Global credit absolute return citywire june 2012

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Global credit absolute return citywire june 2012

  1. 1. AVIVA INVESTORSGLOBAL CREDIT ABSOLUTE RETURNJune 26, 2012Prepared for qualified investors onlyIMPORTANT INFORMATION SWITZERLAND: The Global Credit Absolute Return fund has not been approved bythe Swiss Financial Market Supervisory Authority (FINMA) as a foreign collective investment scheme pursuant toArticle 120 of the Swiss Collective Investment Schemes Act of 23 June 2006 (the "CISA") Accordingly, the shares maynot be offered to the public in or from Switzerland and neither this presentation nor any other offering materialsrelating to the shares may be made available through a public offering in or from Switzerland. The shares may only beoffered and this presentation may only be distributed in or from Switzerland by way of private placement to "QualifiedInvestors" (as defined in the CISA and its implementing ordinance).
  2. 2. Global Credit Absolute Return FundAGENDA1 Introduction to Aviva Investors2 Team overview3 Performance4 Investment process5 Appendix
  3. 3. Global Credit Absolute Return Fund AVIVA INVESTORS OVERVIEW Aviva Investors Fixed Income • Globally integrated asset management • Major presence in global fixed income markets business of Aviva plc, the world’s sixth-largest insurance group1 • Global capability that spans the full fixed income opportunity set • Categorized as a top 20 asset manager based on total worldwide institutional assets • A natural investor in bonds – significant short under management2 and long dated insurance liability business • Over CHF325 billion assets under • Integrated risk analysis management worldwide • Over 450 institutional clients worldwide Assets Under Management by Asset Class • Over 20 locations worldwide CHF Billion Fixed Income CHF204 Equities CHF51 Real Estate CHF30 Cash CHF17 Other CHF20 fixed income, $256bn Global Other 13% Convertibles 1% Credit 40% Sovereign 46%1Based on gross world-wide premiums for the year ended 12/31/2010 32Based on 12/31/2010 AUM; Pension and Investments June 27, 2011 issueAll other information on this page as of 31 Dec 2011.
  4. 4. Global Credit Absolute Return FundGLOBAL TEAM EXPERIENCE Global Process, Analytics, Fund Managers with Communication Complementary Substantial Skills Analytical Resources ● 9+ years of team● Mark Wauton – collaboration ● Five senior Portfolio / Risk fundamental Manager with 25+ ● Team experience of credit analysts years of fixed managing €2bn+ bank income experience prop credit book and a ● Five fundamental successful credit hedge credit analysts in● Jiten Joshi – 18+ fund Mumbai years Portfolio Management / ● Fundamental, quantitative ● Three Quant Fundamental and trading skills Analysts in Mumbai Analytical ● Global hedge fund, prop experience trading, asset ● Advanced● Dinesh Pawar – management and modeling 10+ years of investment banking Portfolio experience Management / ● Credit skills Credit Trading encompassing alpha experience generation, risk and liquidity management 4
  5. 5. Global Credit Absolute Return FundAVIVA INVESTORS – GLOBAL CREDIT ABSOLUTE RETURNFUNDPERFORMANCEPerformance versus benchmark to 31 May 2012 5% 4% 3% 2% 1% 0% 3 months Year to Date 6 months 1 year 3 months Year to Date 6 months 1 yearAviva Investors - Global Credit Absolute Return Fund 0.39% 3.19% 4.71% 1.82%Source: Lipper Hindsight & Aviva Investors 31 May 2012. Data is representative of share class I and is provided net of fees in EUR.Benchmark: 3 Month EURIBOR . Past performance is not a guide to the future. 5
