Dynamic Asset Allocation for
Pensions Funds –
Evolutions in Portfolio
Management
Presentation by Giovanni Leonardo
Head of Multi Asset Class Solutions
Swiss & Global Asset Management Zurich, Switzerland
Tel Aviv, 20 June 2011
A member of the GAM group.
1
Separation of Private Bank and Asset Management
Split of Julius Baer Holding into two listed companies as of 1 October 2009
Julius Baer Holding Ltd.
BAER.VX
Julius Baer Group Ltd.
Bank Julius Baer
2
Source: Julius Baer
GAM Holding AG
GAM.SW
GAM Holding AG
Key financial information – segmental figures 2010
GAM Holding AG
(Consolidated)
GAM
AuM CHF 117.8 bn*
AuM CHF 53.6 bn
Revenues CHF 470.3 m
Revenues CHF 712.5 m
Pre-tax profit CHF 246.5 m
Pre-tax profit CHF 146.2 m
Swiss & Global
Asset Management
AuM CHF 80.4 bn
Revenues CHF 217.1 m
Pre-tax profit CHF 99.8 m
Staff 1,052
Staff 757
Staff 279
* Excludes CHF 16.2 billion of Julius Baer branded funds distributed by Swiss & Global Asset Management and sub-advised by GAM.
3
Source: GAM Holding AG, Annual Report 2010
Swiss & Global Asset Management
All units of GAM Holding AG have a unique strategic position
Alternative
• Single & multi-manager
• Single & multi-strategy
Long-only
• Global/regional equities
• Single country equities
• Global fixed income
4
Source: Swiss & Global Asset Management
Equities
• Active core
• Emerging markets
• Satellites/themes
Fixed Income
• Active core
• Absolute return
• Satellites
Multi Asset Class Solutions
• Asset allocation
• Unleveraged absolute return
Alternative assets
• Commodities
Swiss & Global Asset Management
Lean and efficient functional structure
CEO Swiss & Global Asset Management
David M. Solo
Sales & Distribution
Michele Porro
Investment Management
Stefan Angele
Products & Services
Martin Jufer
Wholesale Switzerland &
International
B. Egger
Private Labelling Europe
Th.van Ditzhuyzen
Equities
S. Huang Sun
Product Management &
Development
R. Schneider
Operations
R. Aeberhard
Institutional Sales CH &
International
St. Schmidweber
Private Labelling
Cayman
P. Nathan
Fixed Income
E. Puntillo
Business Technology
P. Arnold
Risk Management
D. Koller
Sales & Distribution
Germany
A. Gerstadt
Marketing &
Communications
M. Rust
Currencies & Commodities
J. Corbach
Luxembourg Fund
Network
E. Hamlescher
Fund Admin Cayman
Ch. Godfray
Sales & Distribution Italy
F. La Scala
Sales & Management
Services
M. Rust
Multi Asset Class Solutions
G. Leonardo
Legal & Compliance
Th. von Ballmoos
Operations Italy
R. Morosin
Finance & Controlling
M. Röthlisberger
Operations Frankfurt
Th. Ott
Product Specialists
D. Kubisch
Human Resources
H. Nohl
5
Source: Swiss & Global Asset Management
Swiss & Global Asset Management
AuM - segmentation by clients & products as per 31 December 2010
Total AuM: CHF 80.4 bn
year ended
2010 2009
By clients
100
7%
78.3
80
14%
80.4
73.0
Institutional clients
51%
29%
63.3
60
Julius Baer private clients 7%
7%
14%
16%
Wholesale fund distr.
29%
Private label funds (PLF) 51%
23%
54%
57.2
year ended
By products
40
2009
7%
7%
22%
10%
4%
21%
Absolute return/hedge
12%
Private label funds (PLF) 51%
11%
54%
7%
7%
51%
20
22%
12%
0
Dec
2008
6
2010
Jun
2009
Dec
2009
Jun
2010
Dec
2010
Source: GAM Holding AG, Annual Report 2010
Equity
Commodities
Fixed income
R-Evolution in investment
approaches
7
Standard approach
Required return defines the Strategic Asset Allocation
Client needs
Coverage ratio ?
