Hub News #42

ISSUE 42 SUMMER 2019

INESCAPABLE TRUTHS Investment in the decade ahead

FUTURE PROOF ENERGY Clean economy solutions

How can investors prepare for the end of the cycle?

G7 CENTRAL BANKS HOLD 40% OF THEIR RESERVES IN GOLD. IS THERE A PIECE MISSING FROM YOUR PORTFOLIO? Merian Gold & Silver Fund Every investor should consider holding gold. Unlike an ETF, this actively managed fund invests both in gold, silver and mining shares, flexing allocations as market conditions evolve.

Three reasons to consider the fund right now: • Potential to mitigate inflation • Ongoing geopolitical uncertainty • Bigger portfolio impact than a gold ETF

To find out more visit merian.com/goldandsilver

Principal partner

Investment involves risk. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Source: World Gold Council, Q3 2018. This communication provides information relating to a fund known as Merian Gold & Silver Fund.

This communication is issued by Merian Global Investors (UK) Limited (trading name Merian Global Investors). Merian Global Investors is registered in England and Wales (number: 02949554) and is authorised and regulated by the Financial Conduct Authority (FRN: 171847). Its registered office is at 2 Lambeth Hill, London, United Kingdom, EC4P 4WR. Models constructed with Geomag. MGI 02/19/0028.

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CONTENTS & WELCOME

CONTENTS 4. Four golden investment ideas 6. Dynamic asset allocation, sustainably 10. Building long-term income,

not short-term yield 14. Investing at the cutting edge: advanced

technologies in investment management 16. Defining value for fund managers 18. Five top tips for advisers with clients

approaching retirement 22. Trade tensions buck the rally 25. Future proof energy 26. Emerging market debt:

investors grow more selective 30. The asset allocation conundrum:

do you feel lucky?

34. Inescapable investment truths

for the decade ahead 36. Millennials: tomorrow’s investors 37. Reforming Brasilia

WELCOME It’s time to get creative. Markets may have been buoyed by the recent change of heart from the Federal Reserve, but it feels like a last hurrah. Economic figures are weakening: China recently reported its slowest growth numbers in almost 30 years. Markets have a distinctly ‘end of the party’ feel.

There may still be more room for equity markets to rise and there can be a cost attached to missing the last few months. Research from RBC group showed investors lose out by, on average, 19% by missing the last six months of a bear market and as much as 29% by missing the last year. However, there can be little doubt that advisers need to be thinking more strategically about where to put their clients’ assets in this environment.

With that in mind, this month’s Hub News looks at a range of options. Ned Naylor-Leyland, manager of the Merian Gold & Silver Fund, offers four ways to think about gold. Others consider areas of structural growth: Amanda O’Toole manager of the AXA World Funds (WF)

Framlington Clean Economy Fund discusses how she invests in companies benefiting from the long-term structural trend of clean economy solutions, while Schroders’ Charles Prideau and Keith Wade highlight the ‘inescapable truths’ of the global economy.

It is a time when asset allocation decisions become more important: Baillie Gifford, Invesco and Fidelity International talk about how their teams are handling the new environment, while M&G Investments discusses its new sustainable multi-asset option. The pressure is on for fund managers to show they are delivering value: Square Mile talks about how they can evidence that in the face of new FCA rules.

As always, we hope you find it an illuminating and insightful read. Please send any thoughts or feedback to enquiries@adviser-hub.co.uk.

Cherry Reynard Editor www.adviser-hub.co.uk

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FOR INVESTMENT PROFESSIONALS ONLY

PRECIOUS METALS

FOUR GOLDEN INVESTMENT IDEAS

Ned Naylor-Leyland, manager of the Merian Gold & Silver Fund, offers four ways of thinking about gold.

SECURE A SILVER LINING We characterise gold and silver as monetary metals, not precious metals, per se. Why? Well, unlike commodities such as copper, corn or oil, gold and silver trade on the currency markets. Indeed, they have currency tickers: XAU for gold and XAG for silver.

While both are currencies and commodities, silver is consumed in a number of ways in industry, such as in electronics, solar and medical instruments. Now, the benefit of this is that its return profile is roughly two times that of gold, meaning that it is a very interesting portfolio tool for a gold investor.

Dynamically including silver in a portfolio offers the potential to achieve higher returns when the market conditions are right, as silver typically increases in value faster than gold when precious metal prices are rising, although it declines faster when prices are falling.

Right now, an ounce of gold is worth around 90 times that of an ounce of silver but the natural geological ratio of around 10:1 suggests a structural bias in the valuation of gold and silver.

We expect this value gap to close in the coming years.

Nobel Laureate Milton Friedman famously said, “The major monetary metal in history is silver, not gold”. Silver has always been the money of the individual, with gold the money of the king.

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With the exception of the Dutch guilder – replaced by the euro in 2002 – nearly all monetary units are named after silver.

For example, the pound comes from a pound of silver while the dollar derives from ‘thaler’, a silver coin used throughout Europe between the 16th and 19th centuries.

GET PHYSICAL According to London Bullion Market Association data, turnover is in the hundreds of billions of dollars equivalent every day. But of that, a tiny 1-3% of overall daily traded volume is physical trading.

As such the majority of gold positions that come together to create price discovery in this market are actually various forms of credit instrument, rather than real metal. In some parts of the world, these gold obligations or credit gold instruments are openly described as ‘paper gold’, in others ‘unallocated gold’ and sometimes they are just called ‘gold’ – this is not an accurate description of the risks inherent to the instrument being offered.

Credit or paper gold is not true gold exposure; rather, it is the credit risk of the institution that issued the instrument.

“As such the majority of gold positions that come together to create price discovery in this market are actually various forms of credit instrument, rather than real metal.”

An awareness of this problem and ensuring ownership of real physical gold can turn what’s otherwise a structural risk into genuine return potential. This is fundamental to the success of a gold fund manager, and needs to be taken seriously when selecting bullion instruments in a portfolio.

Being as close to physical gold and as far away from credit gold as possible is key to successful investing in the asset class.

THE DOLLAR’S LOSS IS GOLD’S GAIN US President Richard Nixon’s 1971 announcement of a ‘temporary suspension’ of the gold standard (the dollar’s convertibility to gold) was supposed to be exactly that – temporary. But almost 50 years on, the US continues to benefit from the “exorbitant privilege” of the dollar’s reserve currency status.

Ever since the petrodollar system was imposed by the US on the rest of the world, the US dollar’s status as the world’s reserve currency has remained firmly entrenched, to the sole benefit of the US. But the world has had enough, and gold is set to benefit. The metal is the apolitical instrument that can replace the dollar as the world’s reserve currency. Gold is not sovereign money, it can’t be issued, and it is not tarred by politics: as such, it can be the objective disciplinarian to the global monetary system. The world is waking up to this.

The likes of China and Russia are looking to gold to fill the role historically played by the dollar, for example to buy oil. These aren’t mere rumblings; they are signs of material change and all potentially supportive of the yellow metal. Economic powers from China to the European Union are signalling that change is afoot. The long unspoken truth of the dollar being a political tool is finally being exposed. And the yellow metal’s re-emergence as genuine apolitical money is only good news for investors in the asset class.

DON’T MISS A TRICK Look up the International Monetary Fund/World Bank table of reserve assets and today’s Western investors might get something of a surprise – gold sits at the very top of that list.

While gold remains the go-to primary reserve asset of the world’s central banks, the global super rich, and even the developing world, the precious metal has long been shunned by most ordinary Western investors.

