0. Aberdeen Asset Management
GR-TAG
Aberdeen Asset Management
It is time to diversify. Genuinely. 60/40 is no longer enough.
July 2017

1. ‘Diversified Growth Funds’ have become the go-to strategy
Growth in AuM of DGF market
2008
2009
2010
2011
2012
2013
2014
2018
200
180
160
140
120
100 80 60 40 20
Institutional investors – and in particular defined benefit and defined contribution pension schemes – have increasingly been allocating to multi-asset strategies
They have also been popular with the LGPS
Source: Spence Johnson, 2015

2. But they have faced their doubters
Does this new breed of multi-asset strategy really deliver relative to an old fashioned balanced fund?
Hasn’t a simple blend of equities and bonds performed just as well for much lower fees?
Source: Aberdeen Asset Managers, 2017

3. DGFs are attractive because they can offer more than equities and bonds
“Equities over the next 20 years could average … more than 250 basis points below the average”
250 bps
400 bps
“Fixed-income
real returns could be … 400 basis points lower or more”
McKinsey Global Institute (MGI), Diminishing returns: why investors may need to lower their expectations, May 2016

4. Start by considering the type of value add the manager is offering
Manager D
Manager E
Manager H
Manager A
Market timing
Manager F
Manager B
Manager I
Manager G
Manager C
Manager J
Manager K
Diversification
Alpha strategies
Manager P
Manager L
Manager M
Aberdeen
Manager N
Source: Aberdeen Asset Managers, 2017

5. Growing investment universe
Frontier debt
Emerging market sovereign
Frontier equities
Asset backed securities
Global property
Structured finance
Developed equities
Insurance linked
High yield bonds
Aircraft leasing
Alt. risk premia
Developed equities
Loans
CLOs
Emerging market corporate
Investment grade credit
Emerging market equities
Global bonds
Litigation finance
Absolute returns
Tail risk hedges
Managed Futures
Government bonds
Private equity
Infra-structure
Renewables
Domestic property

6. Comparison of strategies – key questions that follow
Is what the manager is trying to achieve, relevant to me and my scheme?
Complementary return drivers
Dependence on manager skill
Transparency
Governance

7. Comparison of strategies – key questions that follow
Is the manager good at what they are trying to deliver?
Return versus risk management
Cyclicality of alpha
Delivering diversification

8. Loosening the liquidity constraint
And DGFs are evolving…
Loosening the liquidity constraint
A source of income
% Monthly income distribution
Source: Aberdeen Asset Managers, 2017

9. Conclusion It is all about understanding the “more.”
DGFs have gained attraction because they offer something “more” than a simple equity bond allocation
More alpha strategies
More market timing
More asset classes
What that “more” is, will impact the possible role in a portfolio
It is also important to understand when assessing managers

10. Disclaimer
The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested. For professional investors only – Not for public distribution. Important Information The above presentation is strictly for information purposes only and should not be considered as an offer, investment recommendation, or solicitation, to deal in any of the investments or funds mentioned herein and does not constitute investment research as defined under EU Directive 2003/125/EC. Aberdeen Asset Managers Limited (‘Aberdeen’) does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials. Any research or analysis used in the preparation of this document has been procured by Aberdeen for its own use and may have been acted on for its own purpose. The results thus obtained are made available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make their own assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as they may consider necessary or appropriate for the purpose of such assessment. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither Aberdeen nor any of its employees, associated group companies or agents have given any consideration to nor have they or any of them made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. Aberdeen reserves the right to make changes and corrections to any information in this document at any time, without notice. Issued by Aberdeen Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority in the United Kingdom.