  6. 6. Global Credit Absolute Return Fund INVESTMENT PROCESS Consistent Alpha Generation  Thoroughly researched individual positions with quantitative overlay  Primarily focused on liquid, higher capital structure investments  Bias towards “asset rich” plays in long positions where higher recovery values limit “asymmetric” risk Risk Management / Manage Beta Hedging Positioning Ongoing assessment of all sources  Ensure strategy is beta neutral during of risk at the position and portfolio periods of high volatility and spread level widening Actively hedging risks as they  Look to take advantage of an emerging materialize and create downside risk, shorter term trend and use market “beta” as a source of “alpha” Manage leverage profile, periodic stress testing, trade discipline and nimble response to credit events 6
  7. 7. Global Credit Absolute Return FundPORTFOLIO CONSTRUCTION Strategic Holdings Tactical Holdings IndicesInvestment Higher quality, lower Higher volatility, special Broad market indicesCharacteristics volatility, stable to situation names with a consistent with market improving credit profile, substantial value gap and volatility generally secured or senior identified catalystsPrimary Carry Capital Return Carry / Capital ReturnObjectiveRatings BB/B, Investment Grade B/CCC, Investment GradeDirection Long Long + Short Long + ShortInstruments Primarily Cash Bonds, Cash, CDS Credit Indices, Index some CDS Options, Equity options, Rate FuturesHorizon 6-12 months 3-6 months 3-6 months% Gross 60 to 80% 20% to 80% 0 to 50%% NAV 60 to 80% -50 to 50% -25% to 25%Credit Index trades are more tactical in nature and are generally layered in to change the beta positioning and therefore directional bias of the strategy Strategic + Tactical Credit Net Tactical Shorts Indices Exposure Longs 7
  8. 8. Global Credit Absolute Return FundSTRATEGY TERMS Aviva Investors Global Credit Absolute Return Investment policy / objective Aim to achieve a positive return under all market conditions by investing in global corporate bonds with an emphasis on high yield, CDS, loans and equities. Performance target* 3.5% to 5% above 3 month EURIBOR, Net Leverage Up to 2.5X Base currency EUR, with hedged share classes in GBP and USD Legal structure Sub-fund of Aviva Investors SICAV Liquidity Daily Minimum investment € / $ / ₤ 500,000 Annual management fee 0.50% Performance fee 20% of performance above 3 month EURIBOR High Watermark Yes Administrator JP Morgan Bank Luxembourg Auditor Ernst & Young Legal Counsel Elvinger, Hoss & Prussen *Internal target only, does not form part of the fund objective. 8
  9. 9. Global Credit Absolute Return FundSUMMARY: THE AVIVA INVESTORS EDGE Global team with 9+ years experience working together People Stop-losses, profit- Diligent taking with identified fundamental and target levels’ Trade Deep quantitative continuous research assessment of Discipline Analysis technical entry/exit points Minimize risk of Focus on issuers Active capital loss via Liquidity Hedging with larger capital structure capital structures hedging 9
  10. 10. APPENDIX 10
  11. 11. Global Credit Absolute Return Fund PERFORMANCE METRICS The Aviva Investors Global Credit Absolute Return Strategy (Aviva GCAR) was launched on May 31, 2011 as the first credit absolute return strategy on the Aviva Investors platform with a target return: L+ 350 - 500 net of fees**. Despite being launched close to the top of recent spread levels followed by immediate significant volatility in credit markets, capital has been successfully preserved and the strategy is meeting its investment objectives. Returns, volatility, drawdowns and correlation have been favourable relative to both market based and hedge fund indices. 