Standard Life Wealth
The Investment Specialists
Darren Ripton – Head of Investment Process
Confidential Restricted – Not to be disclosed beyond authorised roles within Standard Life group or authorised third parties
So what could go wrong over the next 2 years ?
Here are some of the “known unknowns!”
• Euro zone break up
• The Euro zone stays together!
• Disruption around the US Elections followed by deficit reduction plan
• Deleveraging process across the Developed World
• A Chinese hard landing / Issues around the Politburo Reshuffle
• Inflation vs Deflation
• Political Interference to increase
• Conflict in Iran / Oil Price Shock
• 59 Countries will have completed elections in 2012
• Elections in 2013 include Germany, Italy and Japan
The “unknown unknowns” are just depressing!
2
Long periods of volatility and no growth
Empirical observation:
1,000,000
US equity market total returns, inflation adjusted
Log scale, January 1871 to Aug 2010
Data source: Professor Robert Schiller, Yale University
over the long term,
equities (shares) have
provided investors with
high, real (inflation
adjusted) returns.
100,000
10,000
10
years
…
1,000
17
years
17
years
20
years
(The U.S. Equity market
is shown simply because
this is the longest data
set of equity market
returns available.)
100
1871
1881
1891
1901
1911
1921
1931
1941
1951
1961
1971
1981
1991
2001
Warning: Past performance is not a guide to future performance
3
Correlation between asset classes has increased
Source: HSBC, Bloomberg, 31 May 2012
4
Increasing Certainty
The benefit of our dynamic asset allocation approach
Clients need access to their wealth at specific points on the yellow line.
• Our approach is to stay as close as possible at all times
“
Your goals are our benchmarks,
not the market
5
Y ie
ld
US
Eq
uit
y
Cr
ed
Ko
it
re a
nE
qu
Ru
ity
ss
ian
Eq
Gl
Eu
uit
ob
y
ro p
al
ea
Inf
nE
lat
qu
io n
UK
it y
-Li
nk
In v
ed
Eu
e
stm
ro p
Bo
nd
en
ea
s
tG
nI
nv
ra d
es
eC
tm
r ed
en
tG
it
rad
eC
red
it
UK
Eq
uit
y
Gl
US
ob
Lo
al
ng
Lo
E
ng
US
qu
it y
Bo
Do
nd
Me
lla
Y ie
rv
xic
sE
lds
an
ur o
(F
Go
orw
Lo
ve
ng
r nm
ard
Br
en
Sta
az
tB
illia
rt)
on
nR
ds
Lo
ea
v
ng
s
lv
Eu
US
sC
ro
ze
Do
ch
l
l
a
Lo
rv
Ko
ng
sC
r un
US
an
a
ad
Do
ian
lla
rv
D
o ll
sJ
ar
ap
an
Lo
es
ng
eY
Eq
en
uit
yV
ola
Eu
tilit
ro p
y
ea
FX
nB
H
o
Br
n
e
d
d
o
US
gin
ad
Y ie
g
vs
Eq
ld
Fin
uit
Ste
yT
an
Fin
e
p
ec
c
e
a
ial
ne
nc
hn
Se
r
ial
olo
cto
Se
gy
rE
cto
Se
qu
rv
c to
it y
sB
rv
r oa
sU
dC
SE
r ed
qu
US
it y
it
Re
Eq
Sm
lat
uit
a ll
iv e
yL
C
arg
Va
ap
ria
ev
nc
sU
Ch
eI
ina
S
n
Eq
co
Eq
me
uit
uit
yS
yv
ma
sU
l
l
K
Ca
Eq
p
uit
yV
o la
tilit
Sto
y
ck
Se
lec
tio
n
Div
ers
ific
Ex
ati
pe
on
cte
dV
ola
tilit
y
Hig
h
Risk profile of multi-market return strategy
25%
Security selection
20%
Relative value
Directional
Source: Standard Life Investments UK GARS portfolio, 31 March 2012
Diversification benefits
Expected volatility
The portfolio is
exposed to multiple
diversified market
risks
15%
16.3%
10%
Market returns
5.7%
0%
22.0% is total
stand-alone
investment risk
chasing returns
5%
Equivalent equity
volatility is 18.8%
Independent risk
analysis shows the
benefits of
investment
diversification
6
Consistency should build into long-term Performance
It’s all about the compounding of those positive returns
Frequency of Monthly Returns August '08 to May '12
Our portfolios are designed to produce
more consistent returns
14
12
Cumulative returns #
SLW Portfolios
29.0% (after fees)
FTSE® All-Share (TR) 16.0% (no fees)
Volatility *
SLW Portfolios
FTSE® All-Share (TR)
5.6%
18.5%
8
6
4
2
12% to 13%
9% to 10%
6% to 7%
3% to 4%
0% to 1%
-3% to -2%
-6% to -5%
-9% to -8%
0
-12% to -11%
Track Record so far
low volatility of returns
on target to exceed return objectives over 3 years
10
-15% to -14%
SLW Portfolios’ Aims
Low volatility of returns
Target returns over 3 years
Number of Months
They are not built to produce very high one-month
returns, as equities can but they are built
to try to avoid the big losses that equities can
also suffer
Distribution of returns
SLW Model Portfolio
FTSE All-Share (TR)
Source: Standard Life Wealth
# 31/7/08 to 31/05/12
* Standard deviation of monthly returns, annualised
Past performance is not a guide to future performance
7
Strategy in practice
Comparison of Dynamic Asset Allocation Strategy
with the FTSE All Share and APCIMS Balanced
The data in the illustration shows the representative performance of a SLW medium risk portfolio targeting a Libor +3% return after fees and charges.
