Investment Update September 2019 For financial advisers only - - PowerPoint PPT Presentation

Standard Life Investment Update

September 2019 For financial advisers only

Agenda

• Market outlook
• Focus on Global Property
• MyFolio update
• Vanguard

Market Outlook

4

The House View

Key questions for investors to ask:

• Will the global economy fall into recession? No, Manufacturing is in a modest recession,
• ther sectors are expected to remain firm
• Will central bank actions be effective? We think rate cuts plus easier fiscal policy will support

moderate growth

• Will political and geopolitical tensions die down? No. This is the new normal
• What is priced into the markets? Slow growth in equities, recession in bonds
• What do valuations and investor sentiment tell us? Valuations are relatively attractive,

sentiment is rather depressed

• How should investors prepare portfolios for volatility?

Remains pro-risk but expects further volatility

5

What does it all mean for markets?

House View tactical asset allocation

Tactical funds

Overweight Neutral Underweight

Yen FX European High Yield Bonds Emerging Market Local Debt US High Yield Bonds US TIPS US Equity Australian Bonds Emerging Market $ Debt Japanese Equity Emerging Market Equity UK Gilts Core & Peripheral European Bonds UK Corporate Bonds European Corporate Bonds UK Equity UK, US, & European Real Estate Sterling FX US Dollar FX UK Inflation-Linked Debt US Corporate Bonds Pacific ex-Japan Equity European Equity Cash Euro FX Japanese Bonds US Treasuries

6

Expected asset risk and return

2019 ASI long-term return forecasts - 5Y horizon EUR hedged, % pa

*EUR Unhedged Source: ASI, 2H2019 Note: Returns are over five years (EUR hedged) on a per annum basis. Return projections are estimates and provide no guarantee of future results.

UK Equities US Equities Europe ex UK Equities Japan Equities Pacific ex Japan Equities Emerging Markets Equities* Global Equities Euro Govt Bonds Euro Inflation-Linked Govt Bonds Global DM Govt Bonds Euro IG Bonds Global IG Bonds US High Yield Bonds EM Sovereign Debt (Hard) EM Sovereign Debt (Local)* Europe ex UK Commercial Property Global Commercial Property Europe ex UK REIT Infrastructure Social Infrastructure Renewables EUR Cash 3M LIBOR

• 1

1 2 3 4 5 1 3 5 7 9 11 13 15 17 19 21 23 25 27 Expected return Expected volatility Equities Rates Credit Alternatives Cash

7

Conclusions

• We have moderate levels of risk in our portfolios across a variety of asset classes
• These are supported by valuations, by investor positioning and by profits growth
• 2019-20 is unlikely to see a recession, but the efficacy of stimulus measures has yet to be

seen

• Volatility could be triggered by further trade tensions, policy errors or political risks
• Portfolios remain in tactical mode and continue to look for diversifiers

Focus on change in a fast changing world

8

Past performance is not a guide to future results. The value of investments, and the income from them, can go down as well as up and clients may get back less than the amount invested. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments The views expressed in this presentation should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain or sell a particular

• investment. The information contained in the presentation is for exclusive use by professional customers/eligible counterparties (ECPs) and not the general public. The information is being

given only to those persons who have received this document directly from Aberdeen Asset Managers Limited or Standard Life Investments Limited (together “Aberdeen Standard Investments”) and must not be acted or relied upon by persons receiving a copy of this document other than directly from Aberdeen Standard Investments. No part of this document may be copied or duplicated in any form or by any means or redistributed without the written consent of Aberdeen Standard Investments. The information contained herein including any expressions of opinion or forecast have been obtained from or is based upon sources believed by us to be reliable but is not guaranteed as to the accuracy or completeness. The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from marketing) any kind of investment decision and may not be relied on as such. Historical data and analysis, should not be taken as an indication or guarantee of any future performance analysis forecast or prediction. The MSCI information is provided on an ‘as is’ basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the ‘MSCI’ Parties) expressly disclaims all warranties (including without limitation, any warranties

• f originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing,

in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages (www.msci.com). Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life Aberdeen*. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen* or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. * Standard Life Aberdeen means the relevant member of Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time. Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL. Standard Life Investments Limited registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated in the UK by the Financial Conduct Authority. DK-100919-98704-1

For professional clients only – Not for public distribution

For financial advisers only

Property

Property options with Standard Life

• 1. UK Property

▪ Invests mainly in UK commercial properties across the retail, office and industrial sectors

• 2. Access to Global direct property – Global Real Estate Fund

▪ The Global Real Estate fund invests in global direct and indirect property

• 3. Property Shares – Global REIT Fund

▪ Invests in listed property investment trusts (REITs) and quoted property companies

• 4. Residential Property

▪ Clients can buy residential property in Ireland, England or Wales through our pension and approved retirement funds

Historically traditional asset classes have delivered

Ten year returns forecast

Source: Aberdeen Standard investments, August 2019 Note: The cash-equity line serves to illustrate risk-adjusted relative performance. Assets above the line are expected to outperform a portfolio of equivalent risk containing only cash and equities; assets below are expected to underperform. Returns projections are estimates and provide no guarantee of future results. Equities are unhedged . All other asset classes are hedged to Euro.

