Nordea

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Nordea

  1. 1. For Professionals Only*Nordea 1 –US Total Return Bond FundISIN: LU0826413865 (BI – USD)ISIN: LU0826414673 (BP – USD)November 2012* investing for their own account - according to MiFID definition
  2. 2. For Professionals OnlyNordea multi-boutique approachInternal and external boutiques 2●
  3. 3. For Professionals OnlyTable Of Contents• Why Mortgages?• What are MBS?• MBS – Market Overview• Process and Philosophy• Security selection and scenario analysis• Investment Guidelines• MBS in a portfolio context• DoubleLine Capital LP• DoubleLine Capital LP Track Record• Appendix 3● g19034 ● 31/10/2012
  4. 4. For Professionals OnlyWhy Mortgages?• There are very few players and it is an under researched market• 80% of the market is government guaranteed• Attractive Yields - During a low yield environment, mortgages offer attractive yields• Lower volatility - Mortgages have historically had lower volatility than other investment grade credits• A well diversified investment universe - Sub-sector variety allows for portfolio flexibility during most interest rate environments• Low correlation with other fixed income assets• No ETFs or trackers for the non agency part or the mix Agency/Non Agency 4●
  5. 5. For Professionals OnlyWhat are MBS? 5● g19034 ● 31/10/2012
  6. 6. For Professionals OnlyWhat are MBS?• Mortgage Backed securities are: - Bonds whose collateral is tied to the US Housing Market and the individual home owners• Security types will include Agency and Non-Agency: Pass through bonds and CMO (Collateralized Mortgage Obligation) mainly• Credit quality of the home owners include Prime, Alt–A and Sub-prime according to the market definition of FICO* (Fair Isaac Corporation)• The majority of the agency bonds carry a high credit rating of AAA/AA since they are guaranteed by the US government• The Non-Agency MBS ratings span the entire credit spectrum (AAA-D)• A bond will typically be D-rated (default) if just 1 of the underlying home owners doesn’t prepay the full principal*Definition in appendix. 6●
  7. 7. For Professionals OnlyTypical MBS cash flow 7●
  8. 8. For Professionals OnlyTypical MBS CMO cash flow 8●
  9. 9. For Professionals OnlySize of the U.S. Mortgage Market in broad IndexSource: Barclays Live. The breakdown is demonstrated by the Barclay’s U.S. Aggregate Index as of the dates indicated above. 9●
  10. 10. For Professionals OnlyMBS – Market Overview 10 ● g19034 ● 31/10/2012
  11. 11. For Professionals OnlyMBS – Market Overview Mortgage Debt Agency MBS Non-Agency MBS ~80% (USD 7trn) ~20% (USD 1.5trn) Conforming Loan Borrower: Non - conforming loans • Loan balance <$417,000 • Loan amount is larger than $417,000, also known as “jumbo loans” Backed by GNMA, FNMA and FHLMC Privately issued mortgages • Agency guarantee; Fannie Mae, Freddie Mac and Ginnie Mae • No government implied guarantee Potential Risks: Potential Risks: • Prepayment risk • Default risk • Interest rate risk • No prepayment risk. Prepayment “reward” • No credit risk • No interest rate risk. Priced at discounts.For illustrative purposes only. Assumes continued support from Government Sponsored Entities (GSE). Source: DoubleLine Capital LP 11 ●
  12. 12. For Professionals OnlyProcess and Philosophy 12 ● g19034 ● 31/10/2012
  13. 13. For Professionals OnlyInvestment Objective & PhilosophyInvestment Approach• Invests in, but is not limited to, Agency and non-Agency mortgage-backed securities. - Agency mortgages have an implied government guarantee - Non-agency emphasizes Prime and Alt-A pools - Senior tranches with appropriate subordination• Seeks to exploit pricing dislocations within the mortgage subsectors.• Long-term investment horizon.• Successful management of mortgage portfolios is labor and data intensive. DoubleLine Capital LP (“DoubleLine”) possess an experienced team of portfolio managers, traders, analysts and information systems specialists devoted to the mortgage sector.PhilosophyThe objective is to seek to maximize total return.DoubleLine’s portfolio management team believes the most reliable way to enhance returns isto exploit inefficiencies within the subsectors of the mortgage market while maintaining activerisk management constraints. 13 ●
  14. 14. For Professionals Only DoubleLine MBS Strategy Opportunity to deliver high income in a portfolio designed to offset risk Positive Duration - Agencies Negative Duration – Non-Agencies Neutral Duration Scenario Agency mortgage securities are Non-Agency mortgage securities Combining Agency MBS and Non- issued, guaranteed, or supported are issued by financial companies Agency MBS may provide a more by government agencies, and banks not associated with a level or neutral duration scenario, instrumentalities or Government- government agency and have no which could be effective in Sponsored Enterprises (GSEs), credit guarantee or support. diversifying the portfolio’s duration including Fannie Mae, Freddie DoubleLine believes these risk. Mac , or Ginnie Mae. securities have attractive yields relative to other fixed income Default Prepayment Interest sectors. Default Prepayment Interest Default Prepayment Interest Risk Risk Rate Risk Risk Risk Rate Risk Risk1 Risk Rate Risk Blending Agency and Non-Agency MBS may reduce some “tail risk” exposure.1. Assumes continued support from Government Sponsored Entities (GSEs).Source: Amherst Securities Group, Bloomberg Financial, DoubleLine Capital as of August 31, 2012. 14 ●
