Review of IOOF Multi. Mix Trusts December Quarter 2011 Presented by: <IOOF Investment Team> IOOF Investment Management Limited Date: <Enter Date>
Disclaimer This presentation is issued by IOOF Investment Management Limited (IIML) ABN 53 006 695 021 AFSL 230524. IIML is a company within the IOOF group of companies, consisting of IOOF Holdings Limited ABN 49 100 103 722 and it's related bodies corporate. This presentation is of a general nature only and is not intended to represent or be a substitute for specific financial or investment advice. The information presented does not take into account any investor's objectives, financial situation or investment needs. You should obtain and consider a copy of the Product Disclosure Statement available from our website www. ioof. com. au before you acquire a financial product. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Neither IIML nor any company in the IOOF group guarantees the performance of any fund or the return of an investor's capital. Past performance is not indicative of future performance. The Lonsec Limited (‘Lonsec’) ABN 56 061 751 102 ratings (assigned as follows: IOF 0092 AU – November 2011; IOF 0098 AU – November 2011; IOF 0094 AU – November 2011; IOF 0095 AU – November 2011; UFM 0051 AU – November 2011; IOF 0093 AU – November 2011; IOF 0097 AU – November 2011; IOF 0090 AU – November 2011) presented in this document are limited to ‘General Advice’ and based solely on consideration of the investment merits of the financial products. They are not a recommendation to purchase, sell or hold the relevant products, and you should seek independent financial advice before investing in these products. The ratings are subject to change without notice and Lonsec assumes no obligation to update the relevant documents following publication. Lonsec receives a fee from the Fund Manager for researching the products using comprehensive and objective criteria. Review of IOOF Multi. Mix Funds Dec 2011 2
Agenda 1. Financial markets review – December 2011 2. Market outlook 3. Multi. Mix sector trusts review – December 2011 4. Multi. Mix diversified trusts review – December 2011 5. Strategic tilting 6. Appendices Review of IOOF Multi. Mix Funds Dec 2011 3
Financial markets review – December 2011
Investment returns for major asset classes Year to 31 Total return major listed asset classes Year to 31 December 2009 2010 % % Year to 31 December 2011 % Quarter to 31 December 2011 % Month to 31 December 2011 % Australian shares 37. 59 1. 90 -10. 98 2. 05 -1. 44 International shares (in A$ - unhedged) -0. 30 -2. 04 -5. 34 2. 00 0. 21 International shares (hedged) 26. 71 13. 13 -1. 91 8. 69 0. 98 Australian bonds 1. 73 6. 04 11. 37 1. 94 0. 78 International bonds (hedged into $A) 8. 03 9. 28 10. 51 2. 04 1. 90 Australian listed property trusts 9. 56 -0. 68 -1. 56 3. 81 -2. 55 27. 41 22. 54 1. 43 8. 31 2. 15 International listed property trusts (hedged) Source IRESS Review of IOOF Multi. Mix Funds Dec 2011 5
Financial markets – quarter in review • All major asset classes posted positive returns for December 2011 quarter • Australian dollar rebounded in December quarter from US$0. 97 to US$1. 03 • Hedged international shares returned 8. 7% while unhedged returned 2. 0% • Developed markets outperformed emerging markets • Best performing asset class was hedged international listed property with a return of 8. 3% • Solid returns from fixed interest as a result of softer global growth expectations and two interest rate cuts from 4. 75% to 4. 25% Review of IOOF Multi. Mix Funds Dec 2011 6
Market outlook • European crisis: some positive signs emerging though structural issues still persist • United States: some positive economic signs emerging • China: continuing to grow but some concerns emerging • Australia: further rates cuts anticipated • Equity Markets: positive start to 2012, remain cheap but susceptible to shocks • Global fixed income: an expensive safe haven • Currency markets remain volatile and are hostage to macroeconomic events Review of IOOF Multi. Mix Funds Dec 2011 7
Multi. Mix sector trusts review – December 2011
