Kylie Minogue Asset Models & Who cares anyway Martyn Dorey Consultant Frequently, presenters must deliver material of a technical nature to an audience unfamiliar with the topic or vocabulary. The material may be complex or heavy with detail. To present technical material effectively, use the following guidelines from Dale Carnegie Training®.   Consider the amount of time available and prepare to organize your material. Narrow your topic. Divide your presentation into clear segments. Follow a logical progression. Maintain your focus throughout. Close the presentation with a summary, repetition of the key steps, or a logical conclusion. Keep your audience in mind at all times. For example, be sure data is clear and information is relevant. Keep the level of detail and vocabulary appropriate for the audience. Use visuals to support key points or steps. Keep alert to the needs of your listeners, and you will have a more receptive audience. 2 December 2003 Important Notice This document has been approved for issue in the UK by PSolve, a division of io investors Ltd., regulated by the FSA. Information contained in this document has been derived from sources that we consider to be reasonable and appropriate. While this information is believed to be reliable, no representations or warranties are made as to the accuracy of information presented, and no responsibility or liability can be accepted for any error, omission or inaccuracy in this document or related materials. This document may also include our views and expectations, which cannot be taken as fact. This information is supplied to you in confidence and you may not pass it on to any other party without PSolve’s prior written consent. Past performance is not necessarily a guide to future returns. The value of investments can go down as well as up as a result of market and currency fluctuations. Due to the above factors, an investor may get back less than was originally invested.

Objectives Split presentation into three parts Epistemology Technical Influence of internal culture on modelling Reflections on debate earlier Technical Pay attention here comes the science bit Behavioural aspects of optimisation How do you put a price on the downside Do we care? What are the big issues we need to be thinking about over the year Plan for next year If you have several points, steps, or key ideas use multiple slides. Determine if your audience is to understand a new idea, learn a process, or receive greater depth to a familiar concept. Back up each point with adequate explanation. As appropriate, supplement your presentation with technical support data in hard copy or on disc, e-mail, or the Internet. Develop each point adequately to communicate with your audience.

Step back in time Whats the Kylie link? This is an accessible conference Fancied doing something different from neighbours & went into competitive pop business Early success was short lived Culture changed Found herself out of a job What was wrong? If you have several points, steps, or key ideas use multiple slides. Determine if your audience is to understand a new idea, learn a process, or receive greater depth to a familiar concept. Back up each point with adequate explanation. As appropriate, supplement your presentation with technical support data in hard copy or on disc, e-mail, or the Internet. Develop each point adequately to communicate with your audience.

Wouldn’t change a thing - Kylie ultimate consultant: Reinvent approach every decade using latest technology Responded to changing cultural environment Measurable feedback on approach Did not specialise but got better at everything Anything goes Above all took risk Got involved in the creative process

Kylie Vs. actuarial risk modelling Creative thinking? Is culture is stagnant Press - do we take it too seriously? Competitive approach in press and talks Competitors in the top 40 Breadth and depth of product philosophies/styles Similar models used 4 advisors 65% of FTSE 100 Change of direction interpreted weakness not creative strength Bitchy? Use competitors good ideas Finish other peoples ideas Integrated vs. segregated Get involved in creative process Seek contemporary creativity Trying to be ‘hard’ You can still be normal

Getting ideas out. 100% funded Express risk as Potential funding level Potential contribution rate rises Analysis examines different outcomes based on a simple bell curve Most people concerned with poor experience Also consider better than expected 100% funded Average in the middle Better than average experience If you have several points, steps, or key ideas use multiple slides. Determine if your audience is to understand a new idea, learn a process, or receive greater depth to a familiar concept. Back up each point with adequate explanation. As appropriate, supplement your presentation with technical support data in hard copy or on disc, e-mail, or the Internet. Develop each point adequately to communicate with your audience. Poor experience Gray area =33% Gray area = 90% 1/3 of time Y funded or better 90% of time X funded or better

Mini case study (1) Client likes bonds With very little information from actuary basis for discussion If you have several points, steps, or key ideas use multiple slides. Determine if your audience is to understand a new idea, learn a process, or receive greater depth to a familiar concept. Back up each point with adequate explanation. As appropriate, supplement your presentation with technical support data in hard copy or on disc, e-mail, or the Internet. Develop each point adequately to communicate with your audience.

Shocked

I should be so lucky

Je Ne Sais Pourquoi? 100% Equities MFR low risk FRS17 high risk 100% Bonds MFR high risk FRS17 low risk 50:50 lowest risk against all benchmarks

Obsession: Behavioural finance Myopic risk aversion Hope for out-performance Need risk to outperform in long term Too much risk under-perform in short term Probability of achieving objective 0.1 0.2 0.3 0.4 0.5 0.6 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 Risk against benchmark Prob where IR = 0.36

Obsession: Behavioural finance Myopic risk aversion Hope for out-performance Need risk to outperform in long term Too much risk under-perform in short term Probability of achieving objectives Active risk Skill Increasing risk Increasing skill

Obsession: Behavioural finance Myopic risk aversion Hope for out-performance Need risk to outperform in long term Too much risk under-perform in short term Probability of achieving objectives Optimum risk Skill Increasing skill

manager information ratio Obsession: Behavioural finance Probability of achieving objectives active risk manager information ratio

Word is out: Cost to risk It’s not ‘hard’ Behavioural method? If things go wrong how much do you have to pay? Looks only at downside Works with any distribution you like – here we will use stochastic Could be thought of as an option You will exercise option if your assets don’t deliver the goods

Cost to risk: What do I have to do? Calculate the option: PV(Min(x-obj),0) Determine a benchmark Determine an objective Calculate distribution around this Work out the mass function Then calculate the expected value of downside

Output (1)

Output (2)

Who cares: What is the biggest issue for the younger members Generate something you would like to hear someone talk about Something that you would like to talk about Opportunity to practice Try out some ideas