Almost 40% of G7 central bank reserve assets are in gold – the US Federal Reserve holds 74% – and 18% of G20 central

bank reserves are in gold, but the average investor’s portfolio exposure is a measly 0.1%1. Quite some disconnect. Academic studies suggest that 2-5% in gold, as a fixed allocation, is optimal for portfolio diversification purposes. Arguably a higher allocation is merited due to the need for systemic insurance.

Why is Western investor exposure so low? Well, for many, gold is a tiny element that sits within a basket of alternative assets. Not since the turn of the century has it been benchmarked in portfolios, or been seen as a core tenet of a balanced portfolio.

They are missing a trick.

Ned Naylor-Leyland joined Merian Global Investors in 2015 and manages the Merian Gold & Silver Fund. He has nearly two decades of experience in precious metals investing, having founded a dedicated monetary metals fund in 2009 at Quilter Cheviot. Ned began his career at Smith & Williamson.

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World Gold Council, Q3 2018.

Past performance is not a guide to future performance and may not be repeated. Investment involves risk. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money.

Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Merian Global Investors (UK) Limited (Merian Global Investors), Millennium Bridge House, 2 Lambeth Hill, London, United Kingdom, EC4P 4WR. Merian Global Investors is registered in England and Wales (number: 02949554) and is authorised and regulated by the Financial Conduct Authority (FRN: 171847).

MGI is authorised and regulated by the Financial Conduct Authority.

Any opinions expressed in this document are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or companies within the same group as Merian Global Investors as a result of using different assumptions and criteria.

Merian Global Investors uses all reasonable skill and care in compiling the information in this communication which is accurate only on the date of this communication. You should not rely upon the information in this communication in making investment decisions. Nothing in this communication constitutes advice or personal recommendation.

No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of any securities, markets or developments referred to in the document.

MGI 06/19/0076

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SUSTAINABILITY

DYNAMIC ASSET ALLOCATION, SUSTAINABLY

Maria Municchi, Fund Manager, discusses the M&G Sustainable Multi Asset Fund, which launched in February this year.

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WHY DID YOU DECIDE TO LAUNCH THE FUND? In our view, this is an interesting proposition that covers two key needs. The first is a product where the asset allocation decisions are made for the investor. We have run this type of multi-asset product for more than two decades and have a strong team, with ten fund managers and more than £20bn under management.

We have managed funds through a variety of different market conditions.

In the last few years, as interest rates have remained low, a dynamic asset allocation approach has been very important for investors. As the relationships between asset classes change over time, investors need to think differently to achieve successful diversification and generate strong returns from it.

The second need is to reflect a growing demand for living our lives more sustainably. This trend, which is altering our consumption patterns, is naturally extending into the financial products we invest in. Consumers have much more information available today and are making more informed decisions about what and how they buy products. Sustainable investing is becoming more important and sophisticated, to meet the demands of more knowledgeable and discerning investors.

WHAT IS THE ROLE OF REGULATORS AND POLICYMAKERS IN PUSHING PEOPLE TOWARDS SUSTAINABLE INVESTMENTS? Regulators and governments are becoming more sensitive to the need to address climate change as the issues it raises become more evident. Increasingly, they recognise they have to act. We are now seeing this reflected in disclosure requirements and regulations. The European Commission, for example, has just launched a vast document defining its interpretation of ‘green’ finance. The Commission’s Technical Expert Group (TEG) has devised a new taxonomy to offer a classification system that may help investors determine where they allocate their capital, and understand the resulting real world impact.

Regulators are placing the onus of compliance on asset owners, saying that incorporating environmental, social and governance criteria is part of their fiduciary duty. This fund aims to achieve a balance between avoiding certain sectors, but providing access to areas making a positive contribution to society.

HOW BROAD IS THE FUND’S INVESTMENT REMIT? As we do with other funds, we invest everywhere. This is a global unconstrained fund and we use our existing asset allocation investment process. We then aim to populate those allocation decisions with individual holdings that meet our sustainability criteria for environmental, social and governance (ESG) and impact characteristics. In some asset classes, such as equities and corporate bonds, there is an established framework for assessing sustainability. Assessing the suitability of government bonds can be more complex, though there is more data available now that we can use.

The fund will hold 20%-80% in fixed income, 20%-60% in equities and 0%-20% in other assets and aims to provide a total return of 4%-8% per annum over five years. We intend for the main driver of returns to be the asset allocation, drawing on the team’s dynamic approach, which uses behavioural factors to identify attractive investment opportunities.

HOW DOES THE ESG/SUSTAINABLE OVERLAY WORK? There are two elements to the ESG/sustainable element of the fund. First, the fund screens out companies that are in breach of the United Nations Global Compact Principles. These principles provide a framework for delivering sustainable outcomes.

This means that specific sectors, such as tobacco, alcohol and weapons, are eliminated. We also use our proprietary internal, and third-party, screening of ESG-rated companies. This aims to identify companies that uphold and promote high standards of environmental, social and governance behaviour.

In addition, we will have a core holding of 20% in investments that are providing a positive impact. This positive impact exposure is diversified across asset classes and aims to identify companies or corporations making positive progress to achieving one or more of the 17 UN Sustainable Development Goals (SDGs). For this portion of the portfolio we look at investment, intention and impact. Investment looks at business quality, focusing on opportunities and risk; intention looks at a company’s mission statement, while impact assesses its attainment of those goals.

“Consumers have much more information available today and are making more informed decisions about what and how they buy products.

Sustainable investing is becoming more important and sophisticated, to meet the demands of more knowledgeable and discerning investors.”

IS THIS MORE COMPLEX IN CERTAIN ASSET CLASSES? It can be more complex in areas such as government bonds. This is where it’s really important to do our own research and we have written a paper on why we believe that government bonds should be available for investment in sustainable strategies. We have a climate tracker and look at the ESG qualities of different countries. A country needs to pass certain thresholds as well as be attractive from an investment perspective. Some countries can introduce complex issues. Indonesia, for example, doesn’t pass our screen because the regulation around palm oil production is too weak. There is not enough impetus to clean up the forests and the industry is still destroying biodiversity.

We work very closely with the various in-house ESG and impact teams within M&G and are able to feed their research into our process as well as benefit from the oversight functions they offer.

HOW DO YOU ENSURE THE PORTFOLIO ISN’T CONCENTRATED IN SPECIFIC AREAS? We are careful to manage for sector biases, but the process of determining the asset allocation position first and then populating it can help avoid them. The 20% positive impact area is also helpful, bringing in new, diverse and interesting areas. We can use derivatives or futures to further minimise unwanted areas of concentrated risk.

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INCOME SOLUTIONS

BUILDING LONG-TERM INCOME, NOT SHORT-TERM YIELD

Investors looking to combine income and growth face a challenge.

And, with low interest rates set to persist, the problem will remain troublesome for some time. However, the Baillie Gifford Multi Asset Income Fund offers one potential solution, as James Dow explains.

AS WITH ANY INVESTMENT, YOUR CLIENTS’ CAPITAL IS AT RISK.

It’s the strongest sign yet that the global economy has not healed from the financial crisis; both the Federal Reserve and European Central Bank have recently signalled that more monetary easing may be ahead. It’s good news for borrowers but, for investors, it means that the struggle to create a reliable income from their investments goes on. A new Baillie Gifford fund seeks to offer a solution.