The index is the APCIMS Balanced Total Return Index and the data shown is for the same periods as the SLW data.
The APCIMS and FTSE® All Share index returns do not include fees. Past performance is not a guide to future performance.
Source: SLW, Bloomberg, BBH, TDW (31/07/2008 to 31/05/2012)
For investment professionals only
8
2012 year to date performance summary
Core Portfolio Performance YTD
110.00
109.00
108.00
107.00
106.00
104.00
103.00
102.00
101.00
100.00
99.00
APCIMS Balanced Return YTD
SLW YTD
FTSE All Share Return YTD
98.00
28/05/2012
21/05/2012
14/05/2012
07/05/2012
30/04/2012
23/04/2012
16/04/2012
09/04/2012
02/04/2012
26/03/2012
19/03/2012
12/03/2012
05/03/2012
27/02/2012
20/02/2012
13/02/2012
06/02/2012
30/01/2012
23/01/2012
16/01/2012
09/01/2012
97.00
02/01/2012
Cumulative
105.00
Date
The data in the illustration shows the representative performance of a SLW medium risk portfolio targeting a Libor +3% return after fees and charges.
The index is the APCIMS Balanced Total Return Index and the data shown is for the same periods as the SLW data.
The APCIMS and FTSE® All Share index returns do not include fees. Past performance is not a guide to future performance.
Source: SLW, Bloomberg, BBH, TDW (31/12/2011 to 31/05/2012)
For investment professionals only
9
Client Risks
For investment professionals only
Past performance is not a guide to future performance. The value of investments and any income from them may go
down as well as up and cannot be guaranteed.
The SIA Fund
The SIA Fund is designed to be used as part of a strategic approach to individual client wealth objectives and should not
be considered as a stand-alone investment.
The SIA Fund is only suitable for those investors who require a separate asset allocation fund to be used in
conjunction with their existing investments, primarily global equities, to achieve an overall objective of a total return.
The fund is designed to generate an absolute return when viewed with other assets in the client’s portfolio. As a result, if
other assets in the portfolio are performing well, this fund may not produce a positive return.
The use of derivatives in the fund may result in increased volatility in the fund’s price.
Due to the leveraged nature of derivatives, gains and losses can be greater than associated with traditional investment
instruments.
The fund will have the ability to hold short derivative positions. This means that the fund will not necessarily follow
market trends i.e. if stock markets rise the fund may not do so at the same rate, or at all.
*"FTSE" is a trademark of the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE
International Limited ("FTSE") under licence. Standard Life Wealth is licensed by FTSE to redistribute the FTSE All
Share and FTSE 100. All rights in and to the FTSE All Share and FTSE 100 vest in FTSE and/or its licensors. All
information is provided for reference only. Neither FTSE nor its licensors shall be responsible for any error or omission
in the FTSE All Share and FTSE 100.
10
Standard Life Wealth Limited (SC317950), Discretionary Investment Manager,
registered in Scotland at 1 George Street, Edinburgh EH2 2LL, and Standard
Life Savings Limited (SC180203), ISA Plan Manager, registered in Scotland at
Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH,
are both authorised and regulated by the Financial Services Authority.
Call 0845 279 8880 for Standard Life Wealth and 0845 279 2002
for Standard Life Savings. Calls may be recorded/monitored and call charges
may vary. www.standardlifewealth.com. © 2011 Standard Life
11