12

EUR CASH GLOBAL COMMERCIAL PROPERTY US TREASURIES GLOBAL DM GOVT BONDS EM EQUITIES EURO GOVT BONDS GLOBAL EQUITIES EM LOCAL SOV DEBT

• 1

1 2 3 4 5 5 10 15 20 25 30

Expected return p.a. (%) Expected volatility p.a. (%)

GLOBAL IG BONDS

Why global property make sense?

▪ Can provide further diversification to a multi-asset portfolio ▪ Can provide much needed diversification to Irish or UK focused property portfolio ▪ Irish & UK Property markets are both late in the cycle ▪ Exposure to a single property market can expose investors to significant single- country risk, e.g. the Irish commercial property market saw capital values fall by more than 2/3rd during the financial crisis ▪ Investing globally gives rise to the potential for higher risk-adjusted returns than a domestic only property portfolio. A global property portfolio outweighs a domestic-only property portfolio in terms of return per unit of risk.

Risk and reward: Global property markets

Source: IPD / MSCI, Aberdeen Standard Investments Regional aggregates in USD Fixed exchange rate, all other data in local currency

Global property powerhouse

€47bn of property assets under management

Managed by an experienced global property team

(270 professionals) with a proven investment process

Foot-on-the-ground approach

19 international offices

Source: Aberdeen Standard investments, 30 June 2019

Aberdeen Standard Investments - global property capabilities

Aberdeen Standard Investments’ House View Outlook for direct global real estate – Q3 2019

Toronto Industrial Los Angeles Industrial Inland Empire Industrial Northern NJ Industrial Charlotte Office Raleigh Office Nashville Office Toronto Office Dallas Industrial San Jose Office

ASI House View – Total return Forecasts

Source: Aberdeen Standard Investments, June 2019 Forecasts based on ungeared, non-risk/currency adjusted 3 year annualised total returns. Projected returns are not guaranteed Americas 4.1%

• Cont. Europe

4.1% United Kingdom 1.3% Asia Pacific 2.7% Adelaide logistics Melbourne logistics Sydney logistics Brisbane logistics Perth logistics Tokyo apartments Canberra Offices Adelaide Offices Japan Multi-family Tokyo Logistics Czech Republic Industrial Portugal Industrial Germany Residential Tier 2 Austria Residential Belgium Residential Portugal Office Rest of Portugal Portugal Office Lisbon Spain Office Madrid CBD Rest of Belgium Industrials Spain Office Barcelona Denmark Ind Major hubs Sweden Ind Major hubs Rest of Sweden Industrials Oslo logistics Rest of Norway Industrials Norway Office Oslo Helsinki logistics Sweden Office Stockholm Norway Office Rest of Norway Rest of Finland Industrial Nordics 4.4% London Standard Industrial Rest of SE Standard Industrials London Dist Warehouses Rest of SE Dist Warehouses Build to Rent (Rest of UK) Healthcare Rest of UK Stand Industrials Hotels Build to Rent (London) Residential

Top 50 Sector Count

13 27 8 2

Offices Retail Indust rial Reside ntial Other

Global Real Estate Fund

Access to global direct property

Source: Aberdeen Standard investments, 30 June 2019

Launch date: 15 March 2017 Currency hedge on directs: 25 April 2017 Fund yield: 5.0% Direct property current yield: 5.8% Hybrid structure: Direct property 50-80% of the portfolio Listed property 20-50% of the portfolio Average unexpired lease term: 4.0 years Average lot size: €23.6m Countries: 17 Direct properties: 14 ESMA rating: 3 Underlying fund size: €475m AMC range: 1.00 – 1.50% Diversification: By country, sector, asset type, property cycles. Ideal diversification from Irish and UK property

Accessing global property

Europe ex UK & Ireland - 41.2% UK & Ireland - 22.6% Australia - 14.8% Asia Pacific - 7.0% North America - 13.9% South America - 0.6%

* Figures exclude cash Source: Aberdeen Standard investments, 30 June 2019

Overall portfolio country exposure (%)*

0% 5% 10% 15% 20%

Sweden Austria Canada Brazil Germany France Hong Kong India Japan Czech Republic United… Spain Poland Netherlands United States Ireland Australia

Direct real estate Indirect real estate (CIS) Listed real estate

Portfolio breakdown*

Diverse range of investment exposure

Direct real estate - 76% Listed real estate - 20% Indirect real estate 4%

Source: Aberdeen Standard Investments, 30 June 2019 Top 20 holdings Weight Asset type