The Baillie Gifford Multi Asset Income Fund aims to provide an option for those looking to convert investments into an income stream. In doing this, the team recognise the importance of long-term income, rather than short-term yield. The fund prioritises resilience and sustainability of income for investors who need predictability.

As such, it is managed with the goal that the income should grow in line with inflation over a five-year period, and even in a time of stress for the economy or markets it should not drop by more than 10% from year to year. This contrasts with a passive investment in, say, a global equity tracker, where the income could fall by as much as 20%.

However, the Baillie Gifford Multi Asset Income Fund does more than seek to address long-term income needs. It also recognises the symbiosis between income and capital. Tomorrow’s capital pays tomorrow’s income. Therefore, the fund has been devised with twin objectives: to offer an attractive resilient, monthly income, and maintain the real value of income and capital.

Manager James Dow says: “Investors may well ask what a capital preservation objective is doing in an income fund.

The preservation of capital is critical to ensuring that the income is sustainable. We believe capital preservation needs to be front and centre.”

Fulfilling these objectives at a time when interest rates are low and getting lower is another challenge. In building the fund, Baillie Gifford has called on its experience in managing this type of portfolio for endowment and charity clients. These clients may need a resilient income stream for anywhere from ten to 40 years. Given their need to budget, they will want foresight into the level of income they can expect.

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Dow says: “It is all about having confidence that the income stream will be there through stressful times and they won’t have to sell assets in order to raise capital. Resilience and sustainability are really important. They need to know that their income can go on for a long time; indeed if we meet our targets it should go on in perpetuity.”

The fund launched in September 2018 and incorporates a number of different asset classes under the growth and income banner. These span equities, fixed income asset classes, infrastructure and property. Dow says that equities will help preserve the real growth of capital, while fixed income and property assets help with the level of income, adding: “Each asset class has something good to contribute, while diversification helps with the resilience.”

In the history of running this type of strategy, Dow and his colleagues have seen a real dividend benefit from owning a diverse range of asset classes. When income is under pressure in one asset class, another uncorrelated asset class may well emerge to fill the gap.

The asset allocation is determined by five different managers.

Each brings specific experience. Dow, for example, is head of the group’s global equity income portfolios. Gregory Turnbull Schwartz is head of the Investment Grade Bond team, while Nicoleta Dumitru and Felix Amoako on the Multi Asset team look after the property and infrastructure elements of the portfolio, and Steven Hay is head of Rates and Currencies.

Everyone comes together to make asset allocation decisions on the fund.

“Investors may well ask what a capital preservation objective is doing in an income fund. The preservation of capital is critical to ensuring that the income is sustainable. We believe capital preservation needs to be front and centre.”

Alongside the asset allocation decisions, the team works on scenario analysis. These are in-depth analyses of the various asset classes to consider what might happen should the macroeconomic or political environment change.

A base asset allocation is reached after referring to the history of income generation from different asset classes when they are trading at fair value. This results in approximately one-third of the portfolio being allocated to equities, one-third to bonds and one-third to property and infrastructure.

Dow says: “We then ask whether we can do better over the short term. At the moment, for example, property is less attractive and infrastructure more attractive, so we have 17% in infrastructure and 8% in property. We are a little bit underweight in equities, which currently represent under 30% of the portfolio, and we’re overweight fixed income.”

The fund has a flexible approach to asset allocation: “Our research suggests that we need a minimum of five asset classes for diversification benefits and no individual asset class should contribute more than 50% of income. We try to leave sufficient flexibility to manage the asset allocation in the best way possible,” says Dow. Portfolio construction will also take account of fund manager skill. Dow says: “We believe we are not only creating an attractive strategy for investors, but also one we can do a good job of managing. The individual components are all ones where we’ve got real strength and experience.”

All the underlying investments in the Multi Asset Income Fund are directly held, rather than using other Baillie Gifford funds within the portfolio. While at the security level there is a high degree of overlap with the firm’s other funds, Multi Asset Income is a separate entity and does not match them exactly. All of the fund’s investments are selected for their ability to generate an income, although some may be held more for capital growth purposes. And the fund currently has the second-lowest fees in its sector too.

The fund is taking an innovative approach to a recurring problem. Dow is in no doubt that it brings something new to the post-retirement market, allowing investors access to an actively managed fund, which aims to provide a consistent income and the ability to preserve capital over the long term.

The objectives stated are not guaranteed.

For financial advisers only, not retail investors. All data is as at 31 May 2019, unless otherwise stated. The views expressed in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. The article contains information and opinion on investments that does not constitute independent investment research, and is therefore not subject to the protections afforded to independent research. Some of the views expressed are not necessarily those of Baillie Gifford. Investment markets and conditions can change rapidly, therefore the views expressed should not be taken as statements of fact nor should reliance be placed on them when making investment decisions.

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Register for free at the Academy of Funds to access our latest fund research, insight and opinion.

www.squaremileresearch.com/funds

Important Information

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This communication is for the use of professional advisers and other regulated firms only. It is published by, and remains the copyright of, Square Mile Investment Consulting and Research Ltd (“SM”). SM makes no warranties or representations regarding the accuracy or completeness of the information contained herein. This information represents the views and forecasts of SM at the date of issue but may be subject to change without reference or notification to you. SM does not offer investment advice or make recommendations regarding investments and nothing in this communication shall be deemed to constitute financial or investment advice in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. This communication shall not constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any investment activity based on information contained herein, you do so entirely at your own risk and SM shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result. SM does not accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance is not a guide to future returns.

GSAMFUNDS.com

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Risk Management

Flexibility

We believe investors today are faced with a series of trends that are likely to redefine the investment landscape over the next five years.

While trends evolve over time, we think that investors are able to position themselves in anticipation of many of these today.

Contact your GSAM representative for more information on the key trends that we believe investors should consider when constructing their portfolios.

For Third Party Distributors Use Only – Not For Distribution to your clients or the General Public.

This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities. In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority.

THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO. Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant. Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.

Confidentiality: No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient. © 2019 Goldman Sachs. All rights reserved. 163557-OTU-952840 13

BIG DATA

INVESTING AT THE CUTTING EDGE: ADVANCED TECHNOLOGIES IN INVESTMENT MANAGEMENT

Javier Rodriguez-Alarcon, Head of Quantitative Investment Strategies EMEA at Goldman Sachs Asset Management, explains how the team is leveraging AI and alternative forms of data to gain an informational edge.

The rise of Artificial Intelligence (AI) has equipped portfolio managers with a new set of tools that have made it possible for investors to collect, analyse and track data at a much deeper – and infinitely faster – level than humans could otherwise achieve on their own. Active management has always been about uncovering opportunities before they are priced in by the broader market. At Goldman Sachs Asset Management, we are seeking to push boundaries by moving beyond conventional data sources and leveraging AI and alternative forms of data to gain an informational edge.

WHAT HAPPENS ONLINE IN 60 SECONDS

> 156m

> 350k

Emails sent

Tweets sent

> 29m WhatsApp messages sent

> 243k

of Netflix videos watched

>1.5m

>2m

Songs streamed on Spotify

Minutes of Skype calls

> 400hrs of YouTube videos uploaded

Source: Statista (2017). Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities.

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The world of data is growing rapidly, creating winners and losers across every sector of the economy. The recent data explosion is illustrated well by the amount of webpages indexed by Google.