2011 2012 Since Jun 2011 - May 2012 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May YE 2011 YTD 2012 Inception Aviva Investors GCAR -1.9% 1.2% -2.3% -0.6% 1.5% -0.7% 1.5% 1.6% 1.2% -0.2% 0.3% 0.3% -1.3% 3.2% 1.8% ML Global HY -1.1% 0.9% -4.4% -3.7% 6.0% -2.7% 2.5% 3.7% 2.9% 0.2% 0.7% -1.6% -2.8% 6.0% 3.1% S&P 500 -1.8% -2.1% -5.7% -7.2% 10.8% -0.5% 0.9% 4.4% 4.1% 3.1% -0.7% -6.3% -6.5% 4.2% -2.6% HFRI RV: FI Corporate Index -0.6% 0.0% -2.6% -2.3% 2.3% -1.1% 0.7% 2.2% 1.5% 0.7% 0.3% -0.8% -3.6% 3.9% 0.2% HFRX Global Hedge Fund Index -1.6% -0.1% -3.5% -3.0% 0.8% -0.9% -0.4% 1.7% 1.4% 0.0% 0.1% -1.7% -8.4% 1.5% -7.0% Aviva HFRI RV: FI HFRX Global Jun 2011 - May 2012 Investors GCAR ML Global HY S&P 500 Corporate Index* Hedge Fund Index Inception to Date Performance (%) 1.8% 3.1% -2.6% 0.2% -7.0% Standard Deviation (%) 3.8% 5.3% 23.4% 5.2% 3.6% Positive Months (%) 58% 58% 42% 55% 33% Maximum Drawdown (%) -4.7% -10.2% -18.8% -5.4% -8.5% Maximum Drawdown Single Month (%) -2.3% -4.4% -7.2% -2.6% -3.5% Aviva Investors GCAR Comparative Performance 104 102 Aviva Investors 100 Correlation Matrix GCAR 98 ML Global HY 0.36 96 S&P 500 (0.29) 94 92 HFRX Global Hedge Fund Index 0.04 90 88 86 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar May Aviva Investors GCAR HFRI RV: FI Corporate Index HFRX Global Hedge Fund IndexSource: Bloomberg. * Net Return. Past performance is not indicative of future results. **There is no assurance that an objective can be achieved. Any statement of return or other performance by anindex is not a representation or assurance that the information or performance attributed to the index was accurately compiled or published; Aviva Investors has not independently verified index-relatedinformation. Index returns are provided to represent the investment environment existing during the time periods shown. For comparison purposes, an index is fully invested, which includes thereinvestment of dividends and capital gains, but index returns do not include any transaction costs, management fees, or other costs that would reduce returns. Composition of each separatelymanaged account portfolio in a composite may differ from securities in the corresponding benchmark index. An index is used as a performance benchmark only, as Aviva Investors does not attempt to 11replicate an index. The prior performance of an index will not be predictive of the future performance of accounts managed by Aviva Investors. An investor may not invest directly in an index. For fullinformation on benchmarks please refer to Appendix
  12. 12. Global Credit Absolute Return Fund ACHIEVED INVESTMENT OBJECTIVES  Delivering strong Sharpe ratios in positive months 2011 2012 Positive Months Jul Oct Dec Jan Feb Apr May Average Aviva Investors GCAR % return 1.23% 1.47% 1.47% 1.60% 1.17% 0.31% 0.26% 1.21% Std Deviation 0.9% 1.2% 0.6% 0.6% 0.4% 0.3% 0.7% 0.7% Sharpe ratio (Euribor) 1.25 1.10 2.45 2.52 2.69 0.82 0.30 1.68  Limiting drawdowns in negative months Aug 2011 Sep 2011 Nov 2011 May 2012 2% 0.3% 0% -0.6% -0.7% -0.5% -0.9% -1.1% -0.8% -2% -1.6% -1.7% -2.3% -2.3% -2.6% -2.7% -3.0% -4% -3.5% -3.7% -4.4% -6% -5.7% -6.3% -8% -7.2% Aviva Investors GCAR ML Global HY S&P 500 HFRI RV: FI Corporate Index HFRX Global Hedge Fund IndexSource: Bloomberg. * Net Return. Past performance is not indicative of future results. **There is no assurance that an objective can be achieved.Any statement of return or other performance by an index is not a representation or assurance that the information or performance attributed to the index was accurately compiled or published; AvivaInvestors has not independently verified index-related information. Index returns are provided to represent the investment environment existing during the time periods shown. For comparisonpurposes, an index is fully invested, which includes the reinvestment of dividends and capital gains, but index returns do not include any transaction costs, management fees, or other costs that wouldreduce returns. Composition of each separately managed account portfolio in a composite may differ from securities in the corresponding benchmark index. An index is used as a performancebenchmark only, as Aviva Investors does not attempt to replicate an index. The prior performance of an index will not be predictive of the future performance of accounts managed by AvivaInvestors. An investor may not invest directly in an index. For full information on benchmarks please refer to Appendix 12
