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Investment products: No bank guarantee I Not FDIC insured I May lose value DWS alternatives suite A compelling option for alternative investing.

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Presentation on theme: "Investment products: No bank guarantee I Not FDIC insured I May lose value DWS alternatives suite A compelling option for alternative investing."— Presentation transcript:

1 Investment products: No bank guarantee I Not FDIC insured I May lose value DWS alternatives suite A compelling option for alternative investing

2 Investment products: No bank guarantee I Not FDIC insured I May lose value Important risk information Although allocation among different asset categories generally limits risk, the investment advisor may favor an asset category that underperforms other assets or markets as a whole. The funds expect to invest in underlying funds that emphasize alternatives or nontraditional asset categories or investment strategies, and as a result, it is subject to the risk factors of those underlying funds. Some of those risks include stock market risk, credit and interest rate risk, volatility in commodity prices and high-yield debt securities, short sales risk and the political, general economic, liquidity and currency risks of foreign investments, which may be particularly significant for emerging markets. In the case of DWS Alternative Asset Allocation Fund, it may use derivatives, including as part of its global tactical asset allocation strategy. The funds expect to have direct and indirect exposure to derivatives, which may be more volatile and less liquid than traditional securities. The funds could suffer losses on its derivative positions. See the prospectus for additional risks and specific details regarding the funds risk profile. 1

3 Investment products: No bank guarantee I Not FDIC insured I May lose value 2 Agenda A definition of alternatives1 4Summary3DWS Investments alternatives 2Why alternative investments?

4 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 3 Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. See next slide for more asset class representations. CategoryIndex name Asset allocation60% U.S. fixed income/40% U.S. large-cap equities (see below for asset class representation) Alternatives 20% FTSE EPRA/NAREIT Global Real Estate Index 20% HFRI Equity Market Neutral Index 20% Barclays Capital US TIPS Index 15% commodities blend (50% Goldman Sachs Commodity Index, 25% MSCI World Energy Index, 25% MSCI World Materials Index) 10% MSCI Emerging Markets Equity Index 10% JPMorgan Emerging Market Bond Index 5% S&P Global Gold BMI Index CashCitigroup Treasury Bill 3-Month Index (When interest rates rise, bond prices generally fall. Although U.S. government securities are backed by the full faith and credit of the U.S. government, their prices fluctuate. Investors may lose principal if the securities are sold prior to maturity.) Commodity50% Goldman Sachs Commodity Index, 25% MSCI World Energy Index, 25% MSCI World Materials Index (Commodities, including gold, gems, and other precious metals, are long-term investments and should be considered part of a diversified portfolio. Market-price movements, regulatory changes, economic changes, and adverse political or financial factors could have a significant impact on performance.) Emerging-market incomeJPMorgan Emerging Market Bond Index (Investing in securities of emerging markets presents certain risks, such as currency fluctuations, political and economic changes and market risks. Also, see fixed-income risk listed below.) Emerging-market equityMSCI Emerging Markets Equity Index (See emerging-market income risk listed above.) Floating-rate noteS&P/LSTA Leveraged Loan Index (Loan investments are subject to interest-rate risk such that when interest rates rise, the prices of the loan, and thus the value of the loan, can decline and the investor can lose principal value. Although the value of senior loans will fluctuate less in response to interest-rate changes than will fixed-rate debt securities, floating rates on senior loans reset only periodically, so changes in prevailing interest rates may cause a fluctuation in the strategy's value.) Global infrastructureMSCI World Infra Sector Capped Index (Infrastructure-related securities have greater exposure to market, economic, regulatory, political and other risks affecting such entities.) Asset class representation

