Navwealth Combined FINAL€¦ · As of 30 September 2015. SOURCE: PIMCO PIMCO at a glance. Your...

Disruption

Investment Review Project

Navwealth Investment Philosophy

1. Can’t accurately predict the future

2. Low turn over of investments (reduces cost and tax)

3. Tax considerations (imputation credits, Capital Gains tax)

4. Core Index allocation

5. Alpha only where value can be achieved

6. Defensive allocation and portfolio income to meet income requirements (i.e. not selling assets at the wrong time)

Navwealth Investment Philosophy

Most Trusted Adviser Award Renewal

Navwealth Website

Service Offering Flyers

Navwealth Gift Certificate

2300+

Employees around the world

13

Global offices throughout the Americas,

Europe and Asia

750+

Global investment professionals

250+

Portfolio Managers with an average of 14

years investment experience

150+

Investment professionals who have been

at PIMCO for more than 10 years

60+

Global Credit Analysts

14

Sector Specialty Desks

$1.47 trillion

Assets under management

To be the leading investment management firm in the world by consistently managing risk and delivering returns for our clients, across asset classes and risk exposures

“

”

As of 30 September 2015. SOURCE: PIMCO

PIMCO at a glance

Your Global Investment Authority

PIMCO Australia

Bonds and the Outlook for 2016

March 2016

For use by wholesale clients only (such as licensed financial advisers) and not for public distribution

pg 14Your Global Investment Authority


Agenda

1. Who is PIMCO?

2. Why bonds?

3. Economic Outlook: Converging Growth – Diverging Policy

4. PIMCO Diversified Fixed Interest Fund – Portfolio Positioning


Who is PIMCO?

intl_tab_12


PIMCO at a glance

New York (2001)

Toronto (2004) London

(1997)

Singapore (1996)

Hong Kong (2006)

Amsterdam (2001)

Newport Beach (1971)

Zurich (2009)Munich (2000) Tokyo

(1997)

Sydney (1997)

Milan (2012)

Rio de Janeiro (2012)

2300+Employees around the world

13Global offices throughout the

Americas, Europe and Asia

700+Global investment professionals

250+Portfolio Managers with an average of

14 years investment experience

150+Investment professionals who have

been at PIMCO for more than 10 years

55+Global Credit Analysts

14Sector Specialty Desks

$1.43 trillionAssets under management

To be the leading investment management firm in the world by consistently

managing risk and delivering returns for our clients, across asset classes and risk

exposures

“”

As of 31 December 2015. SOURCE: PIMCO

PIMCO_Update_01


Quiz - What do you know about bonds?

intl_tab_12


Q1. What is the value of Australian Government bonds issued in the past 12 months?

a. $86bn

b. $369bn

c. $119bn


Q2. Who is the largest corporate issuer in the Australian bond market?

a. Westpac

b. BHP

c. Apple


Q3. What is a Kangaroo bond?

a. A new line of Chesty Bond underwear

b. A foreign entity raising AUD denominated debt

c. An Australian corporate raising debt in foreign

markets


Why bonds?

intl_tab_12


What makes a bond a bond?

EQUITY HOLDERS

Corporation issues equity to shareholders

Corporation issues bonds to bondholders

CORPCORP

BOND HOLDERS

Equity holders receive

� Dividend payments

� Earnings growth

� Price appreciation or depreciation

Bond (IOU) holders receive

� Coupon and principal payments

� Fixed yield quoted on bond

� Price appreciation or depreciation

(from changes in yields)Hypothetical Example Only.


Why do you hold bonds?

Diversification

Income Generation

Liquid and transparent

Capital Appreciation

Capital Protection


Capital structure determines risk & return

Source: PIMCO, Bloomberg, CBA, As of: 31 December 2015

*As of 15 May 2015 Distributions are non-cumulative, paid

at the discretion of the CBA board and subject to payment tests.

Based on 90 Day Bank Bill rate of 2.16% and a quoted margin of 2.8%.