  13. 13. Global Credit Absolute Return FundNET EXPOSURE / LEVERAGE Leverage Net Exposure  Leverage is not used as a primary way to achieve  Net Exposure is monitored on a notional, market returns value and “beta” adjusted basis  High leverage will normally coincide with the need  Beta adjusted exposure is calculated by to increase short positions considerably during aggregating the betas of individual positions periods of market stress  Individual betas are assigned on a forward  Since launch given extreme spread volatility, Aviva looking basis using historical volatility ratios and GCAR leverage briefly reached 2.00x in August amplitude betas (observed price betas) 2011, but has been quite stable since September  Ongoing calibration of individual betas to 2011 at around 1.25X determine changes to net positioning  Dynamically manage net positioning via single name and index trades 120% 2.50 x 100% 100% 2.00 x 80% 80% 1.50 x 60% 60% 1.00 x 40% 40% 0.50 x 20% 20% 0% 0.00 x 0% -20% Long Exposure (Left Axis) Short Exposure (Left Axis) Net Exposure (Market Values) Net Beta Adj. Exposure* Gross leverage (Right axis) * Net Beta Adj. Exposure = Beta adjusted XO equivalent exposure as a % of average of starting and ending period Capital InvestedHoldings are shown for illustrative purposes only. Each account is managed individually. Accordingly, holdings may vary. The inclusion of holdings information in this presentation should notbe interpreted a recommendation to buy or sell or hold any security. It should not be assumed that an investment in the securities mentioned was or will be profitable. Holdings are subject tochange. 13
  14. 14. Global Credit Absolute Return FundNET EXPOSURE: RESPONSE TO VOLATILITY CYCLES Due to the inherent leverage in the developed world’s financial system, the medium to long-term will be defined by shorter exaggerated spread volatility cycles embedded within the longer traditional credit default cycle. These spikes in volatility will often erode capital without a corresponding rise in defaults thereby placing a premium on quantitative analysis, skillful trading and beta management techniques to complement sound fundamental analysis. • Long bias • Strategic carry trades plus • Reduce long bias event driven tactical trades • Increase market hedges • Selective tactical shorts primarily via indices • Capital structure hedging • Reduce beta of longs STEADY RISING VOL VOL DECLINING MARKET VOL STRESS • Market neutral to net short • Increase net long position • Reduce index hedges bias • Take profit / unwind single • Maintain index hedges name CDSs • Add single name and • Increase beta of longs thematic sector basket hedges Qualitative assessment of market risk Quantitative modeling of indices  Financial sector deleveraging led crisis  Volatility regime identification  Timing and significance of headline risk  Correlation of risk assets  Traditional default cycle  Mean reversion vs. momentum 14
  15. 15. Global Credit Absolute Return Fund RESEARCH PROCESS Traditional Research Quantitative Overlay Additional quant research Quantitative factors:Published information: Non-published information:  Spread volatility Financial statements  Company Meetings  Beta analysis Company websites  Conferences  Correlation analysis Indentures  Networking  Momentum vs. mean-reversion Industry data  Dealer Desks  Underlying equity and cap structure technicals 15
