AEGON Asset Management

Beating the BetaMarch 2011

David Pringle

Investment Manager

AEGON UK Equity Absolute Return Fund

2

Investing in AEGON UK Equity Absolute Return

o Aims to deliver a return significantly above Bank of England base rate with similar volatility to government bonds

o A disciplined, repeatable process

• Delivers on buy and sell decisions

• Generates returns from a multi-cap approach

• Volatility of less than 8% annualised

• Uncorrelated returns

Delivering strong risk adjusted returns

-10

-5

0

5

10

15

20

25

-18m -12m -6m -3m -1m 1m 3m 6m 12m 18m

Average relative return of sells

Capturing alpha from sell ideaso Third party verification of our

sell decision expertise

o Sell decisions on average

underperform the market

o Long only funds cannot fully

harvest this skill

o Extensive test period to prove

capability

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Source: Inalytics. Fund: AEGON UK Equity OEIC from April 2004 to December 2010

Adding alpha from sell decisions

SELL

Volatile markets…

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…becoming the norm?Low correlation in uncertain times

Q. In a model portfolio, how much would you allocate to Absolute Returns?

A. 0% - unconvinced

B. < 15%

C. > 15%

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The alpha squeeze

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Source: Bloomberg

CBOE Implied Correlation Index

Collapse of Lehman Brothers

Uncovering alpha

The case of the disappearing hedge

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Source: Bloomberg

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar65

70

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100

105

WTI Crude Oil (ICE $/bbl

Fund manager = Risk manager

Fund structure

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Themes

Pair trades

Best ideas

oSeveral names to diversify individual stock

risk

oLong, short and long-short

oBottom-up uncorrelated stock ideas

oLong and short

oGradual outperformers

oCatalyst-driven

Diversification at various levels

Risk management

o Batting for singles

• Correlation = 6.5%

• Realised volatility = 2.1%

• Information Ratio = 1.2

• Sortino Ratio = 2.1

• Average VaR = -2%

9Delivering uncorrelated returns

Source: AEGON Asset Management as at 21 March 2011

-5.0%

-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Jun

-10

Jul-

10

Au

g-1

0

Se

p-1

0

Oct

-10

No

v-1

0

De

c-1

0

Jan

-11

Fe

b-1

1

Expected Shortfall Value at Risk

0

10

20

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-0.4

0%

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5%

-0.3

0%

-0.2

5%

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0%

-0.1

5%

-0.1

0%

-0.0

5%

0.0

0%

0.0

5%

0.1

1%

0.1

6%

0.2

1%

0.2

6%

0.3

1%

0.3

6%

0.4

1%

Histogram of Returns

Q. What do you think is an appropriate benchmark for an Absolute Return fund?

A. LIBOR

B. Peer group

C. Specific target

10

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Fund outlook – still favouring emerging markets

Source: Longview Economics

East over west

US Deleveraginge.g. Consumer Credit outstanding US$trn

India, China & BrazilLoans Outstanding

US & West – Deleveraging

Emerging Markets – Leveraging

Fund outlook – preference for corporate spend

o The investment share of GDP in major

economies is close to an all-time low

o Whilst non-financial corporates free

cash flow is close to a record high

share of GDP

o With balance sheets and profitability

now in good shape, corporates are

looking to the drive further growth

through investment

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Source: Thomson Reuters, Credit Suisse Research

UK CBI investment intentions are at their highest since 1997

Corporates to lead the recovery

Fund outlook – and what we don’t like

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Source: FactSet

Generating short ideas

o The domestic outlook remains in doubto Margins being squeezed by input costs

'01 '02 '03 '04 '05 '06 '07 '08 '09 '100

100

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400

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5S&P GSCI Sugar - Commodity Index (Left)Tallow ($ per lb.) (Right)

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'86'87'88'89'90'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10-6

-4

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-30

-20

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(% 1YR) Index Of House Price (1983) (Right)

(% 1YR) Real Household Final Consumption Expenditure (Left)

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Investing in AEGON UK Equity Absolute Return

o Delivering excess returns over base rate with low volatility

o Returns are generated from the proven UK equity process

• Capitalising on our sell ideas

• Uncorrelated returns

• Lipper Awards 2011, Best UK Equity Group (Small)

• Four funds rated by OBSR

Delivering strong returns at low risk

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Important informationThis document is not intended for retail distribution and is directed only at investment professionals. It should not be distributed to, or relied upon by, private investors.

The information in this presentation is based on our understanding of the current and historical position of the markets. The views expressed should not be interpreted as a recommendation or advice. Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed.

The value of the fund may also be impacted by a decline in an entire market or a specific asset class. Regardless of market conditions, the fund aims to deliver a positive absolute return for clients, rather than tracking or seeking to outperform a benchmark or index. This fund is a medium to long-term investment. Fluctuations in exchange rates may affect the capital value of the fund.

The AEGON UK Equity Absolute Return Fund is a sub-fund of AEGON ICVC, an Open Ended Investment company. AEGON Asset Management UK plc is the Authorised Corporate Director of the Company.

AEGON Asset Management includes AEGON Asset Management UK plc (no: 113505) and AEGON Investment Management UK ltd (no: 212159). Both are registered in Scotland and have their registered office at AEGON House, 3 Lochside Avenue, Edinburgh Park, Edinburgh, EH12 9SA.

AEGON Asset Management UK plc provides segregated and retail funds and is the Authorised Corporate Director of AEGON ICVC, an Open Ended Investment Company. AEGON Asset Management UK plc is authorised and regulated by the Financial Services Authority, (FSA reference no: 144267).

AEGON Investment Management UK ltd provides investment management services to AEGON, which provides pooled funds life and pension contracts. AEGON Investment Management UK ltd is an appointed representative of Scottish Equitable plc, an AEGON company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (FSA reference no: 165548).

FP ID No: 2011/11599