ABSOLUTE RETURN INVESTMENTS

ABSOLUTE RETURN INVESTMENTS
“CAPITAL PROTECTION”
October 2014 updates
ABSOLUTE RETURN CAPABILITY
 We target
positive absolute returns under varying
market conditions
 Our portfolios are
diversified across all asset classes,
including equities, property, bonds, cash and alternatives
 The common theme of all of our portfolios is
protection
capital
“Prophesy as much as you like, but always hedge.”
Oliver Wendell Holmes
2
THE TEAM
Capital protection is the cornerstone of our investment philosophy
Tom Connell, CA
Boutique Head
John Gilchrist, MBA CA(SA)
Chief Investment Officer & Portfolio Manager


Experience 30 yrs; Group 18 yrs

Saul Burman, FIA CFA B.BusSc (Hons) Act. Sci.
Portfolio Manager
Hanno Niehaus, BEcon (Hons) CFA
Portfolio Manager



Absolute Return Funds
Experience 18 yrs; Group 18 yrs

Absolute Return Funds
Experience 16 yrs; Group 15 yrs
Bivashen Naidoo, FIA CFA CAIA B.BusSc (Hons)
Investment Structuring Actuary
Nelisiwe Nzama, EMBA B.Com (Hons) Act. Science
Portfolio Manager



Absolute Return Funds
Experience 10 yrs; Group 6 yrs

Absolute Return Funds
Experience 15 yrs; Group 8 yrs
Tassius Chigariro, BSc (Hons) FIA, CFA
Portfolio Manager
Bryn Hatty, CA(SA) CFA B.BusSc (Hons) B.Com (Hons)
Portfolio Manager



Absolute Return Funds
Experience 16 yrs; Group 9 yrs
Theresa Delcarme, BSc
Business Development Executive