  16. 16. Global Credit Absolute Return FundALPHA GENERATION IDEA GENERATION PROPRIETARY SCREENS, BROKER SOURCED IDEAS, SECTOR THEMES, MARKET EXPERIENCE Fundamental / Valuation Trade StrategyCompany Type of trade: strategic vs. tactical– Company and org structure Security selection– Management Liquidity assessment– Operating performance Sizing of capital at risk– Cash flow generation Identifying hedges/ratios– Capital Structure analysis Stop loss levels– Liquidity analysis Target exit levels– Covenant analysis Risk / RewardSector – Identify catalysts– Competitive positioning – Upside determination– Industry structure / trends – Quantify downside riskRelative Value – Maximum MTM loss– Comparable credits – Recovery values– Within capital structure PORTFOLIO CONSTRUCTION / RISK MANAGEMENT 16
  17. 17. Global Credit Absolute Return FundRISK MANAGEMENT ● Extensive fundamental and technical analysis of target investment opportunities Position ● Ongoing review of fundamentals and potential change in credit quality Level ● 5% adverse move in individual name requires a trade thesis revisit ● Determine idiosyncratic tail risk and identify potential hedges ● Diversification: 40-60 positions, but sufficient specific risk to achieve alpha ● Dynamic “beta” adjusted long/short bias monitoring Portfolio ● Concentration Limits: 5% net single name, 25% net sector Level ● Leverage Limits: 2.5X gross ● Currency exposure hedged and embedded rate risk is managed separately ● Scenario stress testing: macro, spread, interest rate ● 25 basis point “alpha” hard stop loss ● Quick trading response to fundamental news flow Trade ● Profit taking and stop-loss discipline Discipline ● Invest in names with actively traded capital structure Our risk management approach emphasizes smoothing volatility while aiming to ensure that the hedges do not become a source of downside risk themselves 17
  18. 18. Global Credit Absolute Return FundHEDGING FRAMEWORK Investment Objective Type of Risk InstrumentCapital structure hedgesMinimize idiosyncratic tail risk Single Name CDS SpecificMaximize idiosyncratic sharpe Sub Debt Equity + OptionsHedge adverse sector risk SectorThematic short sector baskets Credit Indices Equity IndicesDirectional bias management Market Index Options FuturesManage embedded rate risk Risk Free Cash Our hedging framework aims to ensure that the risk/return trade off is appropriate for idiosyncratic developments and prevailing market condition. In periods of high volatility the manager has an analytical Skill framework to take the fund notionally back to cash 18
  19. 19. Global Credit Absolute Return FundCAPITAL STRUCTURE HEDGING● Capital Structure trade Short MGM 5Y CDS vs. Long MGM 13% Sr Secured Establish correlation and betas Determine if hedges yield higher sharpe ratios Determine the PnL neutral hedge ratio Determine hedge ratio that maximizes return/vol For illustrative purposes only. Holdings are shown for illustrative purposes only. Each account is managed individually. Accordingly, holdings may vary. The inclusion of holdings information in 19 this presentation should not be interpreted a recommendation to buy or sell or hold any security. It should not be assumed that an investment in the securities mentioned was or will be profitable. Holdings are subject to change.
  20. 20. Global Credit Absolute Return Fund BETA ADJUSTED EXPOSURE Single Name Betas Beta Adjusted Exposure Beta adjusted MV (Actual) MV (Beta) Vol ratio Vol ratio 3m Observed Assigned 30d 10d Beta Beta Adj. Exposure US HY HoldingsWIN 8 7/8 06/30/17 0.59 0.69 0.40 0.50 946,674 Eur Eur Bonds 27,104,951 17,043,921JAH 8 05/01/16 2.19 0.33 0.11 0.50 948,841 Single Name CDS Longs - -BMET 10 10/15/17 0.33 0.22 0.25 0.50 567,355 CDX HY - -NLSN 7 3/4 10/15/18 0.81 0.55 0.67 0.75 871,504 Single Name Shorts-CDX HY (2,130,672) (3,196,009)DISH 7 1/8 02/01/16 0.52 0.53 0.81 0.50 765,138 Single Name Shorts-CDX IG (CDX HY equiv) (1,953,691) (586,107) 0.96 0.77 0.48 0.75 855,906 US Net (CDX HY equiv) 23,020,587 13,261,805TWTC 8 03/01/18 US Net (XO equiv) 23,020,587 9,283,263DAN 6 1/2 02/15/19 0.63 0.76 0.96 0.50 561,506HCA 7 1/4 09/15/20 0.51 