Multi. Mix Australian Shares Trust December 2011 Vinva 16. 4% Solaris 18. 4% Perennial 16. 4% Merlon 8. 1% Total Returns for period ending 31 December 2011 Alliance Bernstein 16. 2% Integrity 15. 8% Legg Mason 8. 7% 3 Months % 1 Year % 3 Years % pa Multi. Mix Australian Shares Trust 1. 05 -13. 01 6. 32 S&P ASX 300 Accumulation Index 2. 05 -10. 98 7. 67 -1. 00 -2. 03 -1. 35 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 9
Multi. Mix International Shares Trust December 2011 Perennial 4. 3% Credit Suisse Asset Management 5. 8% Neuberger Berman 19. 9% Wellington 9. 3% SSGA 36. 6% Total Returns for period ending 31 December 2011 LSV Asset Management 24. 1% 3 Months % 1 Year % 3 Years % pa Multi. Mix International Shares Trust 0. 86 -7. 57 -2. 70 MSCI All Countries World ex Australia $A Index * 1. 60 -5. 71 -2. 71 -0. 74 -1. 86 0. 01 Excess return * International shares benchmark changed from MSCI World ex Australia $A Index (unhedged) from October 2011. Figures shown here a composite of both indexes Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 10
Multi. Mix Diversified Fixed Interest Trust December 2011 Perennial Enhanced 9. 4% IIML Income 7. 0% IIML CMT 11. 3% Loomis Sayles 11. 7% PIMCO (Aust fixed interest) 11. 3% Cash 1. 7% Perennial Australian Fixed Interest 21. 1% Total Returns for period ending 31 December 2011 PIMCO (Intl fixed interest) 26. 5% 3 Months % 1 Year % 3 Years % pa Multi. Mix Diversified Fixed Interest Trust 1. 94 8. 32 9. 22 50% UBS Comp Bond Index / 50% Barclays Capital Global Agg Index 2. 00 10. 95 7. 79 -0. 06 -2. 63 1. 43 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 11
Multi. Mix Cash Enhanced Trust December 2011 Cash 1. 1% IIML 66. 8% Total Returns for period ending 31 December 2011 Perennial 32. 1% 3 Months % 1 Year % 3 Years % pa Multi. Mix Cash Enhanced Trust 1. 33 5. 45 5. 99 UBSA Bank Bill Index 1. 22 5. 00 4. 38 Excess return 0. 11 0. 45 1. 61 Performance is net of management costs and expenses Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 12
IOOF Wholesale Income Trust December 2011 Cash 0. 9% Perennial Income Fund 99. 1% Total Returns for period ending 31 December 2011 3 Months % 1 Year % 3 Years % pa IOOF Wholesale Income Trust 2. 14 7. 18 13. 13 UBS Credit FRN Index (from 31/12/10) 1. 15 5. 13 4. 42* Excess return 0. 99 2. 05 8. 71 Performance is net of management costs and expenses Past performance is not a reliable indication of future performance. Source: IOOF *Performance figure is a composite of UBSA bank bill index and the UBS Credit FRN Index. Review of IOOF Multi. Mix Funds Dec 2011 13
IOOF Cash Management Trust • FUM: $1. 5 b • Weighted average duration: 60 days • Term deposits: 50% • Maximum exposure: CBA 33% • A 1+ exposure: 84% • A 1 exposure: 16% Total Returns for period ending 31 December 2011 1 Month % 3 Months % 1 Year % 3 Years % pa 5 Years % pa IOOF Cash Management Trust 0. 39 1. 20 5. 12 4. 30 5. 28 UBSA Bank Bill Index 0. 39 1. 21 4. 99 4. 37 5. 48 Excess return 0. 00 -0. 01 0. 13 -0. 07 -0. 20 Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 14
Multi. Mix Wholesale Australian Property Trust December 2011 Colonial First State 22. 4% Challenger 77. 6% Total Returns for periods ending 31 December 2011 3 Months % 1 Year % 3 Years % pa Multi. Mix Wholesale Australian Property Trust 4. 95 -0. 51 5. 52 S&P ASX 300 Property Trust Accum Index 3. 81 -1. 56 2. 32 Excess return 1. 14 1. 05 3. 20 Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 15
Multi. Mix Wholesale International Property Trust December 2011 Cash 1. 6% Cohen & Steers 30. 8% Total Returns for periods ending 31 December 2011 Perennial 67. 6% 3 Months % 1 Year % 3 Years % pa Multi. Mix Wholesale International Property Trust 7. 25 -5. 18 11. 37 UBS Global Investors ex Aust AUD hedged net TR 8. 86 1. 94 18. 82 -1. 61 -7. 12 -7. 45 Excess return Performance is net of management costs and expenses Past performance is not a reliable indication of future performance. Source: IOOF Review of IOOF Multi. Mix Funds Dec 2011 16
Multi. Mix Wholesale Alternatives Trust December 2011 Alternative Debt Strategy Weight % 22. 7 Subordinated Debt 14. 7 Credit Opportunities 11. 3 Cash Alternative Equity Infrastructure 51. 3 Strategy Private Equity Special Situations Weight % 15. 3 2. 3 Discretionary Hedge Funds 10. 2 Systematic Hedge Funds 43. 6 Cash 28. 6 Review of IOOF Multi. Mix Funds Dec 2011 17
Multi. Mix diversified trusts review – December 2011