5 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 4 Asset class representation Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. CategoryIndex name Global real estateFTSE EPRA/NAREIT Developed Index (There are special risks associated with an investment in real estate, including credit risk, interest-rate fluctuations and the impact of varied economic conditions. Real estate investment trusts (or REITs) can also be affected by interest-rate moves, economic cycles, and tax and regulatory requirements.) GoldS&P Global Gold BMI Index (See commodity risk listed above.) International equityMSCI EAFE Index (Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes and market risk.) Large growthRussell 1000 Growth Index (Large-cap equity stocks are affected by how the stock market performs.) Large valueRussell 1000 Value Index (See large-growth risk listed above.) Market neutralHFRI Equity Market Neutral Index (Short sales involve the risk that the strategy will incur a loss by subsequently buying a security at a higher price than the price at which the strategy previously sold the security short.) Small growthRussell 2000 Growth Index (Stocks of small-cap companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more-erratic and more-abrupt market movements.) Small valueRussell 2000 Value Index (See small-growth risk listed above.) TIPSBarclays Capital U.S. TIPS Index (Although inflation-indexed bonds are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation, investments in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure.) U.S. large-cap equity (stocks)S&P 500 Index (See large-growth risk listed above.) U.S. fixed income (bonds)Barclays Capital U.S. Aggregate Index (Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall.) U.S. small-cap equityRussell 2000 Index (See small-growth risk listed above.)

6 Investment products: No bank guarantee I Not FDIC insured I May lose value A compelling option for alternative investing A definition of alternatives

7 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 6 How the world is defining alternatives Asset classesAlternative strategiesInvestment vehicles Beyond Morningstar style boxes Absolute return Real return New asset classes Long/short and risk- managed equity Absolute return Multi-strategy Managed futures Tactical asset allocation Relative value Hedge funds Limited partnerships Mutual funds ETFs Investments outside of traditional equity and fixed income are broadly known as alternatives.

8 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 7 The DWS Investments definition of alternatives Diversification neither assures a profit nor guarantees against a loss. The DWS Investments definition of alternatives New, less-efficient asset classes Asset classes with the potential to provide attractive returns with reduced risk when added to traditional asset allocation No industry-standard definition: Morningstar, Lipper and industry reports all define alternatives differently

9 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 8 Alternative categories today AlternativeDefinition Absolute returnSeeks to provide positive returns in up and down markets Real return Seeks to maintain value during inflationary environments Nontraditional/non-U.S. dollar Seeks diversification through less efficient asset classes, not limited to a geographic region, market or security type While market neutral and absolute return strategies may outperform the market during periods of severe downturns, they may also underperform the market during periods of market rallies.

10 Investment products: No bank guarantee I Not FDIC insured I May lose value A compelling option for alternative investing Why alternative investments?

11 Investment products: No bank guarantee I Not FDIC insured I May lose value Why alternatives may fit into a portfolio Bring institutional defined-benefit thinking to individual investors Improve diversification potential when added to a traditional portfolio consisting of stocks and bonds May deliver better risk-adjusted returns May address market challenges 10 Our view is that investors need greater diversification and protection from movements in the marketand alternatives may fulfill these needs.

12 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 11 Asset allocation of defined benefit vs. defined contribution Defined benefitDefined contribution Source: BNY Mellon and Callan DC Index as of 3/31/10. Percentages may not add up to 100% due to rounding. Institutions and defined benefit plans are increasing allocations to alternative asset classes

13 Investment products: No bank guarantee I Not FDIC insured I May lose value Correlation to the S&P 500 Index (five years as of 12/31/11) 12 Morningstar categories Large Value 1.00 Large Blend 1.00 Large Growth 0.98 Short-Term Bond 0.53 Target Date 2021-2025 0.98 Multialternative 0.94 Mid-Cap Value 0.98 Mid-Cap Blend 0.97 Mid-Cap Growth 0.96 Multisector Bond 0.77 Moderate Allocation 0.98 Inflation- Protected Bond 0.34 Small Value 0.95 Small Blend 0.95 Small Growth 0.95 High Yield Bond 0.78 Real Estate 0.84 Foreign Large Blend 0.93 Diversified Emer. Markets 0.86 Consider alternatives for further diversification. Source: Morningstar as of 12/31/11. Categories are Morningstars. Correlations are historical and do not guarantee future results. Correlation refers to how securities or asset classes perform in relation to each another and/or the market. A 1.0 correlation indicates that two security types move in exactly the same direction. A –1.0 correlation indicates movement in exactly opposite directions. A zero correlation implies no relation in the movements.