CBA PERLS VII Capital Notes:Approximately 4.48%*

“AA-”

Telstra, USD 2021 Bond:4.81%

“A”

US Treasury, USD 2021 Bond:3.56%“AA+”

“Big 4 bank” Equity:Dividend yield:

7.29% Grossed Up“AA-”

Lowest Risk

Highest Risk

pg 26Your Global Investment Authority ubs_review_16a

As of 31 Dec 2015SOURCE: PIMCO

Bonds – Diversity & liquidity

CBA Equity

$140bn

CBA Debt

• $122bn• 20 Currencies• Maturities out to 2047

15yr

30yr

10yr

3yr

1yr

1 stock

819 Issues

5yr

2yr


The size of financial markets:Why care about bonds?

Global Equity Market: A$83 Tr

Global Bond Market:

A$107 TrSource: Global Equities: Bloomberg Financial Markets, Index used for issues: MSCI World as of 31 Jan 2015Global Bonds: Bank of International Settlements, Index used for issuers: Barclays Capital Multiverse Index,as of 30 June 2014, PIMCO Estimates

Issues: 19,332

Index constituents: 1634


PIMCO’s Cash Rate Quiz

?


Economic outlook

intl_tab_12


The New Neutral® in a nutshell

Aging population, weak productivity growth, debt overhang and muted inflation

Slow growth (real and nominal)

Low interest rates


PIMCO’s cyclical outlook

PIMCO forecast as of 17 December 2015. BRIM is Brazil, Russia, India and Mexico. Real GDP and inflation projections reflect the midpoints of PIMCO’s forecasts for the four quarters ending Q4 2016Refer to Appendix for additional forecast, outlook and risk information.

Mk_4cs_intl_outlook_01

U.S.

2.25%

1.75%

GDP

Inflation

Despite lackluster demand from abroad, the economy should deliver above-trend

growth as wage gains take the baton from payroll increases as a

driver of consumption.

BRIM

6.00%

1.75% GDP

Inflation

Increasingly divergent economic conditions

and idiosyncratic factors suggest a cautious

outlook for emerging markets.

EUROZONE

1.50%

1.00%

GDP

Inflation

Better credit conditions and weaker euro should

continue to support growth momentum,

though low inflation may warrant more ECB action.

U.K.

2.25%

1.50%

GDP

Inflation

Domestic demand remains key to growth, though uncertainty around the

“Brexit” referendum looms.

CHINA

GDP6.00%

2.00% Inflation

Modified currency regime should signal more market-

based yuan depreciation as a complement to continuing

stimulus on the monetary and fiscal side. PJA AN

1.00%

0.75%

GDP

Inflation

New arrows of Abenomics II focused on redistribution over reflation as monetary

support may face technical limits.GDP

Inflation

2.30%

2.20%

Sluggish rebalance away from mining-linked

sectors and few signs of increased capex despite

easy monetary conditions suggest a cautious growth

outlook.

AUSTRALIA


1224

363739

455858

7378

92106

120

0 20 40 60 80 100 120 140

July 1980

November 1970

May 1954

March 1975

November 2001

November 1982

March 1991

Duration of U.S. expansions since 1945 (months, trough to peak)

Star

tin

g m

on

thU.S.: Resilient economy should continue to grow

As of 31 December 2015

SOURCE: NBER, Bloomberg, PIMCO

Old, but not dead yet

4cs_intl_outlook_03

The current expansion may be old by historical standards, but it is likely to continue as long as the usual suspects remain absent

The Usual Suspects

NO Policy over-kill

NO Oil shock

NO Overheating

NO Overinvestment

NO Overconsumption


Eurozone: ECB spurring positive growth momentum


SOURCE: Haver, Bloomberg, PIMCO

Finally catching up

4cs_intl_outlook_05

ECB QE has led to a weaker euro and improved credit conditions, though inflation undershoots may warrant more action

-8

-6

-4

-2

0

2

4

6

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Rea

l GD

P g

row

th (

%)

Eurozone U.S. U.K.


Japan: Policy focus shifting to redistribution

� The “new” arrows of fiscal policy are intended to stimulate consumption and

income growth


SOURCE: Bloomberg, PIMCO

Reloading the quiver

4cs_intl_outlook_06

As limits of monetary policy become apparent, Abenomics is adapting to structural constraints

� Fiscal stimulus

� Monetary easing

� Structural reforms

� Cash transfers to elderly and poor

� Increase in minimum wage

� Expanded child/elder care

Abenomics II (redistribution)

ABENOMICS I (reflation)


China cooling – who will feel the cold?