Multi. Mix Balanced Growth Trust December 2011 Alternatives 10. 4% Cash 6. 8% Australian shares 29. 1% Fixed interest 16. 6% Property 7. 1% Total Returns for period ending 31 December 2011 International shares 30. 0% 3 Months % 1 Year % 3 Years % pa Multi. Mix Balanced Growth Trust 1. 32 -3. 89 4. 70 Strategic benchmark* 2. 18 -2. 62 5. 26 -0. 86 -1. 27 -0. 56 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 19
IOOF Multi. Mix Balanced Growth Trust detractions (Quarter to December 2011) Zero hedged benchmark • Zero hedged benchmark detracted from performance (US $0. 97 to $1. 03) • Hedged international shares returned 8. 7% while unhedged returned 2. 0% • Trust had unhedged stance over the December quarter and past 12 months Rationale for continued zero hedged benchmark • Our view: • AUD remains overvalued • Commodity prices may be weaker • Australian interest rates are likely to fall • AUD classified as a risk asset • Historically, markets fall, so too does A$ • AUD a natural hedge Review of IOOF Multi. Mix Funds Dec 2011 20
IOOF Multi. Mix Balanced Growth Trust detractions (Quarter to December 2011) Fixed income • Tilt away from global bonds to cash hurt as US Treasuries rallied • US 10 year government bond yield unsustainably low at 1. 88% at end of December, so we are maintaining tilt Underperformance of sector trusts • Australian equities • International listed property • Alternatives – growth • Property Plus Fund Review of IOOF Multi. Mix Funds Dec 2011 21
IOOF Multi. Mix Balanced Growth Trust detractions (Quarter to December 2011) Overweight international versus Australian equities • Australian equities outperformed unhedged international equities for the quarter • However, over the 12 month period, unhedged international equities has outperformed Australian equities Review of IOOF Multi. Mix Funds Dec 2011 22
IOOF Multi. Mix Balanced Growth Trust positive contributions (Quarter to December 2011) • Outperformance of Australian Listed Property sector • Outperformance of Alternative – Debt Trust • Fixed interest managers generally outperformed Review of IOOF Multi. Mix Funds Dec 2011 23
Asset allocation update IOOF Multi. Mix Balanced Growth Trust Asset class Target allocation (%) Range (%) Actual as at December 2011 (%) Cash & short-term securities 3 0 -15 6. 8 Diversified fixed interest 22 10 -35 16. 6 Alternative – defensive 3 0 -15 3. 3 Property 10 0 -20 7. 1 Australian shares 30 20 -40 29. 1 International shares 25 15 -35 30. 0 Alternative – growth 7 0 -20 7. 1 100 Review of IOOF Multi. Mix Funds Dec 2011 100 24
Multi. Mix Moderate Growth Trust December 2011 Alternatives 10. 0% Australian shares 17. 4% Cash 25. 4% International shares 14. 9% Property 7. 0% Fixed interest 25. 3% Total Returns for period ending 31 December 2011 3 Months % 1 Year % 3 Years % pa Multi. Mix Moderate Growth Trust 1. 76 -1. 35 5. 42 Strategic benchmark* 2. 41 -0. 18 5. 76 -0. 65 -1. 17 -0. 34 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 25
IOOF Multi. Mix Moderate Growth Trust detractions (Quarter to December 2011 Zero hedged benchmark • Zero hedged benchmark detracted from performance ($A 0. 97 to $1. 03) • Hedged international shares returned 8. 7% while unhedged returned 2. 0% • Trust had unhedged stance over the December quarter and past 12 months Rationale for continued zero hedged benchmark • Our view: • • • AUD remains overvalued Commodity prices may be weaker Australian interest rates are likely to fall AUD classified as a risk asset Historically, markets fall, so too does A$ AUD a natural hedge Review of IOOF Multi. Mix Funds Dec 2011 26
IOOF Multi. Mix Moderate Growth Trust detractions (Quarter to December 2011) Fixed income • Tilt away from global bonds to cash hurt as US Treasuries rallied • US 10 year government bond yield unsustainably low at 1. 88% at end of December, so we are maintaining tilt Underperformance of sector trusts • Australian equities • International listed property • Alternatives – growth • Property Plus Fund Review of IOOF Multi. Mix Funds Dec 2011 27
IOOF Multi. Mix Moderate Growth Trust positive contributions (Quarter to December 2011) Underweight equities (early December) • Australian and international equities underperformed cash for the month of December Outperformance of some sector funds • Outperformance of Australian Listed Property sector • Outperformance of Alternative – Debt Trust • Fixed interest managers generally outperformed Review of IOOF Multi. Mix Funds Dec 2011 28