3
Absolute Return & Hedge Funds; Structured Products
Experience 17 yrs; Group 9 yrs
Experience 21 yrs; Group 21 yrs

Absolute Return & Hedge Funds; Structured Products
Experience 15 yrs; Group 7 yrs
OLD MUTUAL DYNAMIC FLOOR FUND
Fund Objective
4
Performance target
CPI
Risk Rating
3 – Moderate
Manager
Hanno Niehaus/Saul Burman – Absolute Return
Investments
Underlying assets
Floor Fund Technology; Derivatives used to manage
downside risk and to capture or lock in gains
Who should invest?
Investors who strive for long term capital growth with a
level of capital protection
Investment Term
3 Years +
TER
2.09% (includes performance fee of 1.04% as at 30.09.14)
Risk Stats
Fund
JSE ALSI
Balanced
Standard Deviation (5 Yrs)
4.8%
12.2%
7.1%
Max 2008/2009 Drawdown
-3.9%
-40.4
-23.6%
Fee Hurdle: CPI + 2% (15% sharing rate)
With effect Jan 2015, the DYF has a flat fee. In the interim we will levy the lower of the two fees.
PROVEN CAPITAL PROTECTION
110
100
-3.9%
90
-19.7%
80
70
-20.7%
Old Mutual Dynamic Floor Fund
60
Balanced Fund
JSE All Share Index
Source: MorningStar
50
May-08
5
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
OLD MUTUAL DYNAMIC FLOOR FUND
Absolute performance and risk objectives
6
Return Objective
CPI + 4% to 5% p.a. (gross of fees)
Risk Objective
Capital protection over rolling 1 year
Since November 2002
Dynamic
Floor Fund
Balanced
Fund
JSE All
Share
Highest 1-year return
+32
+46
+73
Lowest 1-year return
-5
-23
-38
Source: S&P Fund Services and Old Mutual Investment Group
Fund returns are net of management fees
OLD MUTUAL DYNAMIC FLOOR FUND
Performance since inception to 31.10.14
Old Mutual Dynamic Floor Fund
Floor - 12 Months forward*
360
340
320
Indexed Returns
300
280
260
240
220
200
180
160
140
120
100
80
7
* This floor level only applies to new investors in 12 months’ time and is an objective, not a guarantee
Source: S&P Fund Services & Old Mutual Investment Group.
CPI + 4% p.a. (net of TER)
OLD MUTUAL DYNAMIC FLOOR FUND
Capital protection over rolling 12 month periods
Old Mutual Dynamic Floor Fund
90% of Capital
35%
30%
25%
% Returns
20%
15%
10%
5%
0%
-5%
-10%
-15%
Oct-03
8
Oct-04
Oct-05
Source: Old Mutual Investment Group. Data to 31.10.14
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
OLD MUTUAL DYNAMIC FLOOR FUND
Effective exposure as 31 October 2014
Cash and
Money
Market
41%
Inflation-Lin
ked Bonds
21%
9
Source: Old Mutual Investment Group
Equity
37%
Quoted
Property
1%
OLD MUTUAL CAPITAL BUILDER FUND
Fund Objective
10
Performance target
Standard Bank Call for amounts >R1 Million
Risk Rating
2 – Moderately Conservative
Manager
John Gilchrist – Absolute Return Investments
Underlying assets
Equity Exposure (65%-75%) with hedging overlay reducing effective
Equity Exposure (0%-40%) with Large Cap Focus; Property; Bonds;
Cash
Who should invest?
Investors who require tax efficient growth in excess of cash with
capital protection – aims to avoid losses over 3 months (tax quarters)
Investment Term
3 Years +
TER
2.13% (includes performance fee of 1.09% as at 30.06.14)
Risk Stats
Fund
Benchmark
Standard Deviation (3 Yrs)
3.2%
9.2%
Standard Deviation (5 Yrs)
3.4%
17.3%
% Positive Tax Quarters
73.1%
100.0%
Fee Hurdle: Standard Bank Call for amounts >R1Million (15% sharing rate)
OLD MUTUAL CAPITAL BUILDER
Performance history (inception to October 2014)
 Targets gross return of Cash+3% over rolling 3 years
240
230
220
210
200
190
Capital Builder:
Cash + 3.2%
Cash+ 3%
Cash
180
170
160
150
140
130
120
110
Source: Absolute Return
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
100
11
Notes:
Returns until February 2008 are based on the Capital Builder institutional portfolio, while returns from March 2008
onwards are the unit trust returns (gross of unit trust related fees).
OLD MUTUAL CAPITAL BUILDER
Performance history (inception to August 2014)
 Targets positive quarterly returns
10%
Aims for quarterly capital protection
Capital Builder Quarter Returns
8%
Average Quarterly Cash
6.6
6%
4.9
4.0
2.2
2%
1.9
1.0
0.7
2.3
2.2
0.6
12
-0.1
-0.7
2.5
0.3
-0.4
Notes:
Returns until February 2008 are based on the Capital Builder institutional portfolio, while returns from March 2008 onwards are the
unit trust returns (gross of unit trust related fees).
Q3 14
Q2 14
Q1 14
Q4 13
Q3 13
Q1 12
Q4 11
Q3 11
Q2 11
Q1 11
Q4 10
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q1 09
Source: Absolute Return
Q4 08
Q3 08
Q2 08
Q1 08
Q4 07
Q3 07
Q2 07
Q1 07
Q4 06
Q3 06
Q2 06
Q1 06
-2%
-0.4
2.6 2.5
0.1
0%
-0.8
2.7
2.6
3.4 3.2 3.2
Q2 13
2.2
2.8
3.6
Q1 13
3.0 2.9
4.1
3.5
Q4 12
4.0
Q3 12
4.1
4%
Q2 12
GROSS RETURN PER QUARTER
8.5
OLD MUTUAL CAPITAL BUILDER
Performance history since inception
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Q1
8.5%
4.9%