14 Investment products: No bank guarantee I Not FDIC insured I May lose value TRADITIONAL PORTFOLIO PORTFOLIO WITH ALTERNATIVES Alternatives can complement a traditional portfolio 13 Source: Morningstar as of 12/31/11. Past performance is no indication of future results. Volatility is represented by standard deviation. See slides 3-4 for asset class representations. Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. Performance for other time periods may not have been as favorable. 10-year returns and standard deviation, respectively, are as follows: U.S. large-cap stocks, 2.92%, 15.93%; U.S. small-cap equity, 5.62%, 21.09%; international equity, 4.67%, 18.73%; U.S. bonds, 5.78%, 3.70%; cash, 1.85%, 0.49%; alternatives, 9.09%, 11.36%. Adding a 20% allocation of alternatives increased return by nearly 100 basis points and reduced volatility over 10 years ended 12/31/11. ScenarioTraditional portfolioPortfolio with alternativesValue added 10-year return4.72%5.68%+0.96% 10-year volatility11.92%10.52% -1.40%

15 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 14 Alternatives seek to address these market challenges Inflation concerns U.S. dollar depreciation Higher interest rates

16 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 15 Implementation: increase diversification with alternatives One-strategy option to simplify investing process Ability to access institutional investment strategies Increased diversification Key features Packaged-fund option to meet alternative allocations Real return Absolute return Nontraditional Equity Fixed income Diversification neither assures a profit nor guarantees against a loss.

17 Investment products: No bank guarantee I Not FDIC insured I May lose value Diversifying with alternatives can help smooth the ride 16 ALTERNATIVE ASSET CLASS CALENDAR YEAR RETURNS AS OF 12/31/11 2002200320042005200620072008200920102011 Gold 52.61% EM equity 55.82% Gbl. real est. 37.96% EM equity 34.00% Gbl. real est. 42.35% EM equity 39.39% TIPS –2.35% EM equity 78.51% Gold 35.06% TIPS 13.56% TIPs 16.57% Gold 45.58% EM equity 25.55% Gold 28.35% EM equity 32.17% Commodities 32.45% Market neutral –5.92% Floating rate 51.62% Gbl. real est. 20.40% EM income 9.20% EM income 14.24% Gbl. real est. 40.69% Infrastructure 21.31% Commodities 25.54% Infrastructure 29.06% Infrastructure 19.58% EM income –9.70% Gbl. real est. 38.26% EM equity 18.88% Infrastructure 5.54% Commodities 12.81% Commodities 29.08% Commodities 20.82% Gbl. real est. 15.35% Gold 20.13% Gold 18.62% Gold –23.10% Gold 35.74% Alternatives 13.03% Floating rate 1.52% Alternatives 9.65% EM income 28.83% Alternatives 16.63% Alternatives 14.91% Alternatives 15.30% Alternatives 12.04% Alternatives –26.52% Commodities 28.03% Commodities 12.55% Market neutral 0.73% Gbl. real est. 2.82% Alternatives 24.70% EM income 11.77% EM income 11.86% EM income 10.49% TIPS 11.64% Floating rate –29.10% Alternatives 26.67% EM income 11.83% Alternatives –1.02% Floating rate 1.91% Infrastructure 24.40% TIPS 8.46% Market neutral 6.22% Market neutral 7.32% EM income 6.45% Infrastructure –32.66% EM income 25.95% Floating rate 10.13% Commodities –5.48% Market neutral 0.98% Floating rate 9.97% Floating rate 5.17% Floating rate 5.06% Floating rate 6.74% Market neutral 5.29% Commodities –44.76% Infrastructure 14.75% Infrastructure 6.60% Gbl. real est. –5.82% EM equity –6.17% TIPS 8.40% Market neutral 4.15% Infrastructure 4.97% Commodities 2.77% Floating rate 2.08% Gbl. real est. –47.72% TIPS 11.41% TIPS 6.31% Gold –17.23% Infrastructure –17.95% Market neutral 2.44% Gold –5.54% TIPS 2.84% TIPS 0.41% Gbl. real est. –6.96% EM equity –53.33% Market neutral 1.17% Market neutral 3.79% EM equity –20.41% Stock (S&P 500 Index) calendar-year returns (as of 12/31/11) –22.10%28.68%10.88%4.91%15.79%5.49%-37.00%26.46%15.06%2.11% Excess return of alternatives vs. stocks (as of 12/31/11) 31.75%–3.98%5.75%10.00%–0.49%6.55%10.48%0.21%–2.03%-3.13% Source: Morningstar as of 12/31/11. Performance is historical and does not guarantee future results. See slides 3-4 for asset class representation. Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. Returns during certain time periods were negative. Excess return calculation is the mathematical difference between the alternative blend (orange) and stocks (light blue). Alternatives blend