  15. 15. For Professionals OnlyUp and Down MarketsSource: DoubleLine Capital LP. Date: 30.04.2010-31.05.2012. Past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The valueof shares can greatly fluctuate as a result of the strategys investment policy and is not guaranteed. If the base currency of the strategy differs from the investors reference currency therepresented performance might vary due to currency fluctuations. The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBSComposite. However, there is no guarantee that using the same investment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and theresult might differ from the composite used for illustration purposes. For further information on the composite please refer slide 33. The sub-fund does not have any official reference index.However, for comparison purposes, we have shown the Barclays Capital US Aggregate Bond Index performance which is one of the possible benchmarks for a MBS portfolio 15 ●
  16. 16. For Professionals OnlyInvestment ProcessQualitativeThorough analysis of market trends and in-depth research contribute to affirmingsubsector opportunities and assessing risk exposure.• Daily risk and analytics reporting• Daily informal discussions• Research includes loan level detailed analysis: Defaults, delinquencies, geographies, etc.QuantitativeBottom-up security selection based on experience:• Prepayment methodologies• Method of “stress testing” securities across differentiated interest rate scenarios• Subsector tactical allocation decisions at the portfolio level• DoubleLine’s technology platform seeks to create efficiencySource: DoubleLine Capital LP 16 ●
  17. 17. For Professionals OnlyMBS Investment Decision ProcessFinal MBS subsector allocation decisions are determined by Jeffrey Gundlach• All PM’s discuss and implement Top-Down Allocation DecisionMBS Security Selection is a Bottom-Up process with extensive scenario analysis• All PM’s and Traders run analysis, compare results make purchase/sell decisionSource: DoubleLine Capital LP 17 ●
  18. 18. For Professionals OnlyInvestment Process: Active ManagementSub-sector variety allows for portfolio flexibility during mostinterest rate environments• Interest rates down – longer duration mortgages and securities favoring higher prepays• Interest rates up – shorter duration mortgages and securities with limited extension riskSub-sector rotation can be used for hedging, balancingor barbelling a portfolio• Cash• Agency Passthroughs• Agency CMO• Non-Agency Residential MBS• CMBSDuration plays• Agency vs. Non-AgencySource: DoubleLine Capital LP 18 ●
  19. 19. For Professionals OnlySecurity selection and scenario analysis 19 ● g19034 ● 31/10/2012
  20. 20. Scenario based security analysis process For Professionals OnlyNon Agency Agency RisingScenarios Base Worse Better Scenarios Base Rate Falling RatePrepayment Speed 6 CPR 4 CPR 8 CPR Prepayment Speed 15 10 35Default Rate 7 CDR 8 CDR 6 CDR LIBOR 0.25 2.00 0.25Severity (%) 60% 65% 55% Yield (%) 8.05% 7.89% 2.16%Yield (%) 7.0% 5.4% 8.5% WAL 1.95 8.91 0.46WAL 6.3 years 6.6 years 5.9 years Price $98.31 $80.88 $102.00Writedown (%) 22.3% 30.9% 15.2% Principal Window Date 05/15/12 - 05/15/12 - 05/15/12 -Collateral Loss (%) 23.5% 30.8% 17.5% 11/15/41 11/15/41 03/15/13CollateralLiquidation (%) 39.2% 47.3% 31.8%Source: Intex, DoubleLine ResearchSample Security Analysis is used for representative purposes only. 20 ●
  21. 21. For Professionals OnlyInvestment Guidelines 21 ● g19034 ● 31/10/2012
  22. 22. For Professionals OnlyInvestment Guidelines• Min. 67% of total assets must be issued in USA or its territories• All instruments must be issued in USD• Min. 50% of total assets must have a minimum rating of AA-/Aa3/AA-• Min. 66.7% of total assets must have a minimum rating of BBB-/Baa3/BBB- from Standard & Poors, Moodys or Fitch, respectively• Max 20% of total assets can be invested in D-rated or non-rated securities, or securities not rated by above-mentioned rating agencies• The portfolio manager may not invest in or hold securities backed exclusively by sub-prime borrowers. These instruments are defined as instruments where the weighted average FICO score of the collateral is lower than 675• The portfolio manager may invest max. 10% of total assets in subordinated or mezzanine tranches of non-agency mortgage bonds• The portfolio manager may not buy or hold bank loans, convertible bonds, repo agreements, equities (unless as a result of a corporate action), funds or ETFs• Cash is max 20% 22 ●
  23. 23. For Professionals OnlyMBS in a portfolio context 23 ● g19034 ● 31/10/2012
  24. 24. For Professionals OnlyBetter risk return profile DoubleLine Total Return MBS Composite*Since Inception of the first full month of the DoubleLine Total Return Composite, May 1, 2010 through June 30, 2012. An Investment cannot be made directly in an index.Past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate as a result of the strategysinvestment policy and is not guaranteed. If the base currency of the strategy differs from the investors reference currency the represented performance might vary due to currencyfluctuations. The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBS Composite. However, there is no guarantee that using thesame investment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and the result might differ from the composite used for illustrationpurposes. For further information on the composite please refer to slide 33. The sub-fund does not have any official reference index. 24 ●
