, so investments may lose value.Interest Rate Risk: Bonds may lose value if interest rates rise or fall—long-duration bonds tend to rise and fall more than short-duration bonds.Credit Risk: A bond’s credit rating reflects the issuer’s ability to make timely payments of interest or capital—the lower the rating, the higher the risk of default. If the issuer’s financial strengthdeteriorates, the issuer’s rating may be lowered and the bond’s value may decline.Allocation Risk: Allocating to different types of assets may have a large impact on returns if one of these asset classes significantly underperforms the others.Foreign Risk: Investing in overseas assets may be more volatile because of political, regulatory, market and economic uncertainties associated with them. These risks are magnified in assets ofemerging or developing markets.Currency Risk: currency fluctuations may have a large impact on returns and the value of an investment may be negatively affected when translated into the currency in which the initial investmentwas made.Capitalization Size Risk (Small/Mid): Holdings in smaller companies are often more volatile than holdings in larger ones.AllianceBernstein has partnered with AXA Wealth* to provide blended fund product solutions which have an underlying asset allocation strategy designed by AllianceBernstein. AXA Wealth will beresponsible for establishing each blended fund and AllianceBernstein is responsible for designing and managing the asset allocation strategy. The underlying funds by reference to which the valueof each blended fund solution will be determined, include collective investment schemes and re-insurance arrangements and are selected by AXA Wealth and AllianceBernstein. Such underlyingfunds may include funds managed by AllianceBernstein and its affiliates.AXA Wealth will make the blended funds available to investors via an insurance contract under which the benefits payable are linked to the performance of the underlying funds.*AXA Wealth is a brand used by the AXA Group. Winterthur Life UK Limited is part of the AXA Group.MSCI: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not befurther redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.Potential investors should note: the interests in the underlying fund held within each balanced fund solution are owned by Winterthur Life Limited through sub-funds of its life-fund and investors willnot have any legal or beneficial ownership in such underlying funds. The returns described above or for any blended fund product are, therefore, dependant on Winterthur Life UK Limited beingable to meet its obligations under the life insurance contract. In the event of Winterthur Life UK Limited being unable to meet its obligations, compensation, subject to limits, may be available fromthe Financial Services Compensation Scheme. AllianceBernstein.com

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