Over various time periods from 1 to 10 years, the document analyzes the risk-adjusted performance of various asset classes using metrics like Sharpe Ratio, excess return, and volatility. For the past 1 year, European High Yield had the highest Sharpe Ratio of 6.46, while Macro Hedge Funds were the only asset class to post negative excess returns. Over 10 years, Risk Parity had the highest Sharpe Ratio of 0.98, while both Risk Parity and Emerging Market Equities generated the highest excess return of 9.9% per annum.

1. R Rf
Rf
RISK-ADJUSTED RETURN:
QUARTERLY UPDATE (2014 - Q2)

2. www.redington.co.uk T. 020 7250 3331 R
1 YEAR
30/06/2013
30/06/2014
Over the last twelve months, European High Yield continued to be a
top performer, with a Sharpe Ratio of 6.46, and a volatility of 2.1%.
However, low spreads indicate repetition of this performance could
be difficult. US High Yield performed well on a risk-adjusted basis
over the past quarter with a Sharpe ratio rising from 1.48 to 4.01,
this was largely due to a rise in excess return from 7.3% to 11.5%
per annum. Macro Hedge Funds were the only asset class to post
negative excess returns during the 12-month period. Compared to
Q2 2013, volatilities are largely lower and excess returns higher
leading to higher Sharpe Ratios: for example European High Yield,
also the top performer in Q2 2013, had a Sharpe Ratio of 3.38.
Although useful for evaluating performance on a short-term basis,
please note that one year is a short time frame over which to
assess the risk and return characteristics of different asset classes
and strategies.
RISK - ADJUSTED
RETURN (2014 Q2)

3. www.redington.co.uk T. 020 7250 3331 R
3 YEAR
30/06/2011
30/06/2014
Over a three-year period, Risk Parity has maintained its position
as the best performing asset class on a risk-adjusted basis with a
Sharpe Ratio of 1.56, up from 1.38 last quarter. It also continues to
have the highest excess return of 14.5% per annum. UK Government
Bonds were the only asset class to experience a reduction in risk
adjusted return over the quarter, with Sharpe Ratios for nominal
Gilts falling from 0.84 to 0.77 and index-linked Gilts falling from
0.90 to 0.76. Commodities, Macro Hedge Funds, and Emerging
Market Equities have posted consecutive negative three-year
performances over two quarters.
RISK - ADJUSTED
RETURN (2014 Q2)

4. www.redington.co.uk T. 020 7250 3331 R
5 YEAR
30/06/2009
30/06/2014
Over a five-year period, US High Yield has remained the top
performing asset class on a risk-adjusted basis with a Sharpe
Ratio of 2.01, down from 2.11 last quarter. European High Yield
continued to produce the highest excess return of 14.8% per
annum. Risk Parity and nominal UK Government Bonds are the only
asset classes to show an improvement in five-year risk adjusted
return over the quarter. Macro Hedge Funds continue to post
negative excess returns, for the eighth consecutive quarter, of
-3.0%, an improvement from -4.2% per annum last quarter.
RISK - ADJUSTED
RETURN (2014 Q2)

5. www.redington.co.uk T. 020 7250 3331 R
10 YEAR
30/06/2004
30/06/2014
Over a ten-year period, Risk Parity is the top asset class on a
risk-adjusted basis with a Sharpe Ratio of 0.98. Both Risk Parity
and Emerging Market Equities have generated the highest excess
return, over 10 years, at 9.9% per annum. On a risk-adjusted
basis Emerging Market Equities have not performed as well, with
a Sharpe ratio of 0.41 and a volatility of 24.3%, approximately
2.5x higher than Risk Parity. Macro Hedge Funds and Commodities
both continue to post negative excess returns over the 10-year
period (though both doing better than Q1 2014) at -1.5% and -1.2%
per annum respectively. This analysis over the 10-year period
includes the impact of the financial crisis, as a result volatilities
are noticeable larger and excess returns smaller compared to the
5-year analysis.
RISK - ADJUSTED
RETURN (2014 Q2)