Eurozone3% of total exports

Japan18% of total exports

Korea26% of total exports

Brazil20% of total exports

Chile25% of total exports

Peru19% of total exports

Australia33% of total exports

China

USA8% of total exports

As of 31 August 2015

SOURCE: China National Bureau of Statistics, CEIC, Bloomberg

Not drawn to scale. Arrow width is proportional to represent % of GDP exported to China

3cs_EM_outlook_05 pg 35


Turning 100: Can Australia manage one more miracle?

While Australia looks set to reach100, another year of sluggish economic rebalance will mean the RBA is more likely than not to provide additional policy support

0 20 40 60 80 100

1980

1958

1971

1954

1949

1975

2001

2009

1983

1961

1991

Australia 1991 - Current

Number of Quarters

Duration of Expansions

United States

As of 31 December 2015SOURCE: Haver


Europe & China easing

US Recovery

Fed lift-off

Property boom

Big-4 rate rises

Resilient AUD

RBA – a slow rebalance

pg 38Your Global Investment Authority 4cs_intl_outlook_02

Cash “safety” is costly – sacrifices return while barely reducing risk

As of 31 December 2015SOURCE: Bloomberg, PIMCO.The 60-40 portfolio reflects a 60% allocation to stocks and 40% to bonds. The 60+Cash portfolio represents the same 60% allocation to equities with 40% to cash. All portfolios are re-balanced quarterly. Stocks are represented by the S&P ASX200 Accumulation Index, bonds by the Barclays Global Aggregate Index (AUD Hedged), and cash by the Bloomberg AusBond Bank Bills Index.

50,000

100,000

150,000

200,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

60-40 Portfolio 60+Cash Portfolio

6.7% per

annum

5.5% per

annum

Bonds

(Global Agg

H)

Stocks

(S&P/ASX20

0)Cash (AU

Bank Bills)

60-40

Portfolio

60+Cash

Portfolio

3%

6%

9%

0% 5% 10% 15% 20%

Moving to cash: Lower return for similar riskR

etu

rn

Risk (volatility)

Gro

wth

of

$100,0

00 o

ver

10 y

ear

s


-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2016 2017 2018 2019 2020

Global Fixed Interest - Interest Rate Shock Scenarios

+25 bps

+50 bps

+100 bps

As of 31 December 2015. SOURCE: PIMCOHypothetical example for illustrative purposes only. Other factors besides current interest rates will impact returns. No representation is made that a particular return may be achieved by a particular strategy. Scenarios are defined as immediate shocks in the first year and constant rates going forward.

Amidst short-term rising rates, long-term returns benefit

As rates rise, the higher level of yields boosts returns in later years

A rising rates event

may cause a short-

term return impact,

though yield provides

a buffer.


How does PIMCO invest in bonds?

intl_tab_12


PIMCO Diversified Fixed Interest Fund:Performance

PIMCO Diversified Fixed Interest

Fund Size $1,645,049,617

Inception Date 31 May 99

Investment Overview

Benchmark50% Barclays Capital Global Aggregate Index hedged into AUD / 50% Bloomberg AusBond Composite 0+ Yr Index

StrategyTo provide a diversified exposure to global and Australian fixed interest securities and to seek to preserve capital through prudent investment management.

ObjectiveTo achieve maximum total return and to seek to preserve capital through prudent investment management.

Performance 1 Mo 3 Mo 6 Mo CYTD FYTD 1 Yr 2 Yr 3 Yr 5 Yr 10 Yr SI*

PIMCO DFI (%) 1.01 0.77 1.61 1.01 3.01 1.59 6.39 5.03 7.08 7.23 7.19

Benchmark (%) 1.44 1.22 2.40 1.44 3.70 2.51 6.50 5.60 7.10 6.91 6.94

Alpha (bps) - 43 - 45 - 79 - 43 - 69 - 92 - 11 - 57 - 2 + 32 + 25

As of Jan 31, 2016

Inception Date: May 31, 1999

Performance is Net of fee. Returns of one year or more are annualised .

Current Benchmark is 50% Barclays Capital Global Aggregate Index hedged into AUD / 50% Bloomberg AusBond Composite 0+ Yr Index.

