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 Philip Todd Head of Charities Ingenious Asset Management 25 April 2012  ASSET MANAGEMENT, CORPORATE FINANCE, INVESTMENTS, VENTURES Charity Trustees.

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Presentation on theme: " Philip Todd Head of Charities Ingenious Asset Management 25 April 2012  ASSET MANAGEMENT, CORPORATE FINANCE, INVESTMENTS, VENTURES Charity Trustees."— Presentation transcript:

1  Philip Todd Head of Charities Ingenious Asset Management 25 April 2012  ASSET MANAGEMENT, CORPORATE FINANCE, INVESTMENTS, VENTURES Charity Trustees Investors Association “Inflation versus the risks of putting your cash to work”

2  2 Today’s (31 Dec 2011) value of £100 invested at the end of 1899, income reinvested gross NominalReal Cash£20,228£274 Gilts£31,459£427 Equities£1,639,368£22,239 THE SCOURGE OF INFLATION Source: Barclays Capital

3  3 £100 CASH 10 YEARS AGO AND 10 YEARS FROM NOW *Assuming inflation and cash returns in the 10 years to 2021 = the 10 years to 2011 Source: Barclays Equity Gilt Study 2012

4  4 Standard Deviation – is a measure of investment risk or volatility in sub-period returns. Higher standard deviation means higher risk. In a normal distribution, one standard deviation covers 68.2% of data points. Two standard deviations cover 95.4% of data points. When considering investment returns, a standard deviation of 15.3% means that there is a 68.2% probability that the actual outcome of an “investment” will be 15.3% either side of the mean or average return. So if the mean expected return is 5%, there is a 68.2% probability that the actual outcome will be between -10.3% and 20.3%. If the standard deviation is 5.1%, and the mean expected return is 5%, there is a 68.2% probability that the actual outcome will be between 0.1% and 10.1% So lower standard deviation equals lower risk or lower volatility. RISK

5  5 STANDARD DEVIATION -25.6% -10.3%5.0%20.3%35.6% μ = 5.0% σ = 15.3% σ σ σ σ

6  6 10 Years to end Dec 2011 UK Base Rate FTSE Gilts All Stocks TR GBP IPD UK All Property TR GBP FTSE All-Share TR GBP Ann Ret (%) Cum Ret (%) Std Dev (%) ASSET CLASS RETURNS Source: Morningstar, Ingenious

7  7 25 Years to end Dec 2011 UK Base Rate FTSE Gilts All Stocks TR GBP IPD UK All Property TR GBP FTSE All-Share TR GBP Ann Ret (%) Cum Ret (%) Std Dev (%) ASSET CLASS RETURNS Source: Morningstar, Ingenious

8  8 30 Years to end Dec 2011 UK Base Rate FTSE Gilts All Stocks TR GBP MSCI UK GBP Ann Ret (%) Cum Ret (%) Std Dev (%) ASSET CLASS RETURNS Source: Morningstar, Ingenious

9  9 20 Years To 31st Dec 2011 UK Base RateAPCIMS IncomeAPCIMS BalancedAPCIMS Growth Ann Ret (%) Cum Ret (%) Std Dev (%) Source: Morningstar, Ingenious APCIMS INDICES vs CASH 10 Years To 31st Dec 2011 UK Base RateAPCIMS IncomeAPCIMS BalancedAPCIMS Growth Ann Ret (%) Cum Ret (%) Std Dev (%) Years To 31st Dec 2011 UK Base RateAPCIMS IncomeAPCIMS BalancedAPCIMS Growth Ann Ret (%) Cum Ret (%) Std Dev (%)

10  10 To end Feb 2012CashLower Risk Moderate RiskHigher Risk Inception Date31/05/2004 Inception Annualised Return (%) Inception Return (%) Standard Deviation (%) Source: Morningstar, Ingenious ACTIVE MANAGEMENT vs CASH

11  11 Cash, with gross income reinvested, may have beaten inflation over longer time periods but over the last 10 years, cash has not beaten inflation if only income net of tax is re- invested and certainly currently, inflation is higher than cash returns. Investing in UK equities a riskier (higher standard deviation) asset class should deliver higher returns than gilts over long time periods. Investing in a mix of asset classes should (with good management) deliver an outcome of higher returns for taking higher risk. CONCLUSION

12  12 This document is for information only and is not intended to constitute investment advice. It is being issued to you as a result of your established or newly accepted relationship with Ingenious Media plc or one of its divisions, or on the basis that you have the requisite technical knowledge and financial resources to fulfil the suitability requirements of Conduct of Business Sourcebook. If you are not the intended recipient and/or do not believe this assumption to be accurate please return this document to the issuer without delay. This document may not be copied or communicated to any other person without the prior written consent of Ingenious or one of its divisions. If you have any doubts as to the content of this document and/or any action you should take, you are strongly recommended to seek independent financial advice from an authorised person with the requisite knowledge of the products mentioned. Decisions to invest should be made on the basis of the individual product brochures and prospectus’ which are available from the manager, and on the basis of any advice you may choose to receive from your professional advisor qualified to advise on the investment in question. Opinions expressed whether in general or on the performance of individual funds represent the views of the issuer at the time of preparation. They are subject to change and past performance is not a guide to future performance and may not be repeated. You may not get back the amount you invest. This document is issued and approved by Ingenious Asset Management Limited, 15 Golden Square, London W1F 9JG. Authorised and regulated by the Financial Services Authority (FSA). Telephone calls may be recorded. IMPORTANT INFORMATION


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