0.32 0.73 0.70 1,061,488 Europe HY HoldingsPXD 6 7/8 05/01/18 1.17 0.76 0.51 0.25 616,797 Eur EurINTEL 8 1/2 11/01/19 0.63 0.60 0.83 1.00 791,961 HY Bonds 10,297,948 6,173,974 Xover - -INTEL 8 1/2 11/01/19 0.63 0.60 0.83 1.00 839,709 Subfin (XO equiv) 5,259,004 3,944,253HST 5 7/8 06/15/19 0.86 0.58 NA 0.75 587,856 Snrfin (XO equiv) 4,724,543 1,889,817HST 5 7/8 06/15/19 0.86 0.58 NA 0.75 587,856 Main - -WIN 7 1/2 06/01/22 0.77 0.53 1.32 1.00 581,854 Single Name Shorts-XO (6,254,661) (6,566,547) Single Name Shorts-Main (XO equiv) (8,404,438) (3,627,189)WPX 6 01/15/22 1.33 0.58 0.45 0.50 744,048 EU HY Net (XO equiv) 5,622,397 1,814,308CHTR 6 1/2 04/30/21 0.57 0.44 1.09 0.75 1,526,429CHTR 6 1/2 04/30/21 0.57 0.44 1.09 0.75 617,129 HY Portfolio Net (XO equiv) 28,642,984 11,097,571F 5 05/15/18 1.11 0.47 0.77 0.50 612,783 1.04 0.93 NA 1.50 938,747 IG BookLVLT 8 5/8 07/15/20 Eur Eur (on XO)FMEGR 5 5/8 07/31/19 NA 0.60 NA 1.00 416,634 IG Bonds - CDX IG (XO equiv) 6,183,865 784,965FMEGR 5 7/8 01/31/22 NA 0.44 NA 1.00 413,199 IG Bonds - Main (XO equiv) 16,710,687 4,321,263MGM 11 1/8 11/15/17 0.44 0.32 0.16 0.50 1,295,268 GCAR Portfolio excl rates (XO equiv) 51,537,536 16,203,799•Calculate historical betas of individual positions • Aggregate beta adjusted exposures •30D volatility ratio • Ongoing calibration of individual betas to determine changes to net positioning •10D volatility ratio • Dynamically manage net positioning via single name •Observed Price beta and index trades•Assign a forward beta based on historical betas as wellas qualitative assessment of inherent spread vol of theposition relative to the market Holdings are shown for illustrative purposes only. Each account is managed individually. Accordingly, holdings may vary. The inclusion of holdings information in this presentation should not be 20 interpreted a recommendation to buy or sell or hold any security. It should not be assumed that an investment in the securities mentioned was or will be profitable. Holdings are subject to change.
  21. 21. Global Credit Absolute Return FundPORTFOLIO STRESS TESTING Methodology Individual Position Impact• Determine stress assumption based on historical Name EUR Notional Z Sprd/CDS Sprd Assigned Beta Stress Point/Spd Beta Impact bps PnL Impact impact cycles (Recent 2008/2009 being most relevant) US HY WIN 8 7/8 06/30/17 1,733,042 434 0.50 1.00 (8.00) (138,643) (19) JAH 8 05/01/16 1,733,042 252 0.50 1.00 (8.00) (138,643) (19)• Sensitize individual risk components, including BMET 10 10/15/17 1,039,825 262 0.50 1.00 (8.00) (83,186) (11) NLSN 7 3/4 10/15/18 1,039,825 374 0.75 1.50 (12.00) (124,779) (17) embedded rate risk for IG DISH 7 1/8 02/01/16 1,386,434 336 0.50 1.00 (8.00) (110,915) (15) TWTC 8 03/01/18 1,039,825 419 0.75 1.50 (12.00) (124,779) (17)• Stress each position based on “stressed” beta DAN 6 1/2 02/15/19 HCA 7 1/4 09/15/20 1,039,825 1,386,434 393 432 0.50 0.70 1.00 1.40 (8.00) (11.20) (83,186) (155,281) (11) (21) assumptions PXD 6 7/8 05/01/18 INTEL 8 1/2 11/01/19 2,103,934 1,486,716 239 534 0.25 1.00 0.50 2.00 (4.00) (16.00) (84,157) (237,875) (11) (32) HST 5 7/8 06/15/19 1,454,863 343 0.75 1.50 (12.00) (174,584) (23)• Determine aggregate P&L impact (test a “melt-up” WIN 7 1/2 06/01/22 544,425 475 1.00 2.00 (16.00) (87,108) (12) WPX 6 01/15/22 1,451,800 379 0.50 1.00 (8.00) (116,144) (16) scenario as well) CHTR 6 1/2 04/30/21 2,683,641 392 0.75 1.50 (12.00) (322,037) (43) F 5 05/15/18 1,158,928 259 0.50 1.00 (8.00) (92,714) (12)• Calculate potential additional hedges required LVLT 8 5/8 07/15/20 FMEGR 5 5/8 07/31/19 586,946 392,588 597 307 1.50 1.00 3.00 2.00 (24.00) (16.00) (140,867) (62,814) (19) (8) FMEGR 5 7/8 01/31/22 392,588 328 1.00 2.00 (16.00) (62,814) (8) MGM 11 1/8 11/15/17 2,282,410 356 0.50 1.00 (8.00) (182,593) (24) Historical Scenario Analysis Aggregate PnL Impact CDX HY XO Main EUR rates GBP rates