Clarus' presentation on "Inside the Strategies" at the PensionSource Fund Manager Conference 2012

1. Clarus Investment Solutions
Inside the Strategies
November 28, 2012
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2. What Are the Strategies?
Four Risk-Graduated portfolios
Drawn from shelf
Monitored
Rebalanced
Adjusted
Framed for use as Core DC choices
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3. Who Are We?
Paul McCarville
 Chartered Accountant, QFA
 4 years in corporate lending – Ulster Bank – 1983-1987
 21 years at senior level in asset management
 Director / Head of Client Services & Marketing, Setanta, 1998 – 2007
 Director, Verus Advisory Limited, 2011 -
Joe Mottley
 B.E, M.Sc. (Public Sector Analysis), Associate Member of IIMR, QFA
 22 years at senior level in asset management
 Director / Chief Investment Officer, Setanta, 1998 – 2007
 Director, Diversification Strategy Fund, 2007 –
 Strategic Investment Advisor, Covestone Asset Management, 2010 – 2012
 Director, Verus Advisory Limited, 2011 -
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4. What Do We Do ?
DESIGN
Strategic asset allocation
Suggest providers
RISK MODELLING
Metrics
Comparisons MARKETING
SUPPORT
Strategy
Portfolios
MONITORING TACTICAL
Portfolio performance Rebalancing
Component performance Asset allocation switches
Analyse deviations
Watch providers REVIEW
Strategic asset allocation
New/better/cheaper providers
Asset class relationships
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5. Core Investment Principles
Passive (where viable)
Costs Matter !
Rebalancing
Diversification
 Bonds
Government/Long-Dated/Index-Linked/Corporate
 Equities
Global/High-Yield/Concentrated/Emerging Market
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6. Choice & DC Pension Funds – the Clarus view
Choice
 Quality of choice much more important than quantity
 In terms of number, the ’sweet spot’ is probably 4 to 6
 Default crucial
 Managed/Consensus too volatile
 massive Drawdowns (31% - 2001/02 and 46% -
2008/9)*
 Ideal will have lower volatility but modest loss of return
 Rebalancing a key element
*ILAC Consensus
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7. More on Diversification
Research ( e.g. NEST ) shows that DC members generally:
 deal very poorly with losses, especially if recur
 tend towards sub-optimal behaviour
 are willing to forsake some return for moderation of risk
Finally being understood by providers !!
“Diversified Growth” funds taking over in UK
SSgA change to its Managed Fund
New Ireland change to IRIS
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8. Pension Source Strategy Portfolios
100%
Prop Comm Abs Return
90%
80%
70%
ABS RETURN
COMMODITIES
60%
PROPERTY
EQUITIES - Concentrated
50% EQUITIES - EM
EQUITIES - Small Cap
EQUITIES - Global
Equitiies
40%
EQUITIES - High Yield
BONDS - Corp
30% BONDS - Infl Linked
BONDS - Long Govt
BONDS - Govt
20% CASH
Bonds
10%
0%
Cautious Balanced Diversified Active ILAC Consensus
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9. Current Strategy Portfolios : Risk Metrics
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10. Performance and Volatility - Strategies
Period 30/6/09 to 30/9/12
Strategy Performance Volatility
(%) (%)
Cautious 25 5.9
Balanced 33 6.5
Balanced Plus 34 5.9
Active 37 8.2
ILAC Consensus 41 9.3
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11. Performance and Volatility - Strategies
Period 30/9/07 to 30/9/12
Strategy Performance Volatility
(%) (%)
Cautious 14 6.9
Balanced 9 8.6
Balanced Plus 14 7.8
Active -1 11.8
ILAC Consensus -8 12.3
Strategy portfolios at Jun-09 simulated back to Sep-07, with cash position reset from
10% to 3%. Actual portfolios from Jun-09 to Sep-12.
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12. Strategies: Further Risk Metrics
25.0%
50%
% of Months Down > 2%
Maximum Drawdown
45%
46% 20.0% 23%
40% 20%
35% 38%
15.0%
30%
25% 27%
20%
23% 10.0% 12% 11%
15%
9%
17% 5.0%
10%
5%
0% 0.0%
Cautious Balanced Balanced Active ILAC Consensus Cautious Balanced Balanced Active ILAC Consensus
Plus Plus
Simulation period Jun-06 – Sep-12. Strategy portfolios at Jun-09 simulated back to Jun-06, with cash position
reset from 10% to 3%. Actual portfolios from Jun-09 to Sep-12.
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13. Risk/Reward Profiles - Strategies
16.0%
Pension Source Strategies
Return vs. Risk
14.0% (month-end prices, Jun-09 - Sep-12)
New Irl Pacific Basin
simulated data
Setanta Equity Dividend
12.0%
Zurich 5*5
ILAC Consensus
SL GARS PensionSource Active
10.0%
PensionSource Diversified New Irl Evergreen
PensionSource Balanced Plus
PensionSource Balanced
8.0%
Annual
Return ILAC Consensus Cautious
PensionSource Cautious
6.0%
ILAC Indexed €Zone Bonds
4.0%
2.0%
Volatility
0.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
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14. Costs
Strategy Weighted AMC
Cautious 0.26% - 0.30%
Balanced 0.30% - 0.34%
Diversified 0.30%- 0.34%
Active 0.34% - 0.38%
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15. Conclusions
 Questions of choice and Default crucial
 The Strategies from are viable alternatives
 Platform offers real choice at very keen pricing
 Build your own range of choice/Default
tailor-make for clients
 Monitoring /re-balancing/reporting on Strategies by
based on a service provided by Clarus
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16. Regulatory Notice
• Clarus Investment Solutions is authorised by the
Central Bank of Ireland under the Investment
Intermediaries Act, 1995
• The value of your investment may go down as
well as up
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17. THANK YOU
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