Andy Ivory-Corr - Brexit - Waterford - 17th May 2016

EDUCATING

SUPPORTING

REPRESENTING

www.charteredaccountants.ie

“Investment in a

complex world!”

April 2016

Andy Ivory-Corr, QFA, Grad Dip, CFP®

Head of Investments

New Ireland Assurance

Since March 2009, long term recovery has been strong!

2

09/03/09 to 10/05/16Warning: Past performance is not a reliable guide to future performance.

+15%

-4%

2015 saw a return to volatility with Q1 providing all returns!

Global Equity Markets

+11%Q1

Q2 – Q4

Warning: Past performance is not a reliable guide to future performance.

Some risks were not as obvious as others!

Currency

To Hedge or not to Hedge…that is the question!

Scenario 1: Weak Euro

$ Company Share Price + 10%

$ vs € + 10%

€ Return with Currency Hedging

Scenario 2: Strong Euro

$ Company Share Price + 10%

$ vs € - 10%

€ Return without Currency Hedging

We believe that currency adds additional risk to equity market

investing which is not rewarded with additional returns over

the long termSource: SSGA

+10% +10%

+20% 0%

Warning: This information does not constitute investment advice or a recommendation. It has been provided for

discussion purposes only. You should seek professional investment advice with your financial advisor

A difficult start to 2016, but we’ve been here before!

Source: Citi Research, Datastream

(YoY Perf means year-over-year performance, which is a way of measuring results from one time period to another on an annualisedbasis.)


What’s affecting markets?

Oil China Policy

£Exit

Brexit?

Policy distortions: QE = EPO for equities!


Lowest rates in UK in over 300yrs of history!

Warning: This information does not constitute investment advice or a recommendation. It has been provided for discussion purposes only. You should

seek professional investment advice with your financial advisor

Leading to the great Migration – in search of yield!

Investors have been encouraged to go on a hunt for yield …Source: Shutterstock, February 2015.

0

1

2

3

4

5

6

0

1

2

3

4

5

6

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Euro-Treasury Euro-Treasury (AAA)

Source: Barclays, SSGA, as of 31 December 2015. Past performance is not a guarantee of future results.

Source: Davy 16/05/2016

Bond yields as low as they’ve been in a generation!

Proportion of total return from yield

declines

Ireland: 10yr 0.81% Germany: 10yr 0.12% US: 10yr 1.72%

With 2015 demonstrating the extent of duration risk facing investors!

Volatility Gilt Fund 9.0%Volatility ARB 1.4%Source: Moneymate Dec 15

Germany: 10yr 0.05%

Germany: 10yr 1.05%


Short term noise, shouldn’t impact long term objectives!

“The Stock Market is a device for transferring money from the impatient to the patient”

- Warren Buffett



Managing the emotions of Investment!

Source: Carl Richards

9%

5%

15


The power of stable returns…..

Year 1 Year 2 Year 3 Total return

A +20% +20% -10% +29.6%

B +35% -10% +5% +27.6%

C +10% +10% +10% +33.1%

Source: Newton

A +20% +20% -10% +29.6%

B +35% -10% +5% +27.6%

C +10% +10% +10% +33.1%

“I have two basic rules to investment, Rule no1: Never lose money.

Rule no 2: Never forget rule no 1”!! …… Warren Buffett

Warning: Past performance is not a reliable guide to future performance. 16

Investment Offers no Free Lunch: More Return = More Risk

Cash

Deposits

Stocks &

Shares

Return

Ris

k

17



Risk profiling will help but we can’t define risk as a single number!

18



19

‘Volatility and risk are not the same thing’Annual letter to Berkshire Hathaway shareholders - 2015



Property REIT v Direct – volatility and short term risk!

REIT

26.9%

DIRECT

3.6%



IREPRS-0516

Risk Profile:How much risk can/will you take to achieve it?

Timeframe: How long do you have to achieve it?

Objectives: What do you want to

achieve?

3 key considerations for every investor!



http://www.google.ie/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=S8tB_k8KLGpoVM&tbnid=sDFInAsIer6IGM:&ved=0CAUQjRw&url=http://www.sapbwconsulting.com/blog/SAP-BW-Consulting/?Tag%3DRisk%2BManagement&ei=-EUvUteMHMPC0QWe0oHoAQ&bvm=bv.51773540,d.bGE&psig=AFQjCNEo7KsyUFxP_hyPmxZTvWNp03hi5A&ust=1378916091460716

Primary objective – generate a real return

The information contained above is for illustrative purposes only.

Can anyone guess the commonality of these three?

Irish Inflation (CPI) = 0.10% Source: Inflation.eu Dec 15.

22



Inflation in a different format?!



Current interest rates don’t offer us much opportunity for growth!

2011

> 5%

2012

> 4%

2013

<2%

2014

<1%

2015

<0.5%


Generating returns probably requires some measured risk taking!

25



Diversification of assets: a better long term solution!

Equity

Commodities Infrastructure

CashBonds

Real Estate

26



Alternative Components can vary but typically will include the following options

Alternatives

Cash

BondsEquities

Property

Commodities/Gold

Infrastructure

Emerging Mkt Debt

Hedge Funds

Private Equity



Where to from here?

Markets are likely to become more volatile (normalise?).

Deposit rates, lower for longer!

Duration and illiquidity remain a real risk in Bond markets.

Generating returns, likely to require taking some level of risk.

Objectives need to be realistic and achievable.

Equities looking mildly expensive.

Risk Management should be a priority depending on time scale!

2016 know what you own, know why you own it!



Andy Ivory-Corr - Brexit - Waterford - 17th May 2016

Business

Transcript of Andy Ivory-Corr - Brexit - Waterford - 17th May 2016