  25. 25. For Professionals OnlyNon-Agency MBSToday certain sectors of the RMBS market are very attractive on a relative and absolute basis Yield‐to‐Maturity Non‐Agency MBS 5% ‐ 7% * Investment Grade Credit 3.0% High Yield Credit 6.7% Emerging Markets Fixed Income 4.5% World Government ex US 0.9% U.S. Treasury 0.9%Source: Loan Performance. Data as of August 31, 2012.BofA/Merrill Lynch Indices, DoubleLine Capital LP yields may not be reached based on various factors.* DoubleLine Capital yield estimates: There is no guarantee that the presented estimates will be met. 25 ●
  26. 26. For Professionals OnlyHistorical risk and return of the MBS marketNone of the MBS indices include the Non Agency part of the investment universeThe asset class offers attractive correlations 5Y EMD US 5Y Correlations US MBS EMD HC EMD LC Corp EU IG US IG US HY EU HY GL HY Gov US MBS 1 38% 18% 39% 36% 53% -6% -3% 3% 80%US MBS only correlated to US treasuries and have historically also offered attractive riskadjusted returns 5 Year EMD US 5Y (annualized) US MBS EMD HC EMD LC Corp EU IG US IG US HY EU HY GL HY Gov Return 6.6% 10.1% 9.3% 7.9% 5.2% 8.0% 9.6% 8.1% 9.3% 7.4% Risk 2.9% 11.0% 15.2% 11.5% 4.6% 6.8% 14.1% 16.8% 15.0% 5.0% Return/Risk 2.28 0.92 0.61 0.69 1.13 1.18 0.68 0.48 0.62 1.48The asset class have benefitted from the falling interest rates in the USAn investment in US MBS’ offer a European investor an attractive low risk diversifier comparedto the classic credit markets – IG, HY and EMDSource: Nordea Asset Management. Date: May 2012 26 ●
  27. 27. For Professionals OnlyRolling 5-Year Volatilities of Investment GradeBond Sectors and High YieldHistorically, mortgages have had lower volatility than other investment grade creditsSource: Bloomberg, Barclays IndicesStandard Deviation (Sigma) = It shows how much variation there is from the “average” (mean, or expected/budgeted value). A low standard deviation indicated that the data point tend tobe very close to the mean, whereas high standard deviation indicated that the date is spread out over a large range of valuesAn investment cannot be made directly in an index. 27 ●
  28. 28. For Professionals OnlyDoubleLine Capital LP 28 ● g19034 ● 31/10/2012
  29. 29. For Professionals OnlyDoubleLine Capital LP – the sub-managerFirm overviewReputation• Known in the investment community for disciplined, fundamentally-driven bond selection• DoubleLine’s team has been widely acclaimed for its management skills across a range of fixed income portfolios including during the global credit crisisExperience• DoubleLine’s Mortgage senior portfolio managers average; 28 years of industry experience and 20 years working together• Senior investment team oversaw more than $70 billion in fixed income at prior firm - Jeffrey Gundlach, lead portfolio manager, was a nominee for Morningstar’s “Fixed Income Manager of the Decade” in 2009Commitment to Clients and Employees• Employee-ownership structure• Team of over 70 members, including over 40 investment professionals• DoubleLine is a federally registered investment advisor with an institutional infrastructureSource: DoubleLine Capital LP 29 ●
  30. 30. For Professionals OnlyMBS Functional Structure Jeffrey Gundlach* CEO, CIO Philip Barach* Joseph Galligan* Joel Damiani* President Portfolio Manager Portfolio Manager Vincent Fiorillo* Vitaliy Liberman* Ken Shinoda* Sam Garza* Portfolio Manager Portfolio Manager Portfolio Manager Portfolio Manager Traders Morris Chen Michael Lee Andrew Hsu Trader, CMBS Trader, MBS Trader, MBS Cris Santa Ana Chief Risk Officer Jeffrey Mayberry David Kennedy Director, MBS Analytics Director, Trading & Settlements Analysts Research  Systems Analysts  Emily Davidson Karen Tsang Trading & Settlements Trading & Settlements Fifi Wong Vincent Fiorillo* Casey Moore Coordinator Coordinator Analyst Washington Liaison Director Systems Audrey Tjiptokesuma Loren Fleckenstein Fan Zhang Analyst Analyst MBS Developer Steven Wald Bill Hansen Analyst Database Developer Angela Caliri Analyst Robert Herron Analyst Portfolio Management Team Based Decisions**Indicates portfolio management responsibilities including trading.Source: DoubleLine Capital LP 30 ●
  31. 31. For Professionals OnlyAssets Under ManagementAs of August 31, 2012 Assets Under Management By Strategy As of 8/31/12 Total Return MBS 33,205,040,781 Core Fixed Income 4,153,327,706 Opportunistic Income 3,098,798,124 Other MBS 1,189,317,825 Emerging Markets 919,617,489 Opportunistic Credit 364,474,478 Multi-Asset Growth 140,906366 Total $ 43,071,482,769 Source: DoubleLine Capital LP DoubleLine Capital Named Fastest-Growing Start-Up Company in 25 Years11. According to research by Strategic Insight, reported by MutualFundWire.com, May 3, 2011; Investment News, May 5, 2011; Pensions & Investments, May 6, 2011.Source: DoubleLine Capital LP 31 ●
  32. 32. For Professionals OnlyDoubleLine Capital LP Track Record 32 ● g19034 ● 31/10/2012