USD rates Rate Hedges IG Average duration Px Move -8.0 -15.3 -2.6 EUR GBP USD Sprd Move 219 500 60 -50 -50 -50 -50 4.9 5.2 7.4 Additional Hedge PnL bps XO HY MAIN Stressed Impact 907,510 121 (5,939,748) (11,343,879) (35,033,091) Since Inception 1,363,551 184 (8,924,582) (17,044,390) (52,637,874) Flat PnL (2,271,061) (306) 14,864,331 28,388,268 87,670,964 Holdings are shown for illustrative purposes only. Each account is managed individually. Accordingly, holdings may vary. The inclusion of holdings information in this presentation should not 21 be interpreted a recommendation to buy or sell or hold any security. It should not be assumed that an investment in the securities mentioned was or will be profitable. Holdings are subject to change.
  22. 22. Global Credit Absolute Return FundVOLATILITY REGIME MANAGEMENT Volatility Regime Identification Volatility Regime Management Hedging: Low CDS Risk off Volatility Indices Equities Risk Taking Market Volatility High Risk on Volatility  Qualitative assessment of market risk  Portfolio risk adapts based on market conditions  Financial sector deleveraging led crisis  Implementation of beta hedges  Traditional default cycle  Indices vs. single name CDS  Quantitative modeling of macro indices  Regime switching model  Mean reversion vs. momentum/trending  Correlation of risk assets 22 For illustrative purposes only.
  23. 23. Global Credit Absolute Return FundBIOGRAPHY Keith Kelsall, CFA Mark Wauton Client Portfolio Manager Head of Credit Joined Investment Industry in After a six year career in the 1990 Army, Mark joined the investment industry in 1986Main responsibilities Main responsibilitiesKeith is the client portfolio manager for convertible Mark is responsible for our high alpha capabilities inbonds and credit strategies. investment grade, high yield and credit absolute return fixed income capabilities, while also ensuring that weExperience and qualifications deliver for more traditional active mandates.Keith joined Aviva Investors in 2009.Prior to joining Aviva Keith worked at Barclays Global Experience and qualificationsInvestors as a senior fixed income product specialist. Mark joined Aviva Investors in April 2009. Prior toPrior to this position Keith was a senior fixed income joining Aviva Investors Mark was Head of Strategicportfolio manager at Daiwa SB Investments and a fixed Credit trading at ABN AMRO.income portfolio manager at Fiduciary Trust. Keith Mark has held Head of Fixed Income roles atbegan his investment career as a fixed income analyst Commerz International and Dunedin Fund Managersat Deutsche Bank. as well as Head of European Fixed Income at UBSKeith holds a BA in economics, accounting and Asset Management. He also co-managed thefinancial management from Sheffield university. Keith AlphaGen Credit Hedge Fund at Gartmore.is also a CFA charterholder. Mark successfully completed the AIIMR in 1994 and is now an ASIP. He holds an MSc in Investment Analysis from Stirling University. 23
  24. 24. Global Credit Absolute Return FundBIOGRAPHY Jiten Joshi Dinesh Pawar Head of Offshore Research Head of Credit Flow TradingMain responsibilities Main responsibilitiesJiten leads a team of analysts to support the London- Dinesh is responsible for credit flow trading and hasbased credit team. Jiten is responsible for supporting over 10 years of investment experience. Dinesh has anand enhancing the London team’s fundamental credit overview of all the trading strategies within each of theresearch capabilities as well as providing technical and credit portfolios and provides analysis on hedging,risk analysis. trading tactics, and the use of derivatives.Experience and qualifications Experience and qualificationsJiten was a special situations analyst at Pali Capital Prior to joining Aviva Investors he was the Market Riskresponsible for idea generation across the capital