Goodbody AM Investment: Market Outlook & Current Positioning

Classified as Public (Green)

Goodbody AM Investment:

Market Outlook & Current

Positioning

Andy Ivory-Corr – New Ireland

Paul O’Brien - Goodbody AM

4 November 2021


Goodbody Asset Management

Campion

For Financial Advisors Only

GDI Multi Asset Funds Update

Paul O’Brien, CFA Head of Investments

November 2021

Classified as Public (Green)3

Performance – Strong Track Record

Warning: Past performance should not be taken as an indication or guarantee of future performance

Source: Bloomberg, New Ireland Fund Centre. *Since Inception, 3rd March 2016. Fund performance is gross of AMC.

As at 29/10/21 YTD % 1YR % 3YR% 5YR%Since

Inception %

Goodbody Dividend Income 3 +9.2 +10.8 +8.4 +6.4 +36.9



Goodbody Global Leaders +35.5 +46.1 +29.6 +23.3 +198.8

MSCI World Index +26.3 +41.4 +17.4 +14.2 +108.0

Goodbody Smaller Companies +36.0 +50.7 +27.1 +21.2 +185.4

MSCI World SMID Index +24.6 +44.6 +16.3 +13.3 +102.6


GDI 3&4 Performance vs. Peers


Source: Longboat analytics. Fund performance is gross of AMC.

Fund Peer Group YTD 1 Year 3 Years 5 Years

GDI 3 ESMA 3 - Multi Asset 1st 3rd 1st 1st

GDI 4 ESMA 4 - Multi Asset 1st 7th 1st 1st


2021 - The Story So Far


Source: Bloomberg. As at 29/10/21. Property = NIAC Property Fund. Cash = 3month Euribor. Commodities = Bloomberg Commodity Index (LC).


Global Equities – Some Context


Source: Bloomberg. As at 29/10/21. 5YR CAGR 14.2%, 10 YR CAGR 14.3%, 20 YR CAGR 7.0%


Key Questions Remain


Inflation – The Major Focus


Source: Bloomberg.


The Trillion $ Question – Transitory, Or Not?

“The economy is beginning to move ahead with real

momentum. During this time of reopening, we are likely

to see some upward pressure on prices…

But those pressures are likely to be temporary as they are

associated with the reopening process.

An episode of one-time price increases, as the economy

reopens, is not the same thing as, and is not likely to

lead to persistently higher year-over-year inflation into

the future.”

US Fed Chairman Jerome Powell

April 2021


Big Shift in Interest Rate Expectations


Source: Bloomberg, WIRP.

Jun-21 1.0

Sep-21 1.0

Nov-21 2.4

FED - Interest Rate Policy

# Hikes Implied By Sept 2022


…Less Transitory Than Expected

“It is becoming increasingly clear that the feature of this episode that has

animated price pressures - mainly the intense and widespread supply chain

disruptions - will not be brief.

Data from multiple sources point to these lasting longer than most initially

thought.

By this definition, then, the forces are not transitory”

Raphael Bostic, Federal Reserve Bank of Atlanta, October 12, 2021


Lead times at record highs

Source: Bloomberg. A reading below 50 indicates faster deliveries, while a reading above 50 indicates slower deliveries. Reflects suppliers’ difficulties in meeting demand due to (1)

ongoing hiring challenges, (2) extended raw materials lead times, (3) input material shortages, (4) stubbornly high prices, and (5) inconsistent transportation availability.


“Lead times have worsened ..to now sit at 80

days, roughly two times normal".

NIKE, Results Call, Sept 21


The Yield Curve in Focus (again)


Source: Bloomberg

10 Year Yield 2 Year Yield Yield Curve/Spread

Dec-20 0.91% 0.12% 0.79%

Mar-21 1.74% 0.16% 1.58%

Jun-21 1.47% 0.25% 1.22%

Sep-21 1.49% 0.28% 1.21%

Oct-21 1.55% 0.50% 1.06%

October vs. March -0.19% 0.33% -0.52%

US Bond Market


The Challenge: Cost Push vs. Demand Pull

“In considering how to use monetary policy, it is also important to

understand the nature of the shocks that are causing higher inflation.

The shocks that we are seeing are restricting supply in the economy

relative to the recovery of demand.

This is important because monetary policy will not increase the supply of

semi-conductor chips, it will not increase the amount of wind (no, really),

and nor will it produce more HGV drivers.

Moreover, tightening monetary policy could make things worse in this

situation by putting more downward pressure on a weakening recovery

of the economy”

Andrew BaileyGovernor BOE

September 27, 2021


Markets Already Pricing Tightening


Source: Bloomberg


So What Happens Next?

Growth rates will start to decelerate but should remain strong in absolute terms.

Expect c.4.5% global GDP growth in 2022 and approx. 7% earnings growth y/y.

Uncertainty around the trajectory of inflation is the key wildcard.

The speed and magnitude of interest rate hikes is now being re-assessed.

Bond yields are likely to grind higher – a headwind for fixed income investors.

Equity valuations have de-rated YTD, the asset class can advance further but

earnings need to be supportive.

Be Selective – Quality/Growth Equities well placed.