In 2013, the company announced that the index has breached a 30-trillion mark. Less than four years later that number grew by another 100 trillion webpages. Without technology running behind the Google Search engine, the index would be effectively worthless. And yet we are rarely stunned by the ability of the algorithm to answer our questions within fractions of a second.

The exponential growth of data, also known as Big Data, is challenging to keep up with by itself; however, matters are further complicated by the type of data fuelling this sudden surge. While it is relatively easy to analyse structured data such as numbers, this is not the case for unstructured, alternative data such as text, video or images. The diversity of data created is astonishing and every minute, every day, each and every one of us contributes to this expansion.

As a result a disproportionate amount of data is being overlooked. We believe this structural change, combined with the modern technological capabilities, offers untapped investment opportunities never seen before.

> 3.8m Google searches

> 87k hrs

Photos uploaded to Facebook

HOW BIG IS BIG DATA?

LEVERAGING THE POWER OF AI TO READ One of the new AI technologies we have adopted within the Quantitative Investment Strategies (QIS) team to analyse unstructured data, namely text, is Natural Language Processing (NLP). The power of NLP algorithms allows us to read earnings call transcripts, research reports and press articles. With over 13,000 public corporations around the world, global investors have to digest millions of news articles, hundreds of thousands of pages in annual reports and over 30,000 hours of earnings calls every year.

NLP allows us to pick up on subtle relationships between companies that might otherwise go unnoticed – we call this intercompany momentum. Traditional momentum focuses on the persistence of price movements for a single security, while intercompany momentum seeks to understand how the

“The diversity of data created is astonishing and every minute, every day, each and every one of us contributes to this expansion.”

movement in price of one security might impact, albeit subtly, the movement in price of other related securities. These not-so-obvious relationships can be assembled from the clustering of companies in text-based data, appearing together in news articles, regulatory filings or research reports.

An extension of NLP is topic modelling – this class of algorithms is capable of summarising a large body of text into topics and themes that can be easily understood by humans. The results can be subsequently leveraged for systematic analysis in statistical and machine learning applications. In investment, these algorithms have a broad spectrum of possible applications, for example, they can be used to identify specific subjects the company management focused on in their earnings call in a given quarter, allowing for comparison with the preceding one.

INVESTMENT INSIGHTS Topic modelling can also be leveraged to establish connections between companies across different industries and sectors in a different way to the one described above.

In QIS, the language of every single securities filing published by companies is broken down by the topic modelling algorithm, looking for common words and themes. Each report is associated with a specific stock; by establishing the links to the various themes showing up in their respective filings, companies effectively self-identify which themes they are most exposed to by virtue of the words they are using to describe their business.

In order to establish the relationships implied by the discovered topics, our model tracks 500 dynamically changing themes in the market each month to understand which companies are benefiting from micro thematic trends. We aim to establish the web of interconnectivity in the marketplace in a way that is difficult if not totally invisible to the naked eye.

This analysis is powerful enough not only to pick up on the micro trends between industries, but also on broader macroeconomic dynamics. Trade war, for example, has been on everyone’s mind for the past couple of years.

Looking through securities filings we have found that companies often discuss China in the context of words like “authorities”, “enterprise”, “plant”, “receivables”, and even the word “safe”. For an investor the key takeaways are the types of companies, reflecting this theme most strongly.

At the end of 2018, the China theme was linked to commodities and chemicals providers, perhaps reflecting that early trade tariffs were largely focused on raw materials. As time went by, at the beginning of 2019, we saw a lot of production based sub-industries acknowledging their sensitivity to this effect, specifically companies within personal products, pharmaceuticals, semiconductors, and industrial machinery. As the proposed tariffs started targeting a broader circle of goods, we saw an increasing number of companies reflect this theme more prominently. The effects of the trade war have even been seen in Europe; we have observed companies with more vulnerable supply chains score worse on our themes metric. For example, this phenomenon has been observed for the technology hardware, storage and peripherals industry. Meanwhile, IT

services and software companies, which tend to be less sensitive to tariff increases, have been ranked as more attractive. The implication here is that a sub-industry analysis offers an opportunity to better identify companies one might be willing to target, given a desire to act on a view related to the trade war.

THE BEST OF MAN AND MACHINE Big Data and technology play an important role in our investment process; however, they merely serve as a decision-enhancing tool and do not replace human judgement and expertise. We maintain that expert knowledge is crucial to determining how and when to leverage technology in the investment process. Our goal is not to redefine what makes a good company but to more quickly and comprehensively measure which companies are good. At QIS we believe we have the technological capabilities as well as the expertise to harness Big Data insights with potential to deliver consistent outperformance.

Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.

Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness.

We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources.

In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority. © 2019 Goldman Sachs. All rights reserved.

Confidentiality No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient.

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REGULATION

DEFINING VALUE FOR FUND MANAGERS

The regulator wants asset managers to define more clearly the value they provide to their investors. Square Mile explores what they need to consider.

The definition of ‘value’ in fund management has come under considerable scrutiny in recent years. Increasingly, regulators are demanding that asset managers have a clear definition of the value they provide to investors. Initially, it looked like this may be a narrow cost-based definition, but recent guidance has seen that broaden out.

The concept of a value assessment emerged from the FCA Asset Management Market study in 2018: this proposed certain changes to the structure of open-ended funds, including the appointment of a minimum of two independent directors (making up at least 25% of the board). It also stated that fund managers should start to provide an annual assessment on ‘value’ to this newly independent board.

Since that point, there has been considerable debate on how ‘value’ should be defined. In January/February 2019 Square Mile and Boring Money conducted some market research with the aim to provide asset managers with an independent third-party

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view on how to assess and measure value. We asked consumers, advisers, investment trust directors, the regulator, service providers and academics for their version of value.

The FCA already has its version. It defined seven elements in its non-exhaustive list: quality of service, performance, general fund manager costs, economies of scale, comparable market rates, comparable services and classes of units. In our discussions with the FCA, we found that there were also a number of key questions that the FCA wanted asset managers to think about from the clients’ perspective: • What do I get charged?

• Can I see what I pay for?

• What simple indicator do I have that will tell me what this fund is trying to do and what it will achieve?

• What are the upsides and downsides?

• Am I paying more for a choice that I’ve made and when I’ve made that choice can I understand it?

In our view, the regulator’s primary concern is that competition is not working efficiently in this market. If investors cannot clearly understand whether a fund is meeting its objectives, how can they compare and shop around? We don’t believe that the primary objective of this project is to impose a blanket reduction in fees, but for managers properly to consider if a fund is delivering value for its customers on an objective analysis.

The FCA doesn’t want a tick-list, which is why it hasn’t been prescriptive about the rules. In doing so, we believe it is pushing the industry to raise the bar on reporting. The FCA is trying to encourage competition on how the industry displays the information. This should bring about better standards overall. A single metric is unlikely to do the job effectively and the FCA recognises this.

The Square Mile research suggests that there are four pillars of value that need to be considered: specifically – performance, cost/price, clarity and service. End investors care about the level of charges, performance compared to cash and also to similar funds, delivery versus expectations, trust in the manager and easy-to-understand documents and communication. The most important element? Returns are better than keeping money in cash.

Each fund management group will have its own interpretation of the rules, but we believe that they are asking groups to be clear about what they expect a fund to achieve and then how they have delivered against that expectation. This doesn’t lend itself to a formulaic approach.

