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Eddie Keating Investment & Fund Development Manager Old Mutual Guernsey November 2002 Old Mutual Guernsey: Ahead of the curve OMG/GAM Diversity Fund: A.

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Presentation on theme: "Eddie Keating Investment & Fund Development Manager Old Mutual Guernsey November 2002 Old Mutual Guernsey: Ahead of the curve OMG/GAM Diversity Fund: A."— Presentation transcript:

1 Eddie Keating Investment & Fund Development Manager Old Mutual Guernsey November 2002 Old Mutual Guernsey: Ahead of the curve OMG/GAM Diversity Fund: A fund for bull and bear markets Available only through OMGs FSB authorised life products

2 2 Agenda Market analysis –Recent investor behaviour –Market conditions since April 2000 –OMG fund developments over the last 12 months GAM Diversity –Its place within the OMG fund range Multi-manager, diverse range of strategies –The company, the team and the fund –Outstanding performance Absolute and relative Conclusions

3 3 The herd mentality - dont get trampled..... Source: SSB, Morningstar Movement of NASDAQ Composite vs technology mutual fund net flows USD billions

4 4 And avoid the boom and bust Source: SSB, Morningstar Movement of MSCI World Index vs mutual fund net flows

5 5 The problems stem back to the late 90s April 2000 Equities considered the answer Bonds out of favour because of low returns October 2002 Equities shunned Bonds now the asset class of choice but increasingly expensive

6 6 Falling nominal returns: we needed a new solution ANNUALISED RETURNS

7 7 Property & alternative strategy meet those needs ANNUALISED RETURNS

8 8 OMG fund developments now over 12 months old Diversified Plus & Growth Plus ($26m.) –Five asset class solution –Top quartile since launch Property ($31m.) –Real commercial property fund –Non-volatile, positive returns since launch (+6.45% ytd) Market Neutral ($7m.) –Outstanding returns since launch (+6.45% ytd) –Global equities down 24.5% over the same period –Significantly ahead of hedge fund of fund sector Inflows of more than $64m. since launch

9 9 Pushing investors another route

10 10 Now these investors are starting to suffer too

11 11 GAM Diversity - a bull & bear market solution from OMG

12 12 Why add another alternative strategy fund?

13 13 Because of the investment house Global Asset Management founded in 1983 Multi-manager alternative strategies since 1989 Now part of UBS - one of worlds largest groups with $1.50 trillion invested assets GAM has $7.6 billion multi-manager assets under management Award winning performance –Best alternative strategy Fund of Funds house –20 international investment awards since 2000 –No 1 UK ISA investment performance over last three years Source: Morningstar

14 14 Because of the investment team 37 investment professionals in London & New York backed by 600 staff world wide Experienced fund managers with proven track records & robust investment process Access to some of the worlds leading fund managers & funds (many closed) Skilled at portfolio construction strategies 50% GAM manager time spent researching new talent

15 15 Because of the fund - GAM Diversity Capital appreciation with risk diversification A 12 year track record of superior returns and low volatility Employs complementary investment techniques Highly skilled portfolio managers - Access Great Investment Talent. Security of tenure - underlying GAM Diversity Fund $1.5 billion S&P AA rated

16 16 Because of GAM Diversitys consistency: since 1995

17 17 This is true over the longer term as well (1) ANNUALISED RETURNS

18 18 This is true over the longer term as well (2) GAM DiversityMSCI WorldJP Morgan Total return393.72%27.17%154.13% Compound growth rate13.16%1.88%7.49% Volatility9.57%14.87%7.42% % Positive months70.97%56.77%59.09%

19 19 All this - with lower volatility too!

20 20 The difference comes in the range of strategies

21 21 OMG GAM Diversity sits well in our new fund range Highly diversified core funds Discretionary Management across five asset classes Asset class funds for tilt/ bias GAM Diversity included in tier 2 Specialist funds Select funds for hands on investor

22 22 GAM Diversity - a new thoroughbred in the OMG stable One of the worlds top asset management houses A fund with a distinguished pedigree Currently 31 underlying funds Blend of Equity Hedge and Trading Funds Access to the best funds (mostly closed) Research/active management

23 23 Available only through OMGs FSB authorised life wrappers Standard OMG Alpha and Maxima life policies Monthly liquidity with low minimum investment levels Offer period 4 November to 20 November 2002 with price held at $1 Brochure available at

24 24 In conclusion - why choose OMG GAM Diversity? Low correlation with equity & bond markets Security of large underlying fund - $1.5 billion Access to global investment talent Expertise of a well resourced multi-manager team Consistent performance in bull & bear markets Even more Diversity within the OMG Five Asset Class solution

25 25 Risk warnings & important notes There are risks associated with investing in the OMG GAM Diversity Fund and it should be noted that OMG has risk rated the fund as High Risk. In particular some of the underlying investment strategies used may be regarded as speculative and may involve substantial risk of loss. Trading investment interests is speculative and volatile. To achieve a managers performance objectives, the applicable fund(s) may make investments that may be considered speculative and may involve substantial risk of loss. The prices of investment strategies can be highly volatile. Price movements are influenced by, among other things: changing supply and demand relationships; trade, fiscal, monetary and exchange control programs and policies of governments; domestic and foreign political and economic events and policies; changes in national and/or international interest rates and rates of inflation; currency devaluations and revaluations and emotions of the marketplace. The managers can control none of these factors and no assurance can be given that the advice of the managers will result in profitable trades or that substantial loss will not be incurred. Alternative investing - general parameters. The market place may be neither open nor transparent; the market may not be regulated; liquidity may be restricted. An alternative strategy fund is a privately organised pooled investment vehicle that invests in publicly traded securities. It uses short and long exposure to reduce reliance on movements in the broader market and to focus on profiting from security selection. Short exposure is achieved by borrowing securities and selling them in the market with a view to buying them back at a lower price and then returning them to the lender. Traditional long-only funds, by contrast, are generally precluded from using material short exposure and are therefore more reliant on rising markets for positive returns. The Fund should be viewed as a high-risk investment. Any investment in the Fund should regarded as speculative and may be subject to sudden and large falls in value. Losses on realisation could equal the amount invested. An investment in the fund is only suitable for the sophisticated investor who can afford the risk that his investment may fall rather than rise in value. An investment in the fund should be regarded as speculative and should not be used as a complete investment programme. If a prospective investor has any doubts about the nature or suitability of the investment, advice should be sought from their own investment advisor.

