Fixed Income in an age of longevity Luc Froehlich, CFA, CAIA - - PowerPoint PPT Presentation

Fixed Income in an age of longevity

Luc Froehlich, CFA, CAIA

Global Head of Investment Directing Fixed Income Fidelity International

Act I - The Diet

Source: Fidelity International, Bloomberg, as of 21 June 2019. References to specific securities are for illustrative purposes and are subject to change without notice. They should not be taken as a recommendation or advice to transact in them. Past performance is not a reliable indicator of future results.

Total returns of equity and bond of CIFI Holdings Group

Consistency

55 70 85 100 115 130 145 160 175 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Rebased to 100 CIFIHG Equity CIFI HLDGS 7.75% 6/5/20 RGS

Total return (equity): +15.0% Total return (bond): +11.2%

Source: Fidelity International, Bloomberg, as of 30 September 2019. *Fund launched on 26 March 2018. Performance returns on a NAV-NAV basis with dividends reinvested in USD terms of the A-ACC-USD share class. Asian Bonds HY: ICE BofAML Asian Dollar High Yield Index. APAC Equity: MSCI AC Asia Pacific Index. The Fund does not have a

• benchmark. Past performance is not an indicative of future performance

Consistency

80 85 90 95 100 105 110 115 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Rebased to 100 APAC Equity Asia Bonds HY Fidelity Enhanced Reserve Fund (gross)

Liquidity solution vs Asia Equity and Asia High Yield

Source: Fidelity International, Bloomberg.

S&P 500

Timing the market

500 1000 1500 2000 2500 3000 3500 Mar-68 Mar-72 Mar-76 Mar-80 Mar-84 Mar-88 Mar-92 Mar-96 Mar-00 Mar-04 Mar-08 Mar-12 Mar-16

0K 200K 400K 600K 800K 1000K 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 High volatility Mid volatility Low volatility

Source: Fidelity International, Goldman Sachs Research; High volatility portfolio: 85% Global Equity, 15% Global Fixed income; Medium vola: 70/30; Low vola: 55/45

Fixed income to increase portfolio longevity

Time in the market

23.4 years 26.5 years 30.0 years $1,282,594 $1,520,702 $1,813,985 0K 500K 1000K 1500K 2000K High Volatility Mid Volatility Low Volatility

Total portfolio distribution

Act II - The Balance

Striking an optimum: income vs volatility

Asia High Yield returns

Source: ICE BofAML Asian Dollar High Yield Index and Asian Dollar Investment Grade Index, as of 30 September 2019. Past performance is not a reliable indicator of future

• results. (*) Annualised capital volatility is calculated based on quarterly capital return.
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 1Q 10 1Q 12 1Q 14 1Q 16 1Q 18 Capital return Volatility(*) : 6.8% Income return

Striking an optimum: income vs volatility

70% Asia High Yield and 30% Asia Investment Grade Return

Source: ICE BofAML Asian Dollar High Yield Index and Asian Dollar Investment Grade Index, as of 30 September 2019. Past performance is not a reliable indicator of future

• results. (*) Annualised capital volatility is calculated based on quarterly capital return.
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 1Q 10 1Q 12 1Q 14 1Q 16 1Q 18 Income Return Capital Return Volatility(*) : 5.5%

Act III - The Token

Digital form of the real asset

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Smart contracts coded on blockchain

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Smart contracts coded on blockchain

Tokenisation simplified

Source: Fidelity

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Company information placed

• n blockchain

Fixed Income in an age of longevity

Diet: Consistency + Time in market = Wealth build-up Balance: Income + Total return = Optimal allocation Token: Infrastructure + Mindset = New asset classes

Fixed Income in an age of longevity

Diet: Consistency + Time in market = Wealth build-up Balance: Income + Total return = Optimal allocation Token: Infrastructure + Mindset = New asset classes

Important information

This document is for intermediaries only and not for external distribution. All external distribution requires prior written approval from Fidelity. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Investment involves risks. Past performance is not indicative of future performance. Please refer to the relevant offering documents for further information including the risk factors. If Investment returns are not denominated in HKD/ USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity ("Third Party Content"). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only. The material is issued by FIL Investment Management (Hong Kong) Limited and it has not been reviewed by the Securities and Futures Commission (“SFC”).