There are two key areas that fund groups will need to address: fund costs and performance. Fund costs are difficult for investors to understand and not always easy for managers to articulate with clarity. The asset management industry mostly focuses on OCF, or an equivalent. We believe that merely looking at a fund’s OCF does not present the full picture. We think asset managers should assess and compare the OCF and its components, plus transaction costs. It should be good practice for managers to show the total cost of investment (TCI) and performance calculated shown net of TCI. On performance, our research findings suggest that funds should demonstrate that over an appropriate time period they are worth paying an active fee for, relative to a passive alternative.

They also need to be measured on criteria that reflect a fund’s specific objectives and investment style. Managers should

present their credentials in the clearest possible way, reflecting on the retail investors’ desire for the use of simple and understandable comparators.

The quality of the independent directors who are appointed to oversee these value assessments will be important.

The investment trust sector has proved that it can work in practice, with investment trust boards increasingly acting in the interests of shareholders and independently of the fund management companies.

In this way, the value assessments could prompt an important cultural shift within the industry. The asset management industry is being asked to make sure it delivers from the perspective of the recipient, removing any lack of clarity, promoting better governance and outcomes. This can only enhance the reputation of the industry over the long-term.

Each fund management group will have its own interpretation of the rules, but we believe that they are asking groups to be clear about what they expect a fund to achieve and then how they have delivered against that expectation. This doesn’t lend itself to a formulaic approach.

Square Mile has taken the output of the market research and in conjunction with feedback from AFMs, the requirements under Fund Objectives (CP18/9 and PS19/4) we have combined this with our own analysis to develop a template and service designed to support/inform asset managers’ value assessment.

We have developed a methodology and service which analyses funds and value in two specific areas: cost/charges and performance. This analysis can be tailored to support an individual asset manager’s own value assessment process and is designed to provide independent input and analysis.

Steve Kenny, Director, Square Mile To access Square Mile’s latest research, please register at squaremileresearch.com/funds

Cost:

Performance:

• Advisers not typically focused on cost of individual funds.

• Client performance expectations measured against cash or specific outcome goal.

• Advisers aim to keep the total cost of service <200bp.

• Advisers encourage clients to look at 5+ year performance assessments.

• Increasing awareness that MiFID II reporting will bring actual costs more clearly to clients’ attention - and thinking about what that means.

• Capital protection is a key consideration.

• Limited client understanding of market benchmarks.

Adviser observations are similar to consumer research findings Clarity:

Service:

• Fund objectives often unclear or vague.

• Access to fund management groups generally perceived as good.

• Industry terminology confusing e.g. Capital Growth v Income.

• Share class structure and eligibility confusing.

• Sales support is also perceived to be good at an industry level.

• Factsheets are inconsistent from one group to another.

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RETIREMENT

FIVE TOP TIPS FOR ADVISERS WITH CLIENTS APPROACHING RETIREMENT Justin Onuekwusi and Andrzej Pioch, Multi-Asset Fund Managers at Legal & General Investment Management, discuss the shift towards decumulation With over 50% of the personal pension wealth currently owned by those over 501, the industry has no choice but to respond to a steady wave of pension pots flowing from the accumulation phase into decumulation. Next to Brexit, the regulator now considers changing demographic patterns their biggest issue, with a major shift of assets towards ‘post–retirement’ products imminent.

Before the Pensions Freedom Act in April 2015, decumulation was relatively easy to navigate. At the point of retirement, many clients moved to annuities which tackled two key risks head on: (1) a regular stream of income, irrespective of market conditions, shielded investors from sequencing risk and (2) the lifetime guarantee effectively removed longevity risk from their portfolios.

This worked well up until annuity rates started to decline and some investors needed to look for alternatives. The Pensions Freedom Act unlocked the gates to a whole range of postretirement options with the same investors now free to choose what they want to do with their retirement savings.

However, we know from experience that any new freedom is followed closely by new responsibilities, with accountability not that far behind. That accountability might now fall on the shoulders of advisers. With annuities no longer the only game in town, advisers need to guide investors not just up to retirement but through retirement as well.

WHY INVESTORS NEED TO BE PREPARED FOR ACCUMULATION OR DECUMULATION The accumulation stage is often characterised by regular contributions and no withdrawals – an ideal set up for growing investment capital and distinguished by some advisers as their Centralised Investment Proposition (CIP).

The decumulation stage turns that whole scenario on its head, characterised instead by no further contributions and regular withdrawals and potentially requiring a distinct Centralised Retirement Proposition (CRP). Entering retirement means: - your contributions stop, introducing longevity risk since without regular top-ups you may live longer than your investment pot allows; - your withdrawals begin, introducing sequencing risk as you might become a forced seller in down markets, materially affecting your chances of recovery.

Faced with completely new circumstances in decumulation, mitigating these two new risks becomes an integral part of delivering appropriate outcomes to clients. The idea of a ‘distinct’ 18

proposition might become the name of the game for the regulator.

The PROD Sourcebook lays potential requirements to meet the needs of the identifiable target market and deliver appropriate outcomes to clients .2 To help advisers navigate that distinct world of decumulation, we have prepared a shortlist of five top tips for those with clients in retirement: 1. Make sure your portfolio is well diversified. Reaching out to unsustainable levels of portfolio yields at the expense of efficient diversification might be a dangerous strategy that could affect the longevity of the investment pot and increase the risk of financial ruin.

2. Consider suitability. As clients’ risk appetite evolves as they reach retirement, the decumulation proposition needs to reflect that. The suitability requirement hardly stops with the last salary payment and remains fundamental to any recommendation. One way an adviser may wish to address it is by using risk-targeted propositions which give advisers peace of mind that they will not drift across risk profiles over time.

3. Identify the ways to mitigate sequencing risk. New risks require new solutions and decumulation risks are no different.

Propositions that generate an attractive level of natural income or integrate cashflow management into their investment process might help you meet these income requirements even in volatile markets.

4. Be ready to question myths of income investing. It is time we critically re-evaluate some of the ‘rules of thumb’ used in managing drawdown assets. The ‘4% rule’ might need to be replaced with a more dynamic, market-dependent strategy and yield targeting. This may lead to significant variation of the portfolio risk over time and could need to be re-examined in the context of ongoing suitability.

5. Segregate your accumulation and decumulation portfolios.

Clear segregation of clients and distinct propositions aligned to clients’ risks and objectives might help advisers meet their PROD obligations.

The world of decumulation might sometimes appear unnecessarily complex and confusing. We believe that the five steps above could help bring more transparency and clarity for both advisers and their clients.

Office for National Statistics Report, February 2018 FCA Product Governance Sourcebook (PROD 1.1.3

1

2

The article first appeared in Professional Adviser, June 2019

â&#x20AC;&#x153;With annuities no longer the only game in town, advisers need to guide investors not just up to retirement but through retirement as well.â&#x20AC;?

Important Notice This is not a consumer advertisement. It is intended for professional financial advisers and should not be relied upon by private investors or any other persons. The views expressed within this document are those of Legal & General Investment Management, who may or may not have acted upon them.

Issued by Legal & General (Unit Trust Managers) Limited. This document should not be taken as an invitation to deal in Legal & General investments or any of the stated investments. The value of an investment and any income from it is not guaranteed and can go down as well as up. Past performance is not a guide to future performance. Exchange rate changes may cause the value of any overseas investments to rise or fall Legal & General (Unit Trust Managers) Limited. Registered in England and Wales No. 1009418. Registered office: One Coleman Street, London EC2R 5AA. Authorised and regulated by the Financial Conduct Authority.