18 Investment products: No bank guarantee I Not FDIC insured I May lose value A compelling option for alternative investing DWS alternatives suite

19 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 18 Simplifying alternative investments Volatility Return potential DWS Select Alternative Allocation Fund DWS Alternative Asset Allocation Fund DWS Investments alternative asset allocation suite Platform: a suite of alternative funds to complement traditional asset allocation DWS Investments is among only a few investment managers to offer a suite of funds to fit the needs of investors Nearly $1.1 billion AUM between the two funds as of 12/31/11. There is no guarantee that the funds will achieve their stated objectives. Visit www.dws- investments.com for complete performance information.

20 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 19 DWS Investments alternatives: key differentiators Ability to generate attractive return potential across various market conditions Provide individual investors with institutional investment strategies Simplify portfolio construction with a packaged fund option More than 40 global investment professionals Nearly $5 billion in alternative assets across alternative retail mutual funds* Results Institutional thinking Experienced investment platform *Source: DWS Investments as of 12/31/11.

21 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 20 Goals and investment process StrategyImplementedAbsolute returnReal returnNontraditional/ non-U.S. dollar Market neutralFundX Global tactical asset allocation*OverlayX CommodityFundX Global real estateFundX Global infrastructureFundX Inflation-protectedFundX Floating-rate noteFundX International incomeETFX Emerging-market fixed incomeFundX Emerging-market equityFundX Emerging-market income (local currency)ETFX International and emerging-market small-capETFX ConvertiblesETFX Preferred stocksETFX GoalsSeek capital appreciation and diversification Investment processAllocate to a variety of alternatives asset classes to provide greater portfolio diversification. The strategies are rebalanced periodically to maintain the desired allocation. Benchmark DWS Alternative Asset Allocation strategy blended benchmark: 70% MSCI World Index, 30% Barclays Capital U.S. Aggregate Index DWS Select Alternative Allocation strategy blended benchmark: 60% MSCI World Index, 40% Barclays Capital U.S. Aggregate Index *The global tactical asset allocation strategy is not used in the DWS Select Alternative Allocation strategy. The strategy will not be used in DWS Alternative Asset Allocation Plus VIP until assets reach $50 million.

22 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 21 Global resource base Absolute return Real returnNontraditional/non-U.S. dollar QS Investors: experienced alternatives platform Global tactical asset allocation strategy* 2 portfolio managers DWS Gold & Precious Metals Fund 3 portfolio managers DWS Global Inflation Fund 5 portfolio managers DWS Enhanced Commodity Strategy Fund 2 portfolio managers DWS Disciplined Market Neutral Fund 3 portfolio managers DWS Enhanced EM Fixed Income Fund 8 portfolio managers DWS Floating Rate Fund 4 portfolio managers DWS EM Equity Fund 2 portfolio managers DWS RREEF Global Infrastructure Fund 4 portfolio managers DWS RREEF Gl. Real Est. Securities Fund 7 portfolio managers QS Investors Janet Campagna Chief executive officer Portfolio managers Robert Wang Inna Okounkova Thomas Picciochi Research platform Rosemary Macedo (CIO) Colm OCinneide. *Global tactical asset allocation strategy (GTAA) is only available on DWS Alternative Asset Allocation Fund. It is not possible to invest directly in this strategy. ETFs International / EM fixed income International / EM small cap Preferred stocks Convertibles 5 investment professionals 21 investment professionals14 investment professionals Strategies are subadvised by QS Investors, LLC.

