Investment in a complex world

Andy Ivory-Corr, QFA, Grad Dip, CFP®

Head of Investments

New Ireland Assurance

Listowel Arms Hotel, Co. KerryTuesday 6th December, 2016

Since March 2009, investment recovery has been strong!

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

Equity volatility 2012 to 2014 – what is that?!

Source: SSGA. Developed Market Equity returns

2016: Volatility is back!

What has made us money in 2016……….

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

7

2017 will witness a number of issues for markets to deal with!

OilPolicy

Policy distortions: QE = EPO for equities?!

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

A simple perspective on returns!

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.

Government Bond yields offer little upside!

12

Ireland: 10yr 0.83% Germany: 10yr 0.28% UK: 10yr 1.38%

Source: Bloomberg and Davy asset management 04/12/16

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

Germany: 10yr 0.05%

Germany: 10yr 1.05%

2015 demonstrated how volatile bonds can be!

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

2016……The end of the bond bull run?

What can we do to navigate this market in 2017?

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1. Be aware of your exposures to Bonds within your portfolio and be realistic about future returns.

2. Know why you might hold bonds -Annuity/diversification/return?

3. Remain well diversified.

“The only certainty about the future is the fact

that it will be different from the past”……Sir John Templeton

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

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

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

Managing the emotions of Investment!

Source: Carl Richards

9%

5%

17Warning: Past performance is not a reliable guide to future performance.

Investment Offers no Free Lunch: More Return = More Risk

Cash Deposits

Stocks &

Shares

Return

Ris

k

18Warning: 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

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

19Warning: 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

20

‘Volatility and risk are not the same thing’

Annual letter to Berkshire Hathaway shareholders - 2015

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

Property REIT v Direct – volatility and short term risk.

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

Investing……3 key considerations!

Risk Profile:How much risk can/will you take

to try to achieve it?

Timeframe: How long do you have to achieve

it?

Objectives: What do

you want to achieve?

Blank

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Primary objective – generate a real return

Irish Inflation (CPI) = -0.30% Source: Inflation.eu end Oct 16

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Can anyone guess the commonality of these Items?

Current interest rates offer limited growth opportunity!

2011

> 5%

2012

> 4%

2013

<2%

2015

<1%

2016

<0.5%

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

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

Generating returns probably requires some measured risk taking!

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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

Diversification of assets: a better long term solution!

Equity

Commodities Infrastructure

CashBonds

Real Estate

26Warning: 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

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

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

Where to from here for 2017?

Markets are more volatile (normalise?).

Deposit rates, lower for longer!

Bond markets remain expensive, little upside, plenty downside.

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

Greater diversification to achieve the same result!

Risk Management remains a priority and vital investment

ingredient.

Good advice will be key, ABM financial advisers will be there to

support you.

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