6. www.redington.co.uk T. 020 7250 3331 R
Here we look at the risk-adjusted performance across asset classes for the past one, three, five and
ten years. The calculations that underlie this analysis use monthly data sourced from Bloomberg.
Excess return is taken to be the annualised return of the asset class for the relevant period above
the risk free rate which is calculated using the UK 3 Month LIBOR total return index. Volatility is the
standard deviation of monthly excess returns. For all asset classes apart from Investment Grade Credit
and High Yield Bonds, total return indices are used to calculate the absolute returns. For Investment
Grade and High Yield, interest rate hedging is assumed and the excess return over swaps is used for
the excess return.
APPENDIX
1 year
Asset Class Benchmark Index Excess Return (% p.a) Volatility (% p.a) Sharpe Ratio
High Yield Europe ML EUR High Yield TR 13.3% 2.1% 6.46
High Yield US ML US High Yield TR 11.5% 2.9% 4.01
Leveraged Loans US S&P US LL index TR 5.3% 1.4% 3.88
Risk Parity Salient Risk Parity Index 25.8% 7.1% 3.64
IG Credit UK ML Sterling Corp&Collateralised Ex Sub - excess swap rtn 5.1% 1.5% 3.42
IG Credit US ML US Corp Master - excess swap rtn 4.6% 1.5% 3.18
Developed Market Equities MSCI Daily TR Net World USD 23.8% 9.6% 2.48
EMD Hard Currencies JP Morgan EMBI 10.8% 6.9% 1.56
Emerging Market Equities MSCI EM TR Index 14.1% 12.3% 1.14
Commodities DJ-UBS Commodity Index TR 8.0% 8.8% 0.91
UK Government Bonds Index-Linked FTSE actuaries uk index linked gilts TR all 3.3% 3.9% 0.83
UK Government Bonds FTSE actuaries uk gilts TR all 1.7% 3.3% 0.53
Hedge Fund-Macro HFRX Macro Index -1.6% 1.8% N/A
3 years
Asset Class Benchmark Index Excess Return (% p.a) Volatility (% p.a) Sharpe Ratio
Risk Parity Salient Risk Parity Index 14.5% 9.3% 1.56
High Yield US ML US High Yield TR 8.9% 6.4% 1.40
High Yield Europe ML EUR High Yield TR 10.4% 9.1% 1.14
Leveraged Loans US S&P US LL index TR 5.1% 4.7% 1.09
EMD Hard Currencies JP Morgan EMBI 7.3% 8.1% 0.90
Developed Market Equities MSCI Daily TR Net World USD 11.5% 13.8% 0.83
IG Credit UK ML Sterling Corp&Collateralised Ex Sub - excess swap rtn 3.0% 3.6% 0.83
UK Government Bonds FTSE actuaries uk gilts TR all 4.1% 5.3% 0.77
UK Government Bonds (Index-Linked) FTSE actuaries uk index linked gilts TR all 5.8% 7.6% 0.76
IG Credit US ML US Corp Master - excess swap rtn 2.6% 4.0% 0.64
Emerging Market Equities MSCI EM TR Index -0.7% 19.7% N/A
Hedge Fund-Macro HFRX Macro Index -2.4% 2.8% N/A
Commodities DJ-UBS Commodity Index TR -5.5% 15.2% N/A
5 years
Asset Class Benchmark Index Excess Return (% p.a) Volatility (% p.a) Sharpe Ratio
High Yield US ML US High Yield TR 13.6% 6.8% 2.01
Risk Parity Salient Risk Parity Index 14.7% 7.9% 1.85
High Yield Europe ML EUR High Yield TR 14.8% 9.5% 1.55
Leveraged Loans US S&P US LL index TR 8.1% 5.5% 1.47
EMD Hard Currencies JP Morgan EMBI 10.1% 7.3% 1.38
IG Credit UK ML Sterling Corp&Collateralised Ex Sub - excess swap rtn 3.6% 3.5% 1.03
IG Credit US ML US Corp Master - excess swap rtn 3.8% 3.8% 1.00
Developed Market Equities MSCI Daily TR Net World USD 14.6% 14.7% 1.00
UK Government Bonds (Index-Linked) FTSE actuaries uk index linked gilts TR all 6.7% 6.9% 0.96
UK Government Bonds FTSE actuaries uk gilts TR all 4.0% 5.3% 0.75
Emerging Market Equities MSCI EM TR Index 8.9% 19.1% 0.46
Commodities DJ-UBS Commodity Index TR 1.6% 15.2% 0.11
Hedge Fund Macro HFRX Macro Index -3.0% 3.7% N/A
10 years
Asset Class Benchmark Index Excess Return (% p.a) Volatility(% p.a) Sharpe Ratio
Risk Parity Salient Risk Parity Index 9.9% 10.1% 0.98
EMD Hard Currencies JP Morgan EMBI 7.4% 9.1% 0.82
High Yield US ML US High Yield TR 6.8% 10.6% 0.64
UK Government Bonds (Index-Linked) FTSE actuaries uk index linked gilts TR all 3.9% 7.2% 0.54
High Yield Europe ML EUR High Yield TR 6.8% 12.6% 0.54
UK Government Bonds FTSE actuaries uk gilts TR all 2.4% 5.2% 0.47
Emerging Market Equities MSCI EM TR Index 9.9% 24.3% 0.41
Leveraged Loans US S&P US LL index TR 3.2% 8.9% 0.36
Developed Market Equities MSCI Daily TR Net World USD 5.2% 16.5% 0.31
IG Credit UK ML Sterling Corp&Collateralised Ex Sub - excess swap rtn 0.5% 4.4% 0.12
IG Credit US ML US Corp Master - excess swap rtn 0.4% 6.0% 0.06
Commodities DJ-UBS Commodity Index TR -1.2% 18.4% N/A
Hedge Fund-Macro HFRX Macro Index -1.5% 7.2% N/A