  33. 33. For Professionals OnlyDoubleLine Total Return MBS CompositeAdditional Information Ending July 31, 2012 Total Total Barclays Barclays U.S. Return Return U.S. MBS Aggregate Composite Composite Index Bond Index (Gross) (Net) Last 3 Months 2.26% 2.16% 1.24% 2.34% Last 6 Months 4.55% 4.35% 2.06% 2.88% Last 12 Months 9.77% 9.33% 4.84% 7.25% SI Ann. (4-7-10 to 7-31- 14.56% 14.11% 5.66% 7.31% 12) Source: DoubleLine Capital LPPast performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate as a result of the strategysinvestment policy and is not guaranteed. If the base currency of the strategy differs from the investors reference currency the represented performance might vary due to currency fluctuations.The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBS Composite. However, there is no guarantee that using the sameinvestment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and the result might differ from the composite used for illustration purposes.1. Gross results do not reflect the deduction of management fees, custodial fees and other administrative expenses. Including these costs would reduce the shown returns. Net results reflectthe deduction of the maximum standard fee charged US institutional clients without taking into account breakpoints. Certain clients could pay a significantly higher or lower fee which wouldresult in different net returns. Non-US clients may pay a higher fee than the U.S. institutional fee. A fee which is 0.5% higher than the standard US institutional fee will result in the total returnbeing reduced, over five years, by 2.53% on a compound basis. Net results do not include the deduction of custodial fees or other administrative expenses, which also will reduce the returnsshown.2. DoubleLine makes no representation that future investment performance will conform to past performance.3. This composite was created on April 7, 2010.4. The composite includes accounts whose objective is to outperform the benchmark (which is the Barclays Capital U.S. Mortgage Index) over the long term by investing in mortgage-backedsecurities that are either guaranteed by the U.S. Government or have no guaranteed by the U.S. Government. Accounts are typically managed to have a duration within 1.5 years of theBarclays Capital U.S. Mortgage Index.5. The Barclays Capital U.S. Mortgage Index covers the mortgage-backed pass through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The Index isformed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates. These aggregates are defined according to type of Agency,Program, Pass-through coupon, and origination year. The Barclays Capital U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. Theindex covers the U.S. investment grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backedsecurities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. You cannot invest in an index.6.SI Ann. = Since Inception AnnualizedThe sub-fund does not have any official reference index. 33 ●
  34. 34. DoubleLine Total Return MBS Composite For Professionals OnlyAdditional Information through July 31, 2012Composite Monthly Returns Value 4/30/10* 5/31/10 6/30/10 7/31/10 8/31/10 9/30/10 10/31/10 11/30/10 12/31/10 2010 YTDDoubleLine Total Return MBS Composite Gross 3.81% 2.15% 2.04% 1.86% 2.52% 1.82% 1.99% 0.38% ‐0.64% 17.02%DoubleLine Total Return MBS Composite Net 3.78% 2.11% 2.01% 1.82% 2.49% 1.79% 1.95% 0.35% ‐0.67% 16.68%Barclays U.S. MBS Index Net 1.19% 1.12% 1.12% 0.86% 0.15% ‐0.38% 0.98% ‐0.18% ‐0.55% 4.37%Barclays U.S. Aggregate Bond Index Net 1.60% 0.84% 1.57% 1.07% 1.29% 0.11% 0.36% ‐0.57% ‐1.08% 5.25% Value 1/31/11 2/28/11 3/31/11 4/30/11 5/31/11 6/30/11 7/31/11 8/31/11 9/30/11 10/31/11 11/30/11 12/31/11 2011DL Total Return MBS Composite Gross 1.27% 0.90% 0.29% 1.17% 1.67% ‐0.37% 1.57% 1.64% 0.84% ‐0.12% 0.39% 0.51% 10.17%DL Total Return MBS Composite Net 1.23% 0.87% 0.25% 1.14% 1.64% ‐0.40% 1.53% 1.60% 0.81% ‐0.16% 0.35% 0.48% 9.74%Barclays U.S. MBS Index Net 0.05% 0.25% 0.28% 1.10% 1.07% 0.09% 0.93% 1.25% 0.17% 0.00% 0.18% 0.70% 6.23%Barclays U.S. Aggregate Bond Index Net 0.12% 0.25% 0.06% 1.27% 1.31% ‐0.29% 1.59% 1.46% 0.73% 0.11% ‐0.09% 1.10% 7.84% Value 1/31/12 2/29/12 3/31/12 4/30/12 5/31/12 6/30/12 7/31/12 2012 YTD SI (Cum) SI (Ann)DoubleLine Total Return MBS Composite Gross 1.64% 0.90% 0.50% 0.83% 0.50% 0.47% 1.27% 6.27% 37.02% 14.56%DoubleLine Total Return MBS Composite Net 1.61% 0.87% 0.46% 0.80% 0.47% 0.44% 1.24% 6.03% 35.77% 14.11%Barclays U.S. MBS Index Net 0.41% 0.09% 0.06% 0.65% 0.32% 0.12% 0.80% 2.47% 13.62% 5.66%Barclays U.S. Aggregate Bond Index Net 0.88% ‐0.02% ‐0.55% 1.11% 0.90% 0.04% 1.38% 3.78% 17.80% 7.31%Source: DoubleLine Capital LP. Past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate asa result of the strategys investment policy and is not guaranteed. If the base currency of the strategy differs from the investors reference currency the represented performance might vary dueto currency fluctuations. The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBS Composite. However, there is no guarantee thatusing the same investment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and the result might differ from the composite used forillustration purposes. *Partial month performance for period April 7, 2010 to April 30, 2010.1. Gross results do not reflect the deduction of management fees, custodial fees and other administrative expenses. Including these costs would reduce the shown returns. Net results reflectthe deduction of the maximum standard fee charged US institutional clients without taking into account breakpoints. Certain clients could pay a significantly higher or lower fee which wouldresult in different net returns. Non-US clients may pay a higher fee than the U.S. institutional fee. A fee which is 0.5% higher than the standard US institutional fee will result in the total returnbeing reduced, over five years, by 2.53% on a compound basis. Net results do not include the deduction of custodial fees or other administrative expenses, which will also reduce the returnsshown.2. DoubleLine makes no representation that future investment performance will conform to past performance.3. This composite was created on April 7, 2010.4. The composite includes accounts whose objective is to outperform the benchmark (which is the Barclays Capital U.S. Mortgage Index) over the long term by investing in mortgage-backedsecurities that are either guaranteed by the U.S. Government or have no guaranteed by the U.S. Government. Accounts are typically managed to have a duration within 1.5 years of theBarclays Capital U.S. Mortgage Index.5. The Barclays Capital U.S. Mortgage Index covers the mortgage-backed pass through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The Index isformed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates. These aggregates are defined according to type of Agency,Program, Pass-through coupon, and origination year. The Barclays Capital U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. Theindex covers the U.S. investment grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backedsecurities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. You cannot invest in an index.6. SI (Ann) = Since Inception Annualized. SI (Cum) = Since Inception CumulativeThe sub-fund does not have any official reference index. 34 ●
  35. 35. For Professionals OnlyKey risk factors vs. Broad aggregate marketSource: Zephyr StyleAdvisor: DoubleLine Capital. Past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of sharescan greatly fluctuate as a result of the strategys investment policy and is not guaranteed. If the base currency of the strategy differs from the investors reference currency the representedperformance might vary due to currency fluctuations. The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBS Composite.However, there is no guarantee that using the same investment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and the result might differfrom the composite used for illustration purposes. For further information on the composite please refer to slide 33. The sub-fund does not have any official reference index. However, forcomparison purposes, we have shown the Barclays Capital US Aggregate Bond Index performance which is one of the possible benchmarks for a MBS portfolio. 35 ●
  36. 36. For Professionals OnlyAppendix 36 ● g19034 ● 31/10/2012
  37. 37. For Professionals OnlyDoubleLine Total Return MBS CompositeCompliant PresentationApril 7, 2010 to December 31, 2011 Barclays U.S. Barclays U.S. Composite Composite Net Composite Internal Composite Mortgage Index Mortgage Index Number of Firm Assets Year Gross Return Return 3-Yr St Dev Dispersion Assets Return 3-Yr St Dev Portfolios ($ M) (%) (%) (%) (%) ($ M) (%) (%) 2010 17.02 16.68 4.37 N/A N/A 4 N/A 4,042 4,914 2011 10.17 9.74 6.25 N/A N/A 8 N/A 16,260 19,573 • The Nordea 1 - US Total Return Bond Fund uses the same investment process as the Double Line Total Return MBS Composite. However, there is no guarantee that using the same investment process will produce similar returns since the Nordea 1 sub-fund has specific limits and restrictions, and the result might differ from the composite used for illustration purposes. The sub-fund does not have any official reference index. • For GIPS® purposes effective as of December 31, 2009, the Firm consists of the assets under management of DoubleLine Capital LP (“DoubleLine”). • DoubleLine has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). DoubleLine has been independently verified for the periods January 1, 2010-December 31, 2010. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Total Return MBS Composite has been examined for the periods April 7, 2010 through December 31, 2010. The verification and performance examination reports are available upon request. • Results are for accounts present for an entire month. The composite includes all accounts, except for accounts subject to material client restrictions and deemed non-discretionary. When a new composite is formed, the first account is included as of the account’s inception date. A full composite definition is available upon request. • A complete list and description of firm composites is available upon request. • The dispersion of annual returns is measured by the standard deviation across equally-weighted portfolio returns represented within the composite for the full year. For those periods where less than six (6) accounts are in the composite for the full year, or where the period is less than a full year, standard deviation is not presented. • Performance is reported in U.S. dollars. • Gross results do not reflect the deduction of management fees, custodial fees and other administrative expenses. Including these costs would reduce the shown returns. Net results reflect the deduction of the maximum standard fee charged US institutional clients without taking into account breakpoints. Certain clients could pay a significantly higher or lower fee which would result in different net returns. Non-US clients may pay a higher fee than the U.S. institutional fee. A fee which is 0.5% higher than the standard US institutional fee will result in the total return being reduced, over five years, by 2.53% on a compound basis. Net results do not include the deduction of custodial fees or other administrative expenses, which also will reduce the returns shown. • DoubleLine makes no representation that future investment performance will conform to past performance. Past performance is no guarantee of future results. It is possible to lose money when investing in this strategy. • Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. • There is no minimum asset level for accounts included in the composite. • This composite was created on April 7, 2010. • The composite includes accounts whose objective is to outperform the benchmark (which is the Barclays Capital U.S. Mortgage Index) over the long term by investing in mortgage-backed securities that may or may not be guaranteed by the U.S. Government or its agencies or instrumentalities. Accounts are typically managed to have a duration within 1.5 years of the Barclays Capital U.S. Mortgage Index. • The Barclays Capital U.S. Mortgage Index covers the mortgage-backed pass through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The Index is formed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates. These aggregates are defined according to type of Agency, Program, Pass-through coupon, and origination year. You cannot invest in an index. Benchmark returns are not covered by the report of independent verifiers. • The U.S. institutional fee schedule is as follows: 0.40% on assets up to $50 million; 0.35% on assets between $50 million and $100 million; and 0.30% on all assets above $100 million. • Leverage or derivatives are not used in the management of the accounts in this composite. • There are not any known inconsistencies between the local laws to which the composite adheres and GIPS®. • Three year annualized ex-post standard deviation of the composite is not presented because 36 monthly returns have not been generated by this composite. 37 ●
  38. 38. For Professionals OnlyRisks in the U.S. Housing MarketDeterioration in the Housing Market• Defaults may rise and recovery rates might get worse - Non-Agency RMBS are already priced to a depressionary case - DoubleLine uses a conservative approach to scenario analysis - Default assumptions used are higher than current fundamentals - Recovery rate assumptions are lower than current fundamentalGovernment Policies on Housing• Uncertainty on debt “forgiveness” - Any nationwide refinancing programs, may lead to losses on the agency side of the portfolio but could lead to prepayment “reward” on the non-agency side, where securities are discounted.Interest Rate Movements• If interest rates rise, it could mean better economy and a better housing market - Non-agency discounted prices would rise - Prepayments on the agency side would slow• If interest rates fall, agency MBS would benefit 38 ●
  39. 39. For Professionals OnlyNon-Agency MBS MarketPrices Not Reflective of Improving Fundamentals• Serious delinquency and conditional default rate for Alt-A and Subprime RMBS seem to have stabilized since peaking in later-2009/early-2010• High defaults are already factored into market prices. 60++ Delinquent 1/1/05 – 8/31/12 Conditional Default Rate 1/1/05 – 8/31/12Serious Delinquencies is defined by mortgages that are 60++ delinquency rates defined as loans 60 or 90 days late in mortgage payments, or already in foreclosure or REO status.Prime defined as FICO > 725 and LTV < 75Alt-A defined as FICO 675-725; or FICO > 725 and LTV >= 75Subprime defined as FICO < 675Source: Loan Performance, Vichara, DoubleLine Capital as of August 31, 2012. 39 ●
  40. 40. For Professionals OnlyNon-Agency MBS MarketCurrent Fundamentals • Similarly, loss severity seem to Loss Severity 1/1/05 – 08/31/2012 have leveled off and have remained consistent for Prime & Alt-A for the past two years. • Subprime severities have ticked-down slightly • After some period of time, DoubleLine expects the remaining homeowners in pools that have not yet defaulted will be perceived as good credits.Serious Delinquencies is defined by mortgages that are 60++ delinquency rates defined as loans 60 or 90 days late in mortgage payments, or already in foreclosure or REO status.Prime defined as FICO > 725 and LTV < 75Alt-A defined as FICO 675-725; or FICO > 725 and LTV >= 75Subprime defined as FICO < 675Source: Loan Performance, Vichara, DoubleLine Capital as of August 31, 2012. 40 ●
  41. 41. For Professionals OnlyDoubleLine Capital LP – the sub-managerFirm accoladesDoubleLine• DoubleLine Capital Named Fastest-Growing Start-Up Company in 25 Years1• DoubleLine Capital awarded “Bond Manager of the Year” by Foundations & Endowments Money Management2Jeffrey Gundlach• Named Fund Leader of the Year (2010) by Fund Action3• Named to SmartMoney’s “Power Thirty: The World’s Most Influential Players”4• Named to Fortune Magazine’s Investor’s Guide “Mutual Fund All-Stars”51. According to research by Strategic Insight, reported by MutualFundWire.com, May 3, 2011; Investment News, May 5, 2011; Pensions & Investments, May 6, 2011. 2. Foundations &Endowments 11th Annual NonProfit Awards, September 18, 2011. http://www.nonprofitawards.com/eventinfo.php 3. Fund Action, April 11, 2011 4. SmartMoney magazine, October 26,2010 5. Fortune Magazine Investor’s Guide 2012, December 26, 2011 41 ●
  42. 42. For Professionals OnlyMBS BiographiesJeffrey E. Gundlach Philip A. BarachChief Executive Officer & Chief Investment Officer PresidentMr. Gundlach is the Chief Executive Officer and Chief PrincipalInvestment Officer of DoubleLine. He was formerlyassociated with TCW where he was Chief Investment Officer Mr. Barach is co-founder and President of DoubleLine. Priorand head of fixed income activities. He is recognized as a to DoubleLine, Mr. Barach was Co-Founder and Groupleading expert1 in bond and fixed income investments. His Managing Director of the TCW Mortgage Group where heinvestment strategies have been featured in leading spent over 23 years. He has over 32 years of fixed incomepublications including The New York Times, The Financial investment experience. Before joining TCW, Mr. Barach wasTimes, The Wall Street Journal, USA Today, Barron’s, Senior Vice President of Chief Investments for Sun LifeForbes, and Fortune. In 2010, Mr. Gundlach was named to Insurance Company in Los Angeles, where he wasthe SmartMoney Power 30. In 2011, he was featured as responsible for the asset/liability management of the firm and“The King of Bonds” in Barron’s, and named one of “5 Mutual oversight and management of the company’s $5 billionFund All-Stars” by Fortune Magazine. In 2012, he was investment portfolio. Previously, he served as Principal Fixednamed to Bloomberg’s “50 Most Influential”. He is a graduate Income Officer for the California Public Employees’of Dartmouth College summa cum laude holding a BA in Retirement System (CalPERS), the largest pension plan inMathematics and Philosophy. He attended Yale University as the country. In that capacity, he was responsible fora PhD candidate in Mathematics. managing the fixed income portion of the fund which was 100% internally managed. Mr. Barach was heavily involved in the creation of the collateralized mortgage obligations (CMO) while at CalPERS, he oversaw the issuance of one of the first private label CMOs using the retirement system’s MBS portfolio. He attended the Hebrew University of Jerusalem, 1. Money News on May 26, 2011: Headline of the story: Bond Expert Gundlach: Housing where he received a BA in International Relations and an Collapse to Spark Second Financial Meltdown. Morningstar on January 5, 2012: “….Jeffrey Gundlach, a high-profile fixed-income expert (and a former Morningstar Fund Manager of MBA in Finance. the Year)…” 42 ●
  43. 43. For Professionals OnlyThe Nordea 1 fund app:Get Nordea on your mobile deviceThe Nordea 1 Fund App keeps you up to date on the Nordea 1, SICAV range.Features include daily price and performance data, latest Nordea news,portfolio manager videos, personalized watch lists, plus of course anintuitive fund palette that introduces you to the funds and their managers.The new Nordea 1 Fund App is available at the Apple App Storeand Android Market for free.Visit www.nordea.lu/app for further information. 43 ●
  44. 44. For Professionals OnlyThe sub-funds mentioned are part of Nordea 1, SICAV, an open-ended Luxembourg-based investment company (Société dInvestissement à Capital Variable), validly formed andexisting in accordance with the laws of Luxembourg and with European Council Directive 85/611/EEC of 20 December 1985. This document is advertising material and does notdisclose all relevant information concerning the presented sub-funds. Any investment decision in the Nordea funds should be made on the basis of the current prospectus, which isavailable, along with the Key Investor Information Document, the current annual and semi-annual reports, electronically in English and in the local language of the market wherethe mentioned SICAV is authorised for distribution, and free of charge upon request from Nordea Investment Funds S.A., 562, rue de Neudorf, P.O. Box 782, L-2017 Luxembourg,from the local representatives or information agents, or from our distributors. Investments in derivative and foreign exchange transactions may be subject to significant fluctuationswhich may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of shares can greatly fluctuate as a result ofthe sub-fund’s investment policy and is not guaranteed. For further details of investment risks associated with these sub-funds, please refer to the relevant KeyInvestor Information Document, available as described above. Nordea Investment Funds S.A. only publishes product-related information and does not make any investmentrecommendations. Published by Nordea Investment Funds S.A., 562, rue de Neudorf, P.O. Box 782, L-2017 Luxembourg, which is authorized by the Commission de Surveillancedu Secteur Financier in Luxembourg. Further information can be obtained from your financial advisor. He/she can advise you independently of Nordea Investment Funds S.A.Additional information for investors in Switzerland: The Swiss Representative and Paying Agent in Switzerland is Nordea Bank S.A. Luxemburg, Zweigniederlassung Zürich,Mainaustrasse 21-23, CH-8008 Zürich. Telephone (+41) 44 421 42 42, Fax (+41) 44 421 42 82. Additional information for investors in Germany: The Information and PayingAgent in Germany is Nordea Bank Finland Plc, Niederlassung Deutschland, Bockenheimer Landstrasse 33, D-60325 Frankfurt am Main. A hard copy of the above-mentioned funddocumentation is also available from here. Additional information for investors in Austria: Sub-paying Agent and Representative in Austria is the Erste Bank derÖsterreichischen Sparkassen AG, Graben 21, A-1010 Vienna. Additional information for investors in Netherlands: Nordea 1, SICAV is a Luxembourg Undertaking forCollective Investment in Transferable Securities (UCITS) registered in the Netherlands in the register kept by the AFM, and as such is allowed to offer its shares in theNetherlands. The AFM register can be consulted via www.afm.nl/register. Additional information for investors in France: With the authorisation of the Autorité des MarchésFinanciers (AMF) the shares of the sub-funds of Nordea 1, SICAV may be distributed in France. Centralising Correspondent in France is CACEIS Bank, located at 1-3, placeValhubert, 75013 Paris. Investors are advised to conduct thorough research before making any investment decision. Additional information for investors in Spain: Nordea 1,SICAV is duly registered in the CNMV official registry of foreign collective investment institutions (entry no. 340) as authorised to be marketed to the public in Spain. The custodianof the SICAV’s assets is Nordea Bank S.A., Luxembourg. In Spain, any investment must be made through the authorised distributors and on the basis of the information containedin the mandatory documentation that must be received from the SICAV’s authorised distributor prior to any subscription. A complete list of the authorised distributors is available inthe CNMV’s webpage (www.cnmv.es). Additional information for investors in Portugal: The Management Company of the SICAV, Nordea Investment Funds, S.A., and thecustodian of the SICAV’s assets, Nordea Bank S.A., are validly formed and existing in accordance with the laws of Luxembourg and authorized by the Commission de Surveillancedu Secteur Financier in Luxembourg. Our distributor in Portugal is BEST - Banco Electrónico de Serviço Total, S.A., duly incorporated under the laws of Portugal and registeredwith the CMVM as a financial intermediary. Additional information for investors in Italy: Fund documentation as listed above is also available in Italy from the distributors andon the website www.nordea.it. The updated list of distribution agents in Italy, grouped by homogenous category, is available from the distributors themselves, at State Street BankS.p.A. branches (located in the main towns of each region), BNP Paribas Securities Services, Banca Sella Holding S.p.A, Allfunds Bank S.A., Societe Generale SecuritiesServices Sp.A. and on the website www.nordea.it. Any requests for additional information should be sent to the distributors. Before investing, please read the prospectuscarefully. We recommend that you read the most recent annual financial statement in order to be better informed about the funds investment policy. The prospectus and KIIDfor the sub-funds have been published with Consob. Additional information for investors in the United Kingdom: Approved by Nordea Bank Finland Plc, London Branch,which is regulated by the FSA in the United Kingdom. Additional information for investors in Latvia: The Representative and Paying Agent is Nordea Bank Finland Plc Latvijasbranch, K. Valdemara St. 62, Riga, LV-1013. Additional information for investors in Estonia: The Representative and Paying Agent in Estonia is Nordea Bank Finland Plc,Estonia Branch, Hobujaama 4, 15068 Tallinn. Additional information for investors in Lithuania: The Representative and Paying Agent in Lithuania is Nordea Bank Finland Plc,Lithuania Branch, Didzioji str. 18/2, LT-01128 Vilnius. Shareholders must evaluate possible investment risks and take this into consideration when making investment decisions.Additional information for investors in Brazil: Nordea 1, SICAV have not been, and will not be, registered with the CVM and may not be offered or sold in Brazil except incircumstances which do not constitute a public offering or distribution under Brazilian laws and regulations. Investors within Brazil should consult with their own counsel as to theapplicability of these laws and regulations or any exemption there from. This material aims to provide information only and does not constitute and should not be construed as anoffer to buy or sell or solicitation of an offer to buy or sell any security or financial instrument.Unless otherwise stated, all views expressed are those of Nordea Investment Funds S.A. This document may not be reproduced or circulated without prior permission and mustnot be passed to private investors. This document contains information only intended for professional investors and independent financial advisers and is not intended for generalpublication. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same,but is included for the purpose of illustration.DoubleLine is a registered trademark of DoubleLine Capital LP. 44 ●

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