Asset allocation update IOOF Multi. Mix Moderate Growth Trust Asset class Target allocation (%) Range (%) Actual as at December 2011 (%) Cash & short-term securities 5 0 -25 25. 4 Diversified fixed interest 35 25 -45 25. 3 Alternative – defensive 5 0 -15 5. 0 Property 10 0 -20 6. 9 Australian shares 22 10 -35 17. 4 International shares 18 5 -30 14. 9 Alternative – growth 5 0 -15 5. 1 100 Review of IOOF Multi. Mix Funds Dec 2011 100 29
Multi. Mix Capital Enhanced Trust December 2011 Australian shares 9. 1% Cash and short term securities 46. 7% Total Returns for period ending 31 December 2011 Property 5. 1% Diversified fixed interest 39. 1% 3 Months % 1 Year % 3 Years % pa Multi. Mix Capital Enhanced Trust 1. 67 4. 96 7. 82 Strategic benchmark* 1. 89 6. 27 6. 67 -0. 22 -1. 31 1. 15 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 30
Multi. Mix Conservative Growth Trust December 2011 Alternative 7. 9% Australian shares 9. 8% International shares 7. 1% Cash and Short term securities 33. 3% Property 8. 6% Diversified fixed interest 33. 3% Total Returns for period ending 31 December 2011 3 Months % 1 Year % 3 Years % pa Multi. Mix Conservative Growth Trust 1. 83 3. 16 7. 11 Strategic benchmark* 2. 08 4. 45 6. 41 -0. 25 -1. 29 0. 70 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 31
Multi. Mix Hi Growth Trust December 2011 Cash and short term securities 2. 9% Alternatives 8. 1% Property 5. 5% Diversified fixed Interest 4. 7% Australian shares 39. 5% International shares 39. 3% Total Returns for period ending 31 December 2011 3 Months % 1 Year % 3 Years % pa Multi. Mix Hi Growth Trust 1. 02 -6. 55 3. 74 Strategic benchmark* 2. 16 -5. 83 4. 14 -1. 14 -0. 72 -0. 40 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 32
Multi Series Balanced Trust December 2011 Cash and short term securities 5. 5% Diversified fixed interest 25. 3% Total Returns for period ending 31 December 2011 Australian shares 33. 9% International shares 30. 2% Australian listed property 5. 1% 3 Months % 1 Year % 3 Years % pa Multi Series Balanced Trust 1. 52 -4. 20 4. 49 Strategic benchmark* 2. 14 -2. 64 4. 44 -0. 62 -1. 56 0. 05 Excess return Performance is net of management costs and expenses. Past performance is not a reliable indication of future performance. Source: IOOF *For further information on the strategic benchmark, please refer to a copy of the IOOF Multi. Mix Trust Product Disclosure Statement available from our website www. ioof. com. au Review of IOOF Multi. Mix Funds Dec 2011 33
Strategic tilting update
Currency/overseas assets • Asset allocation committee decided to put more money offshore (Australian Equities to International Equities) for the Balanced Growth and Hi Growth Trusts (November 2010). All funds maintain a zero hedge target benchmark. • The AUD is trading at historically high levels • We see the following three main catalysts for Australian dollar weakness: • increased risk aversion from the ongoing debt crisis in Europe • RBA easing • decline in commodity prices prompted by the economic slowdown in China • Valuation on overseas shares was attractive – especially in the US • The natural hedge – if markets fall, AUD falls – GFC example • Tilt has outperformed by 4. 3% as at 31 December 2011 Review of IOOF Multi. Mix Funds Dec 2011 35
AUD/USD Source: Datastream Review of IOOF Multi. Mix Funds Dec 2011 36
Global fixed interest/cash tilt • August 2010, 20% allocated to cash funded from global bonds within IOOF’s Multi. Mix Diversified Fixed Interest Trust Rationale • US Gov’t bonds yields unsustainably low at 1. 88% • Cash and term deposits currently have a high running yield with no duration risk Status/Outcome • Since implemented, global bonds outperformed cash • Tilt has underperformed by approximately 2% as at 31 December 2011 Review of IOOF Multi. Mix Funds Dec 2011 37
US 10 year government bond yield Source: IRESS Review of IOOF Multi. Mix Funds Dec 2011 38
United diversi. AAppendices
News update • Chant West ratings confirmed January 2012 Multi. Mix sector funds review – September 2011 • Multi Series Balanced Trust Enhancements and Research House Feedback Review of IOOF Multi. Mix Funds Dec 2011 40
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