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GLOBAL ECONOMY

TRADE TENSIONS BUCK THE RALLY

Bill McQuaker, Portfolio Manager of the Fidelity Multi Asset Open range sifts through the complicated geopolitics to unearth where he believes the opportunities lie.

This year equity markets have been benefitting from market optimism as a result of the US Federal Reserve ‘pause’ and positive noise coming from China-US trade talks but for now, both influences seem to have run their course. So, where does this leave investors looking to invest in the regions?

TALES FROM THE TRADE WARS There are major fundamental sticking points on each side of the trade dispute between the US and China, and there are real risks in having strong convictions in either a meaningful resolution or major escalation. While the resurgence of the ‘trade wars’ story has worried markets and negatively impacted sentiment, performance this year is still strong, with the US equity market up almost 15%, and down just 3% from its recent all-time peak.

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At the tail end of 2018, we did expect markets to rally given a period of overselling and were positioned accordingly. More recently, we had become a bit wary of the price action when economic ‘green shoots’ seemed thin on the ground. We maintain that a bit of price weakness is therefore a welcome development.

One of the key drivers of the global backdrop this year has clearly been the dominance of policy. In China, the most recent policy support falls short of the ‘big bang’ stimulus implemented in response to previous slowdowns in 2008 and 2015, but we do expect a pick-up in data in the second half of the year. In Europe headwinds remain, and while the ECB policy responses of delaying rate hikes and beginning a new round of targeted long-term refinancing operations (TLTROs) have at least temporarily reassured markets, we believe this to be more ‘damage control’ than major stimulus.

“The disparity between strong markets and weak fundamental data can’t continue forever”

CAN THE US GO BACK TO ‘NORMAL’?

In the United States, the Federal Reserve’s foray into policy normalisation eventually upset markets, forcing them to return to data dependency and hit the ‘pause’ button on the tightening cycle. While this ‘words-based policy intervention’ has certainly corresponded to strong market performance thus far, there are some concerning signs on the horizon.

The disparity between strong markets and weak fundamental data can’t continue forever, and the question is on what side will convergence come from? Will a market correction narrow the gap, or will economic data pick up? While there have been tentative signs of global growth stabilising, the outlook for the US economy is less promising, and we remain a tad cautious.

The corporate sector remains a key area to watch, and despite the majority of US firms soundly beating lowered earnings forecasts, positive surprises have been rewarded less than normal (0.7% vs. a five-year average of 1.0%).1Meanwhile, downside surprises have had a much more negative impact on share prices (-3.5% vs. a five-year average of -2.5%).

S&P 500

In terms of shorter-term indicators, the most recent ISM Non Manufacturing PMI index is also concerning, and indicates the weakest monthly expansion in the service sector since July 2017. We also continue to watch corporate capex and discretionary spending levels, as well as the health of leveraged loans and the rapidly growing BBB-rated corporate bond space.

Against this complicated backdrop, and as trade tensions surface in earnest once again, we do not believe it is sensible to put more risk on the table. In recent weeks we have added some exposure back to physical gold and gold equity, after reducing our position at the end of Q1, and we do suspect that there may be further weakness facing markets as optimism on trade and policy falters. But with the Federal Reserve, President Trump, and Chinese policy makers all seemingly intent on avoiding a major slowdown, we are wary about getting too negative.

30/04/2014 – 30/04/2015

30/04/2015 – 30/04/2016

30/04/2016 – 30/04/2017

30/04/2017 – 30/04/2018

30/04/2018 30/04/2019

13.0%

1.8%

17.9%

13.3%

13.5%

Source: Bloomberg, Fidelity International, 30 April 2019.

1 https://insight.factset.com/market-punished-sp-500-companies-reporting-negative-eps-surprises-in-q1

Important information This information is for investment professionals only and should not be relied upon by private investors. The value of investments and the income from them can go down as well as up and clients may get back less than they invest. Past performance is not a reliable indicator of future returns.

Investors should note that the views expressed may no longer be current and may have already been acted upon. These funds use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. These funds invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited.

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FUTURE WORLD

FUTURE PROOF ENERGY

The AXA World Funds (WF) Framlington Clean Economy Fund launched in December 2018, designed to invest in companies benefiting from the long-term structural trend of clean economy solutions.

Manager Amanda O’Toole discusses how the fund works.

The move towards a cleaner global economy is a necessity.

Resources are finite and under pressure and the planet is straining under the demands we are placing on it. For Amanda O’Toole, manager of the AXA WF Framlington Clean Economy Fund, this is the unarguable structural trend that supports the businesses in which she invests.

The Clean Economy Fund forms part of AXA IM’s growing range of global thematic funds, all designed to tap into long-term secular growth trends.

In designing the fund, the group has focused on four key areas: sustainable transport, sustainable energy, responsible nutrition and recycling and waste reduction. O’Toole says: “The reason we look at these four is that they have long-term growth in their addressable markets with clear demand for cleaner solutions.”

Technology and consumer demand are changing quickly, and there is a constant wave of innovation, she says. The shift to electric vehicles, for example, may bring demand for certain products in the short term, but in the longer term it will also require an improvement in the sustainability of the supply chain.

Companies that are involved have significant growth potential for years to come.

O’Toole’s approach is rigorous and multi-layered. The first layer is a screen, managed by the investment analytics team, which also brings in third-party feeds. This looks at the individual exposure of companies to specific issues. It identifies those companies with high and medium exposure and gives the team a clean and well-defined stock list from which to work.

The second layer of the process is an integrated ESG (environmental, social, governance) overlay. This brings the universe down to around 600 companies that the team considers investible. From there, it will build a concentrated portfolio of 40-60 holdings. At the moment, the fund holds around 50 companies.

In selecting these companies, O’Toole says: “We look at the fundamentals of the business. It needs to have a good quality management team, which can translate the growth opportunity into good margins, free cash flow and high returns for shareholders. We like to see a healthy balance sheet and a sustainable competitive advantage which creates a moat of safety around the company.”

Sustainable investment used to be seen as a smaller companies’ phenomenon, because the sector was relatively immature. This has changed significantly in recent years, however; companies are larger and the fund has a good spread

across the capitalisation spectrum. O’Toole says: “We have around 15% in small caps and 50% in mid-caps. Clearly there is a huge amount of innovation in the unlisted space, but these companies don’t have a lot of the other characteristics we look for - such as free cash flow. We watch these companies closely, but our process naturally leads us away from early stage companies.

As with all thematic funds, there is a risk that the fund is concentrated on certain areas, which leaves it exposed to certain risks. O’Toole is careful to avoid this as far as possible, ensuring a spread of geographies and sectors.

“It’s a pretty diversified portfolio. We have a range of industrials - those that are promoting resource efficiency and wind turbine manufacturers. We also hold materials companies, consumer discretionary groups, healthcare companies and life sciences.”

This is a reflection of the breadth of the shift, she says: “Every industry has its challenges with carbon and the environment.

Increasing wealth brings increasing demand for raw materials.

Companies have to be mindful of the way they use resources.”

Geographically, the fund also has a broad spread: “Innovation isn’t happening in only one place. There are some really interesting European companies, but we also find companies in emerging markets and the US.” The sectors in which the fund operates will have often had support from governments, through the need for corporates to deploy technology to meet ever more stringent regulatory requirements; or to report on their effect on the environment.

However, O’Toole is careful to invest in companies that don’t need subsidies to survive, as this can introduce another element of risk.

Consumer demand for better solutions is also supportive.

