Multi Asset investing – the Danish wayAnders Weihrauch, Jyske Bank

Jyske Capital

”Multi Asset Investing – the Danish Way”

NIMF, October 2017

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Jyske Capital

A part of Jyske Bank

Second largest Danish domiciled bank

101 branches in Denmark, Hamburg and Gibraltar

Designated as SIFI Bank by the Danish FSA

+ 25 years of experience with asset management for

retail clients, companies, foundations, public

institutions and institutional investors

EUR 16 Bn. under management and EUR 4 Bn. in Risk

Management mandates

Most of the AUM is within Cross Asset Strategies

69 dedicated investment specialists:

Portfolio managers, Strategists and Analysts

Support and Risk Management

Client Relations and Client Service teams

www.jyskecapital.com

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How We do Asset Allocation

•Active and tactical

•Diversification

•Team based decision making

Philosophy

•Systematic

•Repeatable & consistent

•Based on models and analysis

Process

•Global

•Absolute & relative return focus

•Portfolios across risk spectrum

•Traditional asset classes and liquid genuine alternatives

Cross Asset Strategy

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How We do Asset Allocation

Combine inputs into risk target and asset allocation

Diversified with respect to risk adjusted return, robust, across

macro factors and styles

Equity

HY & EMD

Alternatives

Bonds

Models

Analysis

Tactical Strategic

Portfolio

Systematic & Repeatable Process

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Alternatives made simple - Diversification and alternative income streams

• Diversification of risk sources

• Access to other return streams

• Over time higher return for same risk

• Lower return expectation on traditional assets

Why?

• Liquid Genuine alternatives and alternative asset classes

• Systematic strategies

• No hedges or traditional beta in other forms

• Different alternatives for different client needs and risk profiles

Which?

• 5-15% of portfolio

• Primarily financed from traditional bonds

• Cat Bonds, FX Alpha, Commodity Seasonality, Multi Asset Risk Premia, Trend…

How?

Traditional portfolio

Expected risk

Expecte

d r

etu

rn

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Estimating Long Term Potential

Equity – PE vs. fwd. returns – R²

Equity – PE vs fwd returns, 20Y

Bonds, IG (& HY) – Starting Yield vs. fwd. Returns – R²

UST 10Y – Actual vs Expected Return

- Valuation & Trend Matters

0%

10%

20%

30%

40%

50%

60%

1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12Y 14Y 16Y 18Y 20Y

R2

R² = 57%

-5%

0%

5%

10%

15%

20%

0 5 10 15 20 25 30 35Forw

ard

retu

rn,

20Y

PE

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Estimating Long Term Potential - Valuation & Trend Matters

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Estimating Medium Term Potential - Where are we in the cycle?

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Estimating Medium Term Potential - General & Specific Factors

Equity, FI, FX, Commodity,

Sector, Region, Factor

PMI (NO)

Inflation

Real Yield

Output Gap

EPS

Equity - Financial Sector

Loan Growth

NPL

Unemploy-ment

Valu-ation

Perfor-mance

External Common Factors Specific Factors

Leading Indicator

Compen-sation Industrial

prod.

Liquidity

Policy

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Estimating Short Term Potential

Sentiment

Sentiment Level vs fwd Returns

Positioning – AAII Bull Bear Spread

Level vs Hit Ratio

- Sentiment, flow/positioning, ST valuation, Technical Analysis

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Stable Strategy

Project

New

philosophy

End-2003

Introduction

of philosophy

Mid 2004

One philosophy

- one team

Early 2005

Project

Risk

End-2008

Introduction of

risk initiatives

2009 March

2007

March

2012 March

2013

March

2014

March

2015

March

2016

Best Overall

Small Group

Lipper Award

Best Overall

Small Group

Lipper Award

Best Overall

Small Group

Lipper Award

Best Overall

Small Group

Lipper Award

Best Overall

Small Group

Lipper Award

Best Overall

Small Group

Lipper Award

Source: Jyske Invest

Note: Return in EUR before costs. As of 29.09.2017

March

2017

Best Overall

Small Group

Lipper Award

100

120

140

160

180

200

220

240

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Jyske Invest Stable Strategy EUR Benchmark

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Stable Strategy - Relative Performance

Source: Morningstar. Funds in Europe available with min. 5-year

performance in the category "Mixed funds EUR defensive - Global".

Return after costs in DKK. Data from 31 August 2017.

Stable Strategy vs. Peer Group

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Ann.

Retu

rn 5

Y

Std. dev. Average

Jyske Invest Stable Strategy EUR

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Allocation & Outlook

• Supportive central banks (still)

• Solid growth signals

• Inflation under control (for now)

• Corporate and investor sentiment

• Capital Expenditure Indication

• Seasonality

Equity - Overweight

• Lower LT return expectation

• Rich relative valuation

• Yields undershoot activity level

• Signs of increasing inflation

• High sentiment

Bonds - Underweight

• Attractive absolute yield

• Low expected default rate

• Increasing/stable oil price

• Positive rating drift

• Compressed spreads

HY Bonds - Neutral

• Macro tailwind (GDP and PMI Breadth)

• Low EM inflation

• Carry

• EM FX looking cheap

• Headwind from Hawkish FED (& USD)

• Compressed spreads

EMD Core & Local - Neutral

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Disclaimer

This material has been prepared by Jyske Capital, which forms part of Jyske Bank A/S, and which is supervised by the Danish Financial Supervisory Authority.

This material has been prepared solely for information purposes for the investors to whom the material has been handed out. Under no circumstances is the information aimed at persons residing in or in a similar way attached to a jurisdiction where it is unlawful to make such offer or solicitation. The information is never addressed to persons resident in the US or persons who have a similar attachment to the US.

The presentation is not an offer or a solicitation to buy or sell financial products and/or financial instruments. We urge investors always to contact their own advisers for individual information about investments, tax issues, etc. before buying or selling financial instruments.

The information is copyrighted by Jyske Capital and must not be represented or reproduced in any other way without acknowledgement of source. Jyske Capital has taken all reasonable care to ensure that the information in this presentation is as correct as possible and information is received from sources which Jyske Capital finds reliable. Jyske Capital shall not be liable for any direct or indirect losses due to incomplete or erroneous information.

Past performance, movements in market prices and forecasts of future performance and movements in market prices are not reliable indicators of future performance or price fluctuations. Performance and/or price development may be negative. The price of and return on an investment may fall as well as rise, among other things because of fluctuations in market prices and exchange rates.

The information in the presentation is subject to changes in market conditions, in returns, dividends, prices, exchange rates, interest rates, fees and charges and other payments, and tax circumstances, etc. Errors and omissions excepted.

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