7. www.redington.co.uk T. 020 7250 3331 R
4 Members
Investment
Consulting
7
5
7
Manager
Research
ALM & Investment Strategy
Technology
Operations Education &
Communication
54 AMAZING EMPLOYEES
W E W E R E T H E F I RST C O N S ULTA N C Y TO B R I N G R I S K M A NAG E M E N T
Named after the visionary actuary Frank Redington, the developer of Immunisation
Theory, Redington was founded in May 2006 by Dawid Konotey-Ahulu and Robert Gardner.
OCT 2006 DEC 2006
DEC 2007
JULY 2008
JUN 2008
SEPT 2008
OCT 2009
JAN 2010
SEPT 2011
OCT 2011
NOV 2011
SEPT 2009
Authorisation granted
Gets its client
Redington staff: 5
E u r o p e a n P e n s i o n s A w a r d s:
Winner of European Breakthrough Firm of the Year
Financial News Awards:
Specialist Investment Consultancy of the Year
Global Life & Pension Awards:
#1 In ALM/LDI #2 in Manager Selection #3 in Strategic Advice #3 Overall Consultant
Assets under consulting of £150,000,000,000
Financial News
Awards
European Pensions Awards
Best Consulting Firm of the Year
JUL 2011 Launched
Assets under
consulting
Redington
staff: 21
Assets under consulting: £30,000,000,000
Redington moves to Mallow Street offices
Redington staff: 36
Assets under consulting: £80,000,000,000
Redington
expands
team to 45
Best Consulting Firm
(non-asset allocation issues)
Risk Management Firm of the Year
Life & Pensions Risk Awards
(£200,000,000,000)
16
11
JUN 2012 European Pensions Awards
Risk Management Firm of the Year 2012
Pension Consultancy of the Year 2012
MAY 2012 RedBlog was listed as one of the Guardian’s
2012 must-read finance resources.
NOV 2012Redington implements
seven step framework
N
In 2012 we also launched RedSTART, a financial literacy programme
tackling young people’s failure to save. Our consultants provide free
educational training days to students at local schools to help them prepare for
September 2012 Redingtons Co-CEO Robert Gardner abseils down the tallest
building in Europe, “The Shard” to raise 25k in support of Commando Spirit
Sean (Age-13) -
Lister Community School
69 years experience as actuaries
257 years capital markets experience
OUR STAFF HAVE A WEALTH OF COMBINED EXPERIENCE INCLUDING
MAY 2013
JUN 2013
JUL 2013
Assets under consulting in excess of (£270,000,000,000)
PENSION WEEK’S PENSION AND INVESTMENT
PROVIDER AWARDS (PIPA)
Best Investment Consultant 2013
Global Investor / ISF
1st
A L M
Development
European Pensions
European Consultancy of the Year
European Risk Management Firm of the Year
Global Investor/ISF Awards
Pension Consultancy
of the year 2013
TECHNIQUES FROM INVESTMENT BANKING INTO THE WORLD OF PENSIONS.

8. www.redington.co.uk T. 020 7250 3331 R
Stay up to date with
our latest thinking
www.redington.co.uk
Previous Editions
More Redington
Publications
Disclaimer
The information herein was obtained from various sources. We do not guarantee every aspect of its accuracy. The information is for your private
information and is for discussion purposes only. A variety of market factors and assumptions may affect this analysis, and this analysis does not reflect
all possible loss scenarios. There is no certainty that the parameters and assumptions used in this analysis can be duplicated with actual trades. Any
historical exchange rates, interest rates or other reference rates or prices which appear above are not necessarily indicative of future exchange rates,
interest rates, or other reference rates or prices. Neither the information, recommendations or opinions expressed herein constitutes an offer to buy or
sell any securities, futures, options, or investment products on your behalf. Unless otherwise stated, any pricing information in this message is indicative
only, is subject to change and is not an offer to transact. Where relevant, the price quoted is exclusive of tax and delivery costs. Any reference to the
terms of executed transactions should be treated as preliminary and subject to further due diligence.
Redington Limited is an investment consultant company regulated by the Financial Conduct Authority. The company does not advise on all implications
of the transactions described herein. This information is for discussion purposes and prior to undertaking any trade, you should also discuss with your
professional, tax, accounting and / or other relevant advisers how such particular trade(s) affect you. All analysis (whether in respect of tax, accounting,
law or of any other nature), should be treated as illustrative only and not relied upon as accurate
©Redington Limited 2014. All rights reserved.
Issue 1 Issue 2 Issue 3 Issue 4
If you would like more details on the
topics discussed, please contact your
Redington representative or email
enquiries@redington.co.uk