23 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 22 Asset allocation Identify diverse, nontraditional asset classes Asset class forecasting: risk, return and correlation Tactical views are implemented monthly via a global tactical asset allocation Portfolio construction Innovative asset allocation toolPortfolioChoice DWS Investments strategies Exchange-traded funds (ETFs) Holdings analysis Portfolio implementation Monthly rebalancing Quarterly monitoring and periodic review of allocations DWS Investments alternatives suite: investment process Risk management DWS Investments applies institutional thinking to all asset allocation products, including the alternatives suite.

24 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 23 Asset allocation: blurring of asset classes Building blocks of asset allocation Traditional asset classes Absolute return Real return Nontraditional/non-U.S. dollar Illiquid

25 Investment products: No bank guarantee I Not FDIC insured I May lose value Volatility of individual asset classes vs. alternatives blend 24 ASSET CLASS VOLATILITY (10 YEARS ENDING 12/31/11) Source: Morningstar. Volatility is represented by standard deviation. See slides 3-4 for asset class representation. Alternative asset classesTraditional asset classes

26 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 25 Source: DeAM as of 12/31/11. The strategy will be rebalanced periodically, so this asset allocation is subject to change. The Global Tactical Asset Allocation (GTAA) strategy may use instruments including but not limited to futures, options and currency forwards. Derivatives may be more volatile and less liquid than traditional securities, and the strategy could suffer losses on its derivatives positions. Nontraditional (25%) Emerging-market equity (7%) Emerging-market fixed income (8%) International and emerging- market small-cap (2%) Emerging-market debtlocal currency (2%) International Treasury bond (2%) Convertibles (2%) Preferred stocks (2%) Absolute return (17%) Market neutral (17%) Real return (58%) Commodities (15%) Global real estate (12%) Global TIPS (11%) Floating-rate notes (10%) Global infrastructure (10%) GTAA strategy DWS Alternative Asset Allocation Fund For performance and other information about the DWS Alternative Asset Allocation Fund, please visit www.dws-investments.com.

27 Investment products: No bank guarantee I Not FDIC insured I May lose value DWS Select Alternative Allocation Fund Page 26 Source: DeAM as of 12/31/11. The strategy will be rebalanced periodically, so this asset allocation is subject to change. Derivatives may be more volatile and less liquid than traditional securities, and the strategy could suffer losses on its derivatives positions. Nontraditional (26%) Emerging-market fixed income (8%) Emerging-market equity (3%) International Treasury bond (6%) International and emerging-market small-cap (2%) Emerging-market debt (local currency (3%) Preferred stocks (2%) Convertibles (2%) Absolute return (17%) Market neutral (17%) Real return (57%) Global TIPS (13%) Floating-rate notes (14%) Commodities (13%) Global infrastructure (10%) Global real estate (7%) For performance and other information about the DWS Select Alternative Allocation Fund, please visit www.dws-investments.com.

28 Investment products: No bank guarantee I Not FDIC insured I May lose value Page 27 Summary of alternative investing Alternative asset classes Provide institutional thinking for individual investors Can improve diversification potential and deliver better risk-adjusted return potential to a traditional portfolio of stocks and bonds May address market challenges DWS Investments alternative investment team and process Provide a global platform with access to alternative asset classes Offer the same tools, team and investment philosophy for both institutional and individual investors Have the potential to generate attractive returns across various market conditions Diversification neither assures a profit nor guarantees against a loss.

29 Investment products: No bank guarantee I Not FDIC insured I May lose value Important information DWS Investments Distributors, Inc. 222 South Riverside Plaza Chicago, IL 60606-5808 www.dws-investments.com inquiry.info@dws.com Tel (800) 621-1148 DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company. Investment products offered through DWS Investments Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc. ©2012 DWS Investments Distributors, Inc. All rights reserved. (3/12) R-11616-7 OBTAIN A PROSPECTUS To obtain a summary prospectus, if available, or prospectus, download one from www.dws- investments.com, talk to your financial representative or call (800) 621-1048. We advise you to carefully consider the products objectives, risks, charges and expenses before investing. The summary prospectus and prospectus contain this and other important information about the investment product. Please read the prospectus carefully before you invest.


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