Required return ?
Risk aversion?
Optimal allocation
Strategic allocation
Cash
Money Market
Fixed Income
Government Bonds CH
Government Bonds World
Corporate Bonds (Inv. Grade)
Corporate Bonds (High Yield)
Emerging Markets Bonds
Emerging Markets Bonds (LOC CCY)
Equity
Equity Switzerland
Equity World
Equity Emerging Markets
Expected Returns
Expected Volatilities
Benchmark definition
Manager selection
Multi Asset Mandate
8
Source: Swiss & Global
Single Asset Class Mandate
Vol.
5.0%
Vol.
10.0%
Vol.
12.5%
Vol.
15.0%
Vol.
20.0%
0.4
0.4
85.7
15.9
18.5
31.7
6.7
3.5
9.5
13.9
8.0
4.8
1.2
3.4
5.0
0.0
0.0
59.7
4.1
2.5
22.7
8.1
14.6
7.7
40.3
18.2
14.9
7.3
4.5
10.0
0.0
0.0
46.6
1.4
0.9
11.7
7.6
20.0
5.0
53.4
22.1
19.4
11.8
5.0
12.5
0.0
0.0
28.6
0.5
0.4
8.0
6.3
9.2
4.1
71.4
35.0
12.5
23.9
5.4
15.0
0.0
0.0
19.3
0.2
0.2
4.6
4.9
6.9
2.6
80.7
14.7
7.9
58.1
6.1
20.0
What should you expect from this process?
Symmetric return profile designed for the long run
payoff for a classical benchmark-driven mandate
Performance allocation
Performance with PM levy
Client needs
9
Source: Swiss & Global
Objective-driven portfolio management
Evolution of investment concepts
1990
“Relative Return”
2000
“Core-Satellite”
2010
“Total Return”
Liquidity
Structural Portfolio
“Core” Investment
Bonds
Equity
Strategic Asset
Allocation
10
Source: Citi / Principal / CREATE Survey 2010
Commodities, EMMA
Total Return
Satellites
Opportunities
Hedge Funds, PE, …
Dynamic Overlay
Dynamic Asset
Allocation
Investing across the business cycle
Exemplary position
EARLY CYCLE
RECOVERY
BOOM
LATE CYCLE
SLOWDOWN
RECESSION
 Small Caps
 Value Stocks
 High Beta Stocks
 Early Cycle Sectors
 Small Caps
 High Beta Stocks
 Late Cycle Sectors
 Large Caps
 Growth Stocks
 Low Beta Stocks
 Defensive Sectors
 Value Stocks
 Low Beta Stocks
 Rate Sensitive
Sectors
 TIPS
FIXED INCOME
 High Yield Bonds
 Municipals
 Short-Term
Treasuries
 Long-Term
Treasuries
 Corporate Bonds
COMMODITIES
 Industrial Metals
 Precious Metals
 Industrial Metals
 Energy
 Livestock
 Energy
 Precious Metals
 Agriculture
 Equity Hedge
 Event Credit
 Credit long biased
 Equity Hedge long
biased…
 Event Merger Arbitrage
 Fixed Income
Arbitrage
 Global Macro
 Distressed
 Global Macro
EQUITIES
HEDGE FUNDS
11
MID CYCLE
Source: Swiss & Global Asset Management
Investment Management
2
Investment
decision
Using appropriate portfolio-specific processes, our investment
teams transform their views into consistent investment decisions,
which are based on a portfolio-specific investment universe and
restriction sets, risk-budget contributions, etc.
3
Portfolio
construction
Our portfolio management teams implement the defined target
structure for specific portfolios in a cost efficient way.
Core holdings reflect the general market views, derivatives are used
to achieve a timely and cost effective overlay where allowed.