Earnings as Ever Are Key

MSCI World Index (F) 2022 EPS Growth Y/Y

Energy 18.3Materials -5.9Industrials 16.0Cons. Discretionary 22.8Cons. Staples 8.1Healthcare 7.2Financials -1.4Technology 10.5Communications 9.4Utilities 8.9Real Estate 4.5

World Equity Market 7.9


Source: JP Morgan, 18th October 2021


Goodbody Dividend Income Suite


Goodbody Dividend Income – 3 Funds

GDI 6 GDI 4 GDI 3

Dividend Equities Other Assets

100%

Benchmark MSCI World Index NA NA

Risk Rating 6 4 3

70% +/-

15%40% +/-

15%Risk

ManagedRisk

Managed

Equity Multi Asset Multi Asset


Goodbody Dividend Income – Multi Asset

Growth Engine

~40 Global Dividend

Paying Companies

Stabiliser/ Diversifier Assets

Government Bonds

Corporate Bonds

Cash

REITS

Gold


What Are We Doing – Positioning For

1. Inflation – we have increased equities

2. Rising Bond Yields – reduced government bond exposure

3. Volatility – we have extended and increased index put options


GDI Multi Asset Funds - Mix Trends

Source: Goodbody Asset Management, Bloomberg. CACEIS.



GDI 3&4 - Key Mix Changes YTD

Global Dividend Equity Exposure

Corporate Bond Exposure

Downside Protection Levels via Index Put Options

Cash

Government Bonds

Gold


GDI 3/4 – Three Lines of Defence

1. Actively Managed, Quality Equities – likely to outperform the equity market

during a period of heightened volatility or during a significant drawdown.

2. Stabiliser Assets – traditional diversifiers including IG Government/ Corporate

bonds, cash and Gold - used to preserve capital and smooth the journey.

3. Downside Protection – index put options (exchanged traded) that offer

‘insurance’ against a significant equity market drawdown.


Why GDI? An Ideal Solution?

Additional Downside Protection

Active Management

Quality/ Transparent Assets that Deliver

26Classified as Public (Green)

• Our unique Death Benefit applies to the

following single premium policies:

• Single Premium Pension Plans

• Personal Retirement Bonds (PRBs)

• Approved Retirement Funds (ARFs) and

Approved Minimum Retirement Funds (AMRFs)

• Smart Funds

Our Unique Death Benefit


• Our unique Death Benefit applies to the following single

premium policies:



• Approved Retirement Funds (ARFs) and Approved Minimum

Retirement Funds (AMRFs)

• Smart Funds


New Ireland Assurance Company plc.

5-9 South Frederick Street, Dublin 2.

T: 01 617 2000 F: 01 617 2075

E: [email protected] W: newireland.ie

New Ireland Assurance Company plc is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group.



Appendix


Why Goodbody Asset Management?

Transparency

SolutionsTeam

Performance

Goodbody AM


2021 – A Record Setting Year


5 Year Asset Return Thoughts

Cash

Government Bonds

Corporate Bonds

Property (selective)

Gold

Global Equities

Quality/Growth Companies (Active Management)



Strong Economic Rebound

Source: Bloomberg



Dramatic CB Liquidity Provision


2019 2020 2021 2022

FED 4.1 7.3 8.8 9.7

ECB 5.2 8.5 9.8 10.7

BOE 0.8 1.3 1.5 1.5

BOJ 5.3 6.8 7.0 7.2

Central Bank Balance Sheets ($ Trillions)

Source: JP Morgan Global Strategy


Earnings - Much Better Than Expected

Source: JP Morgan Global Strategy, Nov 21.



Global Equities – Valuation De-rating


Source: JP Morgan Global Strategy, Nov 2021.

Jan-21 Current Change YTD

World 21.0 19.4 -1.6

US 23.4 21.2 -2.2

Eurozone 17.7 15.8 -1.9

UK 14.1 12.3 -1.8

Japan 18.2 15.1 -3.1

YTD Change in (F) 12m FWD P/E Ratios


The Yield Curve in Focus (again)

“Of all the fashionable alarm bells that market-

watchers keep an eye on, the yield curve is the

most timeless. It is Coco Chanel’s proverbial “little

black dress” of economic indicators”

Financials Times, June 20th 2018


The Challenge

Not all inflation is the same


Peer Group Comparison Fund Listings

**ESMA 3 Funds: New Ireland Prime 3, New Ireland iFunds 3, Zurich Prisma 2, Aviva MAF Cautious, Aviva L&G Multi Index III, Friends First Magnet Cautious, Friends First Compass Cautious, Irish Life MAPS 2, Standard Life MyFolio Active I, Standard Life MyFolio Market I, New Ireland iFunds Alpha 3.

**ESMA 4 Funds: New Ireland Prime 4, New Ireland iFunds 4, Zurich Prisma 4, Aviva MAF Strategic, Aviva Merrion Multi Asset 50, Aviva L&G Multi Index IV, Friends First Magnet Stable, Friends First Compass Stable, Irish Life MAPS 3, Standard Life MyFolio Active III, Standard Life MyFolio Market III, Aviva Merrion Multi Asset 30, Zurich Prisma 3, New Ireland iFunds Alpha 4.


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Goodbody AM Investment: Market Outlook & Current Positioning

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