Increasingly, faced with poor environmental management, consumers just move their spending elsewhere. Furthermore, there is an important economic rationale for corporates to adopt cleaner solutions to manage their cost bases. Water and other scarce resources will cost more in the future. Investing to improve it is rational economic response, not just a ‘nice to have’.

Companies that aren’t switching are behind the curve.

A greater problem for the fund may be the excitement around many of these areas and O’Toole admits that this can drive valuations higher. However, she navigates this through the breadth and diversification in the defined universe and by varying the amount in each theme. In the long term, the growth trajectories of all areas of the Clean Economy have clear support from powerful structural trends.

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EMERGING MARKETS

EMERGING MARKET DEBT: INVESTORS GROW MORE SELECTIVE

Emerging market debt has been through some notable highs and dramatic lows, but investors have not always discriminated between individual markets. Liam Spillane, Head of Emerging Markets Debt at Aviva Investors, believes that may be about to change.

Emerging market debt has been through some notable highs and dramatic lows over the past 18 months, mirroring variable sentiment towards emerging markets in general. In these sentiment-driven markets, investors have not notably differentiated between individual markets – the beta decision has been the most important. However, Liam Spillane, Head of Emerging Markets Debt at Aviva Investors, believes a shift may be changing.

At the start of 2018, most investors saw a supportive environment for continued global growth. The economies of China, the US and Europe all looked healthy and this seemed set to continue. Then China started to slow, while European growth moderated and only the US continued to perform well. US exceptionalism became the dominant driver of markets, prompting a rally in the dollar, which, in turn, was the catalyst for further volatility in emerging markets.

Spillane says: “As is often the case, as the tide went out, it became clear who was swimming naked - Turkey and Argentina, notably. We found ourselves in a different environment.

Uncertainly and volatility were felt across the entire emerging market debt space.” In particular, there was considerable volatility in local currency debt. The Aviva Investors team hunkered down – reducing the beta of the portfolio and idiosyncratic positions in Argentina and Turkey.

In this ‘risk-off ’ environment, markets did not really discriminate between Argentina, which was doing all the right things – engaging with the IMF, intervening in their currency, managing short-term liquidity – and Turkey, where policymakers were doing little to convince domestic and international investors that the economy was on a sound footing. Spillane says: “Turkey and Argentina were grouped together as bad poster children of emerging markets. A reliance on bottom-up fundamental analysis - a key part of our process - suggested a more favourable outlook for Argentina. However, the market was unwilling to give higher beta assets the benefit of the doubt or differentiate between them.”

The market began to change toward the third quarter of 2018. For Spillane, there was no specific catalyst, but there had been such a significant drawdown in emerging market debt assets that valuations had been early to reflect the reality of global growth backdrop when compared to other asset classes.

The rally, when it came, was quick with a rapid improvement in

26

prices. But while this was good for emerging market debt investors, the market was still not discriminating between individual opportunities. Market beta remained the key consideration for investors.

However, Spillane believes the environment is continuing to evolve: “We are coming to the end of the economic cycle at some point, though the exact moment is difficult to pinpoint. Market conditions are going to evolve and there will be more return dispersion, which should create a fertile environment for managers with a strong focus on risk-adjusted outcomes such as ourselves.”

He believes the global economy is shifting. We have been in an environment where growth has been weak, but recession has been avoided. However, monetary conditions are getting easier as major central banks provide additional stimulus and the trade war has shown some tentative signs of being resolved. From here, our latest House View suggests those underlying growth concerns will remain elevated and that trade-related uncertainties will persist, but that a global recessionary environment will continue to be avoided.

He adds: “The Federal Reserve has changed its path and China is able to provide more stimulus to the global economy if required. If we are correct about our macro outlook and the positive tailwind provided by that policy support, local currency emerging market debt as an asset class could deliver as much as seven or eight per cent in dollar terms, while hard currency could deliver something similar but looks particularly attractive in risk-adjusted terms. To our mind, it remains a positive environment for fixed income and particularly for emerging market debt.”

There remain strong valuation arguments for the sector, he says. Spreads are mid-range and therefore reasonably attractive, but valuations in local currency are more attractive because of the greater potential for appreciation in emerging market currencies. Valuations are one of the four key pillars of the team’s process. The others are macroeconomics, fundamentals and technicals. He says the technicals factor – which in part looks at asset flows into the sector – is also supportive: “The long-term average of inflows into the asset class is approximately $35bn per year and yet we’ve already seen $45bn come into emerging market debt this year alone. Most of that has gone into the hard currency debt, which is more defensive. This reflects lingering

“Market conditions are going to evolve and there will be more return dispersion, which should create a fertile environment for managers with a strong focus on risk-adjusted outcomes.”

client uncertainty to a degree, which we expect to continue given the macro outlook.”

What does this look like in portfolios? The group is finding a compelling risk-reward balance in areas such as Kenya, Ghana and Nigeria, where investors are well-compensated for the underlying fundamentals. The portfolios are also overweight in Indonesia, Peru, Russia, Mexico and South Africa.

Spillane adds: “Notable countries that we haven’t invested in so far this year include Turkey and Argentina. It is easy to make a case for Argentina – with some assets yielding up to 40-50% but it is not on our preferred list yet simply because the fundamentals aren’t improving.”

Overall, his view is that emerging market debt remains in a bullish environment having already delivered returns this year of nearly ten per cent and 12 per cent for local currency and hard currency debt, respectively. Nevertheless, he also needs to look at the potential for alternative scenarios. The biggest risk, as he sees it, is that the US trips into recession, which could push the wider global economy into recession.

He says: “This would be the most concerning scenario, but the probability is quite low and diminishing. The Fed is changing direction. There is also a scenario where the US continues to perform well but China and Europe don’t improve. That scenario wouldn’t necessarily tip the global economy into recession but returns in the asset class are likely to be more muted than our expected base case.”

The group’s multi-factor investment approach is top-down and bottom-up. It is designed to help generate returns through different market environments and in different regions across the globe. For Spillane, this is the optimal way to build a diversified portfolio and ensure the portfolio does not become too heavily concentrated in the higher-yielding markets within the asset class. Aviva Investors currently has three funds based on this process – Emerging Markets Hard Currency Bond, Emerging Markets Local Currency Bond, Emerging Markets Corporate Bond – alongside strong capabilities in building segregated solutions for our investors, all of which are designed to tap into the growth in emerging markets with a diversified portfolio built to access alpha opportunities and deliver consistently strong risk-adjusted returns.

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Bringing it all together for today’s investor We are Aviva Investors. The global asset manager who chooses the power of integration.

That’s why we combine our insurance heritage with broad and deep investment capabilities to deliver outcomes that matter.

That’s why we bring together over 1,500 people in 14 countries, connecting seamlessly as one team to focus on your unique needs.

That’s why we’re breaking down barriers to ensure you get the very best of our collective expertise with every investment.

That’s why we strive to act and invest responsibly for you and the world around us.

Find out how we bring it all together at avivainvestors.com/together

For today’s investor The value of investments can go down as well as up. Investors may not get back the original amount invested.

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In Switzerland, this advertisement is issued by Aviva Investors Schweiz GmbH, authorised by FINMA as a distributor of collective investment schemes. Issued by Aviva Investors Global Services Limited. Registered in England No. 1151805.

Registered Office: St Helen’s, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority.

Firm Reference No. 119178.

RA19/0423/10042020

Summit. A multi asset range built by those who see things differently.