432 St Kilda Rd,St Kilda,Melbourne,Victoria 9.04% Direct 3 & 5 Custom House Plaza,IFSC,Dublin 1 8.86% Direct WTC Almeda Park Building 4,Barcelona 8.52% Direct DC Goossens, Veghel,Doornhoek 3865,Veghel,The Netherlands 8.34% Direct 44 Esplanade, Jersey,St Helier,Jersey,JE4 9WU 8.21% Direct Galeria Gniezno,Palucka 2,Gniezno,62210 7.59% Direct Fleming Court, Dublin,Fleming Place,Dublin 4 5.51% Direct Retail Park Hana,Kafkova 471/29,Olomouc,779 00 4.72% Direct ExtraVerde, The Hague,Prinses Catharina Amaliastraat 10,The Hague 3.89% Direct Nishi-Shinbashi (PR-EX),2-4-12,Nishi- Shinbashi,Shinbashi,Minato, Tokyo,Tokyo,105-0003 3.63% Direct 3-5 John Morphett Place,Erskine Park,NSW 2759 2.66% Direct Retail Park Ostrava,Novinárská 6a,Moravská Ostrava,702 00 2.58% Direct 1651-1657 Centre Rd Melbourne,Springvale, Victoria 2.22% Direct Pradera Central & Eastern European Fund 2.16% Indirect (CIS) Duke Realty 1.53% Listed Saffron India property Fund 1.40% Indirect (CIS) Equity Lifestyle Properties 1.22% Listed Prologis 1.17% Listed American Tower 1.11% Listed Simon Property Group 1.03% Listed

Total 85.38%

44 Esplande, St Heller, Jersey

• ExtraVerde. The Hague

Nishi-Shinbashi, Tokyo St Kilda Road, Melbourne, Australia Fleming Court, Dublin

Global Property Fund – portfolio holdings

Global property Fund– performance and risk

Performance Annualised performance Risk ratios – since launch* Fund 1 month YTD 1 Year Since launch* Volatility Max Drawdown Global Real Estate

2.87% 7.99% 8.29% 4.6% p.a. 3.9%

• 2.8%

1Source: Financial Express, September 2019, performance is net of Annual Management Charge

Max drawdown data is on a weekly basis

Growth of €10,0001 15 March 2017 – 13 September 2019

*Launch date: 15 March 2017 Source: Aberdeen Standard Investments, 13 September 2019, performance is net of Annual Management Charge Past performance is not a reliable guide to future performance. This investment may be affected by changes in currency exchange rates. The value of this investment may go down as well as up. Hedging implementation date 25 April 2017

^Source: Aberdeen Standard investments, 30 June 2019

▪ Global opportunities ▪ Diversification ▪ The potential for better risk-adjusted returns ▪ Stable income ▪ Capital appreciation

Why invest in the Global Real Estate Fund now?

MyFolio

Why advisers choose MyFolio?

▪ Peace of mind ▪ Diversification ▪ Flexibility ▪ Forward not backward looking ▪ Reporting

MyFolio - choice of passive or active

MyFolio Market MyFolio Active Forward looking (Not managed to ESMA) ✓ ✓ SAA decision making process (Moody’s Analytics & Aberdeen Standard Investments) ✓ ✓ Tactical asset allocation

×

✓ Quarterly rebalancing ✓ ✓ 5 risk levels ✓ ✓ Investment style Predominately passive Active Asset classes Equities, Bonds, Property, money market instruments (including cash) and Diversifying Asset (including Absolute Return Strategies) Equities, Bonds, Property, and money market instruments (including cash) AMC available from 0.45% 0.65%

MyFolio Market performance

4.4% 5.6% 6.6% 7.6% 8.5%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

MyFolio Market I MyFolio Market II MyFolio Market III MyFolio Market IV MyFolio Market V

MyFolio Market Performance since launch

3.5% 5.4% 7.7% 10.0% 12.1%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

MyFolio Market I MyFolio Market II MyFolio Market III MyFolio Market IV MyFolio Market V

MyFolio Market Volatility since launch

Source: Longboat Analytics to 31 August 2019. Performance is gross of annual management charge (AMC). MyFolio Market launch 27 January 2014

Past performance is not a reliable guide to future performance. These investments may be affected by changes in currency exchange rates. The value of these investments may go down as well as up.

MyFolio Active performance

5.0% 6.0% 7.1% 8.3% 9.1%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

MyFolio Active I MyFolio Active II MyFolio Active III MyFolio Active IV MyFolio Active V

MyFolio Active Performance since launch

3.3% 4.6% 6.5% 8.2% 9.6%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

MyFolio Active I MyFolio Active II MyFolio Active III MyFolio Active IV MyFolio Active V

MyFolio Active Volatility since launch

Source: Longboat Analytics to 31 August 2019 . Performance is gross of annual management charge (AMC). MyFolio Active launch 11 June 2012

Past performance is not a reliable guide to future performance. These investments may be affected by changes in currency exchange rates. The value of these investments may go down as well as up.