Past performance is not a reliable indicator of future results. *SI Means Since Inception


PIMCO Diversified Fixed Interest Fund: Sector breakdown

Government: 57%Examples:• Government bonds, e.g.

Australian Government Bonds, European Gov’t bonds.

State Govt/Agency: 15%Examples:• Local Government & Agencies,

e.g. Province of Quebec

IG Corporates: 17%Examples:• Top tier Global Banks, e.g.

Barclays Bank, Lloyds, Citigroup

Emerging Markets/Other: 3%Examples:• EM’s with healthy balance sheets,

e.g. Mexico, Brazil• Top tier EM Corporates/Quazi

Sovereigns, e.g. State Bank of India, Korea Development Bank

High Yield: 2%Refers to high yielding bonds with sub investment grade ratings.

DWE%

Securitised: 6%Examples:• Mortgage Securities,

e.g. U.S. non-agency MBS

As of 31 January 2015

pg 43Your Global Investment Authority ubs_review_16a

Key Take outs for 2016…

1. STAY INVESTED - active management can support capital preservation and income objectives

2. Rising rates BENEFIT long-term investors

3. You can’t market-time DIVERSIFICATION


Appendix

OUTLOOKStatements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

RISK Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. All investments contain risk and may lose value. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.

Capital_Securities_Appendix


Disclaimer

The material in this presentation has been prepared by PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862 (PIMCO Australia) and is intended to provide general information only. This presentation is not a recommendation to hold, purchase or sell a particular financial product and may not include all the information an investor needs to make an investment decision. The information contained herein does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision investors should consider whether the information contained herein is appropriate in light of their particular investment needs, objectives and financial circumstances and any relevant offer document. Investors should obtain relevant and specific professional advice before making any investment decision.

Investment management products and services offered by PIMCO Australia are offered only to persons within its respective jurisdiction, and are not available to persons where provision of such products or services is unauthorised.

Equity Trustees Limited ("EQT") (ABN 46 004 031 298, AFSL 240975) is the Responsible Entity of the PIMCO Diversified Fixed Interest Fund (ARSN 093 519 558). PIMCO Australia is the investment manager and distributor of the Fund. This publication may not include all the information an investor needs to make an investment decision. Before making an investment decision, investors should consider whether the information herein is appropriate in light of their particular investment needs, objectives and financial circumstances and any relevant offer document. Investors should obtain relevant and specific professional advice before making any investment decision. A current PDS can be obtained from pimco.com.au Neither PIMCO Australia nor any of its related bodies corporate make any representations or warranties, express or implied, as to the accuracy or completeness of any of the information contained in this presentation. To the maximum extent permitted by law, neither PIMCO Australia nor its directors, employees, agents, representatives or advisers accepts any liability whatsoever for any loss arising from the use of information in this presentation.

Past performance is not a reliable indicator of future results. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Except to the extent implied by law, no representation or warranty as to the validity, certainty or completeness of any of the assumptions or the accuracy of the information, opinions, estimates or forecasts contained in this presentation is made by PIMCO Australia. This presentation contains the opinion of PIMCO Australia as at the date of the presentation and such opinions are subject to change without notice.

The content of this presentation remains the property of PIMCO Australia. No part of this presentation may be reproduced in any form, or referred to in any other publication, or conveyed to a third party without express written permission of PIMCO Australia. PIMCO is a trademark or registered trademark of Allianz Asset Management of America L.P. in the United States and throughout the world.

THE NEW NEUTRAL and YOUR GLOBAL INVESTMENT AUTHORITY are trademarks or registered trademarks of Pacific Investment Management Company LLC in the United States and throughout the world. © PIMCO, 2016.

© 2015 Morningstar, Inc. All rights reserved. Award to PIMCO for Australian Fixed Interest Fund Manager of the Year 2015. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement (Australian products) or Investment Statement (New Zealand products) before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO").

Navwealth Combined FINAL€¦ · As of 30 September 2015. SOURCE: PIMCO PIMCO at a glance. Your...

Documents

Transcript of Navwealth Combined FINAL€¦ · As of 30 September 2015. SOURCE: PIMCO PIMCO at a glance. Your...