4
Risk
management
Using industry-leading risk management tools, our independent
risk controlling specialists daily monitor the overall risk as well as
compliance with the investment guidelines, providing visibility on
each single position of the portfolio.
1
12
Source: Swiss & Global Asset Management
5
Market
assessment
Specialised investment teams formulate clear views in their
specific area of expertise. They reflect a systematic assessment
of opportunities and risks in their investment universe from a pure
investors’ point of view ("buy side").
Quality management
Investment process aligns decision making, implementation and accountability
MACS solves the client puzzle
One product combines all the capabilities of Swiss & Global
TAA
Fundamental
data
Fixed Income
Team
Technical &
Quantitative
MACS
FX & Com.
Team
Risk budgeting
External
Research
Portfolio allocation
13
Source: Swiss & Global Asset Management
Economics
Absolute
valuation
Specialists
Equity
Team
Valuation
Relative
valuation
Multi asset products address basic client needs
Inflation / Deflation: How do I position my wealth?
How can I participate in the mega trends of the next decade?
Where are we in the cycle?
Are Chinese stocks expensive?
How can I protect my capital?
Cash
Equities
Bonds
Real Estate
Commodities
Multi asset products
14
Julius Baer Asset Allocation Funds
by combining our products and other asset classes
Dynamic Asset Allocation Overlay
Absolut Return
Strategies
Directional
Strategies
Quantitative
Strategies
Thematic
Strategies
15
Swiss & Global Asset Management
Our fixed income product offering
Active core
Absolute Return
JB CF Swiss Franc
JB BF Swiss Franc
JB (CH) Helvetbär*
JB BF Absolute Return
Defender
JB CF Euro
JB CF £ Sterling
Europe JB BF Euro
JB BF Euro Government
JB BF Inflation Linked-EUR
JB BF Absolute Return
Plus
CH
JB BF Absolute Return
JB BF Absolute Return
Emerging
JB CF Dollar
JB BF Dollar
North
America JB BF Dollar Medium Term
JB BF Inflation Linked-USD
Global
JB BF Total Return
Swiss & Global Asset Management
Associated or external asset manager
16
Source: Swiss & Global Asset Management
* registered in Switzerland only
Satellites
Emerging
Markets
JB BF Emerging–EUR
JB BF Emerging–USD
JB BF Local Emerging
JB BF EM Inflation Linked
Higher
Yielding
JB BF Global High Yield
JB BF Credit Opportunities
JB BF ABS
Hybrid
JB BF Global Convert
Swiss & Global Asset Management
Our equities and alternatives offering
Active core
CH
JB EF Swiss
JB EF Swiss Small&Mid Cap
JB (CH) Swiss Sustainable*
JB EF Absolute Return
JB EF Euroland Value
JB EF Euro Large Cap
JB EF Europe Growth
Europe
JB EF Europe Leading
JB EF Europe Small&Mid Cap
JB EF Europe
JB EF German Value
USA
Asia
Global
Emerging Markets
JB EF Black Sea
JB EF Agriculture
JB EF Central Europe
JB EF Natural Resources
JB EF Chindonesia
JB Commodity
JB EF Global Emerging Mrkts.
JB (CH) Physical Gold*
JB (CH) Physical Silver*
JB EF Russia
JB (CH) Physical Platinum*
JB (CH) Physical Palladium*
JB EF US Leading
JB EF US Value
JB EF Asia
JB EF Japan
Energy
JB EF Energy Transition
Infrastructure
JB EF Infrastructure
Life Science
JB EF Global
JB EF Special Value
JB EF Global Selection
Source: Swiss & Global Asset Management
Commodities
JB EF Northern Africa
Other
Swiss & Global Asset Management
Associated or external asset manager
17
Satellites / Themes
* Registered in Switzerland only
JB EF Biotech
JB EF Health Opportunities
JB EF Luxury Brands
Important legal information
This document is destined exclusively for internal use by intermediaries appointed by Swiss & Global Asset Management and/or institutional or qualified investors and
shall not be passed on to third parties. Particularly, this document shall not be used as advertising material for public distribution or any other kind of public offering of
the Julius Baer Funds, their sub-funds or share categories. The responsibility for the further use of fund descriptions contained in this document lies solely with the
intermediary.