26 26 Risk warnings & important notes Transparency is improving in the alternative strategy industry. Nevertheless there may be a limit beyond which transparency could damage investors interests - other market participants could use information against the manager. Managers are reluctant to release information on their current positions, however they will release varying degrees of past periodic data. Risk of alternative strategies The Fund intends to engage in the trading of equity securities. Although the manager is expected to use a strategy which is intended to protect the funds assets from losses due to general declines in the international stock markets, there can be no assurances that the strategy to be used by the manager will be successful. The market values of related securities or other instruments may not move in correlation with each other or in ways anticipated by a manager, and intervening events may cause long and/or short positions not to perform as anticipated. A hedged position also may perform less favourably in generally rising markets than an unhedged position. Short Sales. The Fund may sell securities short, a practice which can be volatile and speculative. Short selling is limited to securities which can be borrowed, and it may not be possible at times to borrow the securities the fund wishes to short sell. It may also be necessary to cover, or repurchase, securities sold short at an undesirable time and at high prices because securities which were sold short can no longer be borrowed. Speculators purchasing securities and then refusing to lend such securities to short sellers can precipitate this short squeeze situation. A short sale involves the risk of potentially unlimited loss if the securities sold short appreciate in value. Counterparty risk. Currency forward contracts, swaps and other forms of derivative instruments, including futures contracts traded on exchanges located outside the USA and UK are not guaranteed by an exchange or its clearing house. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. The business failure of a counter-part with which the fund has entered into forward contracts or other derivatives will most likely result in a default. The default of a party with which the fund has entered into a forward contract or derivative will force the fund to cover its resale commitments, if any, at the then current market price. Illiquid assets. Certain securities purchased or sold short by the fund may be thinly traded or relatively illiquid. Consequently, it may be relatively difficult for the fund to dispose of investments rapidly at favourable prices in connection with redemption requests, adverse market developments or other factors.

27 27 Regulatory Information Old Mutual Guernsey is registered and has its principle office at Fairbairn House, PO Box 121, The Rohais, St Peter Port, Guernsey, GY1 3HE, Channel Islands. The company is registered under section 11 of Insurance Business (Guernsey) Law, 1986 and the statutory functions of regulation under the legislation are carried out by the Guernsey Financial Services Commission. To protect policyholders, this commission requires offshore life offices registered in Guernsey to hold at least 90% of their policyholder assets in custodian trusteeship with an approved third-party custodian. In common with industry practice and in order to protect the interests of all investors, the Company may, in exceptional circumstances, defer the realisation of any investment, other than to pay death claims, for a period of up to 12 months. Old Mutual Guernsey is the name under which the Old Mutual Life Assurance Company (South Africa) Ltd. (also known as Old Mutual) is trading in Guernsey. The registered office of the Old Mutual Life Assurance Company (South Africa) Ltd. is located at Mutualpark, Jan Smuts Drive, Pinelands 7405, Cape Town, Republic of South Africa. Old Mutual Guernsey, although domiciled in Guernsey, is permitted to market its policies in South Africa, as a branch of the Old Mutual Life Assurance Company (South Africa) Ltd. It is consequently regarded by the South African Revenue Service (SARS) as being resident in South Africa for tax purposes. The policy in which you invest is therefore subject to South African income and capital gains tax. Deductions in respect of tax will be taken from the fund. Tax deductions maybe reduced by the amount of any foreign withholding tax already incurred on non-South African income that would be subject to South African tax. Published fund prices, as always, will reflect the price after any deduction in respect of tax and management fees. Currently, for South African residents, no further tax arises when the policy is surrendered or reaches maturity. The tax status described is based on our current understanding of South African tax rules and Old Mutual Guernsey can not be held responsible for any future tax or legislative changes that may affect this position. It is recommended that investors contact their financial adviser to discuss any tax implications before making any investment.

28 28 Regulatory Information Client confidentiality is protected at all times - Old Mutual Guernsey complies with the Criminal Justice (proceeds of crime) (Bailiwick of Guernsey) Law 1999 but otherwise has no duty of disclosure of clients records to any statutory or government body within Guernsey. Investors should remember that past performance is no guarantee of future returns and that fund prices will reflect the value of their underlying securities. As a result of the nature of investments and possible exchange or interest rate fluctuations, the value of investments may go down as well as up. Old Mutual Guernsey investments are not available to residents of the Bailiwick of Guernsey or the United States of America (or any of its territories) or of any jurisdiction where such investments would be unlawful. This presentation does not constitute an offer or a solicitation to anyone in any jurisdiction in which an offer is not authorised or to any persons to whom it is unlawful to make such an offer or solicitation. Source of data: S&P/Micropal offer to offer, unadjusted terms, US Dollars for the periods shown. Other data sources: as stated

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