At Invesco, diversity of thought is central to everything that we do. We believe thinking differently makes for better decisions and more robust investment outcomes.

Summit, our new multi asset range, harnesses this by drawing on our extensive capabilities across asset classes, providing a simple investment solution designed to make your life easier.

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THIS ARTICLE IS FOR PROFESSIONAL CLIENTS ONLY AND IS NOT FOR CONSUMER USE

ASSET ALLOCATION

THE ASSET ALLOCATION CONUNDRUM: DO YOU FEEL LUCKY?

David Aujla, Investment Strategist on the Invesco Summit Growth range of funds, looks at how to avoid building binary outcomes into a portfolio.

By now I suspect we are all used to the question often posed at the start of every year, whether it is a new calendar year or a new tax year. The question can take different forms but it is essentially asking the same thing: Where should I invest my money this year to get the best returns?

The trouble is to answer that question correctly is extremely difficult. It means taking a very short-term view and also relies on being right every time. That is both unlikely and unsustainable.

While the upside returns potential from such an approach may be compelling, the downside potential is much less so. It leaves investors in a binary outcome situation, with very little protection.

RETURNS CAN VARY CONSIDERABLY Picking a market that will perform well each year is no easy endeavour. Looking back over the last 15 calendar years it is clear that there have been significant differences in return between the best and worst performing asset classes globally.

In 2017 for example, the difference in returns achieved for those invested in equities and those invested in commodities was around 17%. Similarly, bond investors achieved around half of the return that equity investors did. Where you invested your money still made a meaningful difference.

Looking within rather than between the major asset classes, the picture is similar. In the bond market (see Figure 2), the returns varied markedly between high yield, investment grade credit and government bonds.

FIGURE 1: ASSET CLASS RETURNS BY CALENDAR YEAR

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

21.62

22.93

39.95

24.63

30.95

4.50

24.15

24.36

5.98

23.09

21.07

23.03

5.79

32.81

13.79

1.37

19.94

9.15

28.44

6.77

10.83

-20.81

22.28

17.34

-0.65

11.52

2.26

11.37

3.84

29.44

6.94

-1.09

12.67

9.12

24.20

6.52

9.49

-27.14

7.12

12.92

-5.16

4.24

-2.65

1.29

-2.75

25.28

1.82

-3.37

9.01

7.77

-4.10

-25.43

-8.41

-28.37

2.43

5.61

-6.35

-4.43

-3.15

-28.83

-29.00

2.16

-3.45

-8.56

Real Estate

Source: Invesco, Bloomberg, in GBP as at 24 April 2019.

Bonds

Equities

Commodities

FIGURE 2: BOND MARKET RETURNS BY CALENDAR YEAR

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

32.42

13.14

3.59

13.69

10.57

10.20

59.40

14.82

7.49

19.55

7.33

7.40

-0.49

14.23

10.43

-0.38

14.78

10.30

1.77

6.44

4.48

-6.21

19.21

9.06

6.33

10.37

-1.28

0.01

-2.72

6.02

7.29

-2.37

8.12

5.31

-6.66

4.48

3.16

-26.81

2.63

5.90

3.12

1.83

-4.30

-0.79

-3.29

1.65

6.44

-4.06

Source: Invesco, Bloomberg, in GBP as at 24 April 2019.

Global High Yield

Similarly, different equity regions performed well at different times (see Figure 3), despite what has felt like persistent US equity market leadership over the last decade.

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Global Investment Grade Credit

Global Treasuries

For UK investors exposed solely, or heavily, to our home equity market in recent years, it is clear that this has been at the expense of returns.

FIGURE 3: EQUITY REGION RETURNS BY CALENDAR YEAR

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

55.36

29.14

66.93

25.68

48.38

-3.64

84.31

31.29

2.53

17.54

30.01

20.53

14.65

56.65

25.77

1.32

40.72

17.25

49.75

19.55

37.89

-14.45

61.49

25.45

-1.81

17.02

26.62

11.45

7.14

33.65

25.75

-0.48

35.09

15.26

40.20

17.58

35.96

-20.81

57.36

23.50

-6.35

13.24

26.17

11.37

5.90

33.27

16.72

-3.37

34.07

14.17

35.67

16.39

15.68

-23.32

36.58

23.17

-8.74

13.23

24.14

10.00

5.68

33.10

14.08

-7.56

29.15

14.12

27.84

14.60

10.83

-24.67

29.28

19.64

-10.48

12.05

22.46

8.64

4.46

29.44

13.79

-7.60

25.83

13.55

27.18

6.77

6.56

-27.01

27.67

19.62

-13.70

11.52

21.07

4.23

3.84

28.42

13.63

-8.21

22.69

11.47

24.94

5.24

5.04

-28.40

22.28

19.21

-13.93

10.86

18.37

2.58

-2.27

28.05

13.47

-8.79

21.62

8.19

24.20

4.86

4.77

-33.52

20.32

17.34

-14.54

10.18

2.07

0.44

-3.53

23.62

13.33

-8.84

18.79

7.77

20.10

1.28

4.02

-33.70

14.75

12.21

-17.72

4.51

-4.18

0.19

-9.70

19.56

11.73

-9.05

16.60

3.05

17.86

-6.57

-5.51

-36.22

-3.86

5.90

-18.71

3.90

-14.89

-6.54

-26.90

19.16

11.27

-9.24

Source: Invesco, Bloomberg, in GBP as at 24 April 2019.

Latin America EM

Asia Pac x Japan Global

Global Small Cap Global Mid Cap

Europe ex UK USA

UK Japan

A MORE PRAGMATIC APPROACH Is there a better way to allocate capital? Taking a multi-asset approach means building a more diversified portfolio of assets that is less susceptible to the â&#x20AC;&#x2DC;feast or famineâ&#x20AC;&#x2122; of short-term binary decisions. While this approach may mean that investors miss out on being fully exposed to the best-performing asset class, region, or market in a given year, those investors also avoid the pain of being solely exposed to the worst-performing ones too. This is particularly important in falling markets as demonstrated in 2018, 2011 and in 2008 (see Figures 1, 2 and 3).

Multi-asset investing is a pragmatic approach which allows investors to express preferences for those asset classes and regions that they think have the potential to perform strongly over the long term. At the same time it could afford them downside mitigation, greater risk-adjusted returns potential, and improved sustainability of returns that a truly diversified portfolio can bring. After all, the wider the spread across various asset classes, regions or markets, the lower the correlation between them, hence the lower the level of overall risk.

Investment risks The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. The Invesco Summit Growth range has the ability to use derivatives for investment purposes, which may result in the funds being leveraged and can result in large fluctuation in the value of the funds. The funds may be exposed to counterparty risk should an entity with which the funds do business become insolvent resulting in financial loss. The securities that the funds invest in may not always make interest and other payments nor is the solvency of the issuers guaranteed. Market conditions, such as a decrease in market liquidity for the securities in which the fund invests, may mean that the fund may not be able to sell those securities at their true value. These risks increase where the funds invest in high yield or lower credit quality bonds and where we use derivatives. The funds invest in emerging and developing markets, where there is potential for a decrease in market liquidity, which may mean that it is not easy to buy or sell securities. There may also be difficulties in dealing and settlement, and custody problems could arise.

Important information This document is for professional clients only and is not for consumer use. All data in this document as at 24 April 2019 unless otherwise stated. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

For the most up-to-date information on our funds, please refer to the relevant fund and share class-specific Key Information Documents, the Supplementary