The information in this document constitutes neither an offer nor investment advice. It is given for information purposes only. No liability is assumed for the accuracy and
completeness of the information. Opinions and assessments contained in this document may change and reflect the point of view of Swiss & Global Asset Management in the
current economic environment.
Investments should only be made after a thorough reading of the current prospectus and/or the fund regulations, the current simplified prospectus, the articles of association, and
the current annual and semi-annual reports, as well as after consulting an independent finance and tax specialist. The mentioned documents can be obtained in hard copy and free
of charge by calling [+41 58 426 60 00] or from the addresses indicated below. Swiss & Global Asset Management is not a member of the Julius Baer Group.
The value of the units and the return they generate can go down as well as up. They both are affected by market volatility and by fluctuations in exchange rates. Swiss & Global
Asset Management does not assume any liability for possible losses. The performance of past values and returns is no indicator of their current or future development. The
performance of values and returns does not include the fees and costs which may be charged when buying, selling and/or switching units. The breakdown into sectors, countries
and currencies and their respective positions as well as possibly indicated benchmarks are subject to change at any time in line with the investment policy determined in the
prospectus.
The range of Julius Baer investment funds domiciled in Luxembourg is, as a general rule, registered for public offering in Luxembourg, in Switzerland, in Germany and in Austria.
However, due to the different registration proceedings in the various countries, no guarantee can be given that each fund, sub-fund or share category is or will be registered in every
jurisdiction and at the same time. For an up-to-date registration list, please refer to www.jbfundnet.com. Please also note the country-specific particularities indicated below. In any
jurisdiction where a fund, sub-fund or share category is not registered for public offering and/or public distribution, the sale of units is only possible in the course of private placement
or institutional investments, and in compliance with the applicable local regulation. Particularly, the Julius Baer Funds are not registered and, therefore, may not be offered for sale or
be sold in the United States of America and its dependencies.
Particularities regarding Switzerland: As far as EU-harmonised Julius Baer investment funds domiciled in Luxembourg described herein are admitted for public offering and
distribution in Switzerland: Representative in Switzerland is Swiss & Global Asset Management Ltd., Hohlstrasse 602, P.O. Box, CH-8010 Zurich; Paying Agent in Switzerland is
Bank Julius Baer & Co. Ltd., Bahnhofstrasse 36, Postfach, CH-8010 Zurich.
Particularities regarding Israel: No action has been or will be taken in Israel that would permit an offering of the products or a distribution of this marketing document to the public
in Israel. In particular, the marketing document has not been reviewed or approved by the Israeli Security Authority. Accordingly, this marketing document may be used to offer or
sell any products directly or indirectly only to investors of the type listed in the First Supplement to the Israeli Securities Law, 1968, and for that purpose only. This marketing
document may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Any offeree who purchases
the product is purchasing it according to its own understanding, for its own benefit and on its own account and with no aim or intention of distributing or offering it to other parties.
Any offeree who purchases the product has such knowledge, expertise, and experience in financial and business matters as to be capable of evaluating the risks and merits of an
investment in the product. Nothing in this marketing document should be considered Investment Advice or Investment Marketing, as defined in the Regulation of Investment Advice,
Investment Marketing and Portfolio Management Law, 1995.
Copyright © 2011 Swiss & Global Asset Management Ltd. - all rights reserved
18
"Wir setzen global auf Schweizer
Grundwerte"
"Living Swiss core values globally"
"Nous misons sur des valeurs
fondamentales suisses à l'échelle
mondiale"
"Valori svizzeri, sguardo globale"
The exclusive manager of Julius Baer Funds.
A member of the GAM group.