Manager for Deutsche Bank financial marketsstructure of stressed and distressed credits. Prior to responsible for managing the banks Loan Book, LoanPali, he was an Executive Director responsible for co- Trading, Credit Origination and Global Risk Syndicate.managing the US exposure of a global prop desk at Prior to this Dinesh was a Director and worked at ABNÅBN AMRO. Prior to ABN, he was part of a team AMRO as part of the Credit prop team focusing on EUmanaging the Gartmore AlphaGen Credit Hedge Fund and GBP credits. Before joining ABN AMRO, Dineshfor 3 years. Prior to joining Gartmore, Jiten was a Vice was a Credit Trader for the AlphaGen Credit HedgePresident and senior analyst covering Cable, Media fund, and was the co-manager of the Gartmore Highand Energy for investment grade, high yield and Yield Retail fund. Dinesh has a BA Hons in Businessdistressed securities at JP Morgan Fleming Asset Finance and an MSc in Banking and InternationalManagement. Jiten’s sell side experience includes Finance from Cass Business SchoolHigh Yield Origination at Chase Securities andRestructuring at Houlihan Lokey. He holds an MBA inFinance from the Columbia Business School and a BAin Economics from Columbia University. 24
  25. 25. Global Credit Absolute Return FundINDEX INFORMATION – ML Global HY - Merrill Lynch Global High Yield Index tracks the performance of USD, CAD, GBP and EUR denominated below Investment Grade corporate debt. Constituents are weighted based on their current amount outstanding. Property – S&P 500 - Standard and Poors 500 Index is a capitalization-weighted index of 500 & Casualty stocks. Insurance Life Insurance & – HFRI RV FI Corporate Index - HFRI RV FI Corporate Index includes strategies in Annuity which the investment thesis is predicated on realization of a spread between related instruments in which one or multiple components of the spread is a corporate fixed income instrument. Strategies employ an investment process designed to isolate attractive opportunities between a variety of fixed income instruments, typically realizing an attractive spread between multiple corporate bonds or between a corporate and risk free government bond. – HFRX Global Hedge Fund Index - The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. 25
  26. 26. IMPORTANT INFORMATION Global Credit Absolute Return FundExcept where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AvivaInvestors) as at 31 May 2012.The content of this document does not purport to be representational or provide warranties above and beyondthose contained in the Prospectus and subscription documentation of the Fund. The Prospectus and thesubscription document contain the full terms, conditions, representations and warranties in respect of the Fund. Property &Nothing in this document shall be construed as forming any part of those terms, conditions, representations or Casualtywarranties. InsuranceAny opinions expressed are based on the internal forecasts of Aviva Investors and they should not be relied upon Lifeas indicating any guarantee of return from an investment managed by Aviva Investors. No part of this document is& Insurance Annuityintended to constitute advice or recommendations of any nature.The value of an investment in the fund can go down as well as up and can fluctuate in response to changes inexchange 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 notbe taken as a recommendation or offer by anyone in any jurisdiction in which such an offer is not authorised or toany person to whom it is unlawful to make such an offer or solicitation.Aviva Investors Global Services Limited, 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 theInvestment Management Association.Contact us at Aviva Investors Global Services Limited, No. 1 Poultry, London EC2R 8EJ.Compliance ref: 12/0403/300912 26

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