0.7%
1.0%
-0.7%
2.2%
2.6%
2.6%
3.2%
*Q2
4.1%
4.0%
4.0%
6.6%
1.9%
0.6%
0.1%
2.5%
3.2%
*Q3
3.0%
2.2%
-0.8%
2.2%
-0.1%
-0.4%
2.7%
0.3%
2.5%
*Q4
2.9%
2.8%
-0.4%
3.5%
4.1%
2.3%
3.6%
3.4%
**0.0%
Annual
Return
16.8%
11.2%
7.2%
12.2%
6.3%
3.5%
10.1%
10.0%
Return above
Cash
9.9%
1.9%
-4.3%
4.3%
0.5%
-1.5%
5.5%
5.6%
*Capital Builder quarters are in line with the tax year: ending 28 February, 31 May, 31 August and 30 November
** Quarter to date (Return for Sept and Oct 2014)
13
Notes:
Returns until February 2008 are based on the Capital Builder institutional portfolio, while returns
from March 2008 onwards are the unit trust returns (gross of unit trust related fees). | Source: Absolute Return
OLD MUTUAL CAPITAL BUILDER
Current positioning
Effective exposures at 31 October 2014
Cash &
Money
Market
40.0 %
Physical
Equities
54.8 %
Inflation
Linked
Bonds
5.2 %
Hedged
Equity
37.0 %
14
Effective
Equity
17.8 %
OLD MUTUAL CAPITAL BUILDER
Long term performance analysis
200
175
Capital protection brings stability to the portfolio
BEAR
MARKET
BULL
MARKET
+33%
150
125
0%
+22%
100
+65%
75
50
+89%
-43%
Capital Builder
15
MIXED
MARKET
Source: Old Mutual Investment Group
Top 40 Equity
5 years since
2008
drawdown
OLD MUTUAL CAPITAL BUILDER
Illustration of returns net of fees & net of tax
9.9% pa1
Fees = 1.6%3
Tax = 1.7%
(tax rate = 20%4)
6.6% pa
Untaxed investor
Return after fees
1.6% pa higher
40% taxed investor
Return after tax and
fees 2.6% pa better
6.7% pa2
Tax = 2.7%
(tax rate = 40%)
4.0% pa
Source: Old Mutual Investment Group
Capital Builder
16
Cash
Notes:
1. Based on Capital Builder Institutional Fund returns from 1 Dec 05 to 28 Feb 08, and Unit Trust institutional returns thereafter
2. Average call rate for +R1m deposits since 1 Dec 05
3. Fees calculated as 0.9% + (15% of benchmark outperformance) + VAT
4. Tax rate calculated as the average for investors in Capital Builder since inception, future rate may be different
REGULATORY INFORMATION
Old Mutual Investment Group (Pty) Limited
Physical Address: Mutualpark, Jan Smuts Drive, Pinelands, 7405
Telephone number: +27 21 509 5022
Old Mutual Investment Group (Pty) Limited (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the
Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory
and Intermediary Services Act 37 of 2002.
Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments.
Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not
necessarily a guide to future investment performance. The investment portfolios may be market-linked or policy based. Investors’ rights
and obligations are set out in the relevant contracts. In respect of pooled, life wrapped products, the underlying assets are owned by
Old Mutual Life Assurance Company (South Africa) Limited who may elect to exercise any votes on these underlying assets
independently of Old Mutual Investment Group. In respect of these products, no fees or charges will be deducted if the policy is
terminated within the first 30 days. Returns on these products depend on the performance of the underlying assets.
Disclosures: Personal trading by staff is restricted to ensure that there is no conflict of interest. All directors and those staff who are likely
to have access to price sensitive and unpublished information in relation to the Old Mutual Group are further restricted in their dealings
in Old Mutual shares. All employees of the Old Mutual Investment Group are remunerated with salaries and standard incentives. Unless
disclosed to the client, no commission or incentives are paid by the Old Mutual Investment Group to any persons other than its
representatives. All inter-group transactions are done on an arms length basis. We outsource investment administration of our local
funds to Curo Fund Services (Pty) Ltd, 50% of which is owned by the Old Mutual Investment Group.
Disclaimer: The contents of this document and, to the extent applicable, the comments by presenters do not constitute advice as
defined in FAIS. Although due care has been taken in compiling this document, Old Mutual Investment Group does not warrant the
accuracy of the information contained herein and therefore does not accept any liability in respect of any loss you may suffer as a
result of your reliance thereon. The processes, policies and business practices described may change from time to time and Old Mutual
Investment Group specifically excludes any obligation to communicate such changes to the recipient of this document.
Old Mutual Investment Group has comprehensive crime and professional indemnity insurance. For more detail, as well as for
information on how to contact us and on how to access information please visit www.oldmutualinvest.com.
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