Passive investing

11 passive funds available

MyFolio Market MyFolio Market I MyFolio Market II MyFolio Market III MyFolio Market IV MyFolio Market V Vanguard funds Vanguard Eurozone Stock Index Fund Vanguard US 500 Stock Index Fund Vanguard Global Stock Index Fund Vanguard Emerging Market Stock Index Fund Vanguard Global Corporate Bond Index Fund Vanguard Euro Government Bond Index

Why Vanguard?

▪ Experienced fund manager ✓40+ years ✓Second largest asset manager globally ✓Just under €4.1 trillion in AUM* ▪ Low cost offering ▪ Proven track record ✓Tight tracking error ✓Efficient trading ✓Consistent performance ▪ Resources ✓Global trading desks ✓24 hour trading

*Source: Investments & Pensions Europe, Top 400 Asset Managers 2018

Approach

Vanguard’s approach to index tracking

Equities Fixed Income

Equities

Vanguard aim to fully replicate the equity indices Holds physical securities Rebalanced daily Unhedged Income is reinvested

Vanguard’s approach to index tracking

Fixed Income

Unlike equities, Vanguard doesn’t fully replicate the fixed income indices Holds physical securities Rebalanced daily Hedged Income is reinvested

Source: Vanguard, 2019

Our Index trackers

Vanguard funds Index Standard Life Vanguard Eurozone Stock Index Fund MSCI EMU Index Standard Life Vanguard US 500 Stock Index Fund S&P 500 Index Standard Life Vanguard Global Stock Index Fund MSCI World Index Standard Life Vanguard Emerging Market Stock Index Fund MSCI Emerging Market Index Standard Life Vanguard Global Corporate Bond Index Fund Bloomberg Barclays Global Aggregate Float Adjusted: Corporate Index Hedged Standard Life Vanguard Euro Government Bond Index Bloomberg Barclays Euro Government Float Adjusted Bond Index

Price

Source performance: Longboat Analytics to 31 August 2019. Performance is gross of annual management charge (AMC). *0.50% fund AMC rebate(reduction) **0.00% fund AMC rebate (reduction)

Vanguard funds Effective AMC 100% gross allocation rate* Effective AMC 104% gross allocation rate** Vanguard Global Corporate Bond Index Fund 0.40% 0.90% Vanguard Euro Government Bond Index 0.40% 0.90% Vanguard Eurozone Stock Index Fund 0.40% 0.90% Vanguard US 500 Stock Index Fund 0.40% 0.90% Vanguard Global Stock Index Fund 0.40% 0.90% Vanguard Emerging Market Stock Index Fund 0.55% 1.05%

Past performance is not a reliable guide to future performance. These investments may be affected by changes in currency exchange rates. The value of these investments may go down as well as up.

8.0% 7.9%

1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Vanguard Emerging Markets Stock Index Fund MSCI Emerging Markets Index

5.0% 5.0%

1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Vanguard Euro Government Bond Index Fund Bloomberg Barclays Euro Government Float Adjusted Bond Index

4.5% 3.8%

1.0% 2.0% 3.0% 4.0% 5.0%

Vanguard Eurozone Stock Index Fund MSCI EMU Index

3.6% 3.5%

1.0% 2.0% 3.0% 4.0% 5.0%

Vanguard Global Corporate Bond Index Fund Bloomberg Barclays Global Aggregate Float Adjusted: Corporate Index Hedged

7.8% 7.7%

1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Vanguard Global Stock Index Fund MSCI World Index

8.4% 8.4%

1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Vanguard US 500 Stock Index Fund S&P 500 Index

Vanguard Index Trackers performance since launch*

Source: Vanguard, 31 July 2019

Vanguard Emerging Market Stock Index Fund: Launch date 27 February 2014 Vanguard Euro Government Bond Index: Launch date 29 September 2000 Vanguard Eurozone Stock Index Fund: Launch date 25 October 2001 Vanguard Global Corporate Bond Index: Launch date 7 February 2018 Vanguard Global Stock Index Fund: Launch date 10 December 2002 Vanguard US 500 Stock Index Fund: Launch date 26 September 2002

Standard Life International dac is regulated by the Central Bank of Ireland. Standard Life International dac is a designated activity company limited by shares and registered in Dublin, Ireland (408507) at 90 St Stephen’s Green, Dublin 2. Standard Life International dac is part of the Phoenix Group and uses the Standard Life brand under licence from the Standard Life Aberdeen Group. Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. These funds may be affected by changes in currency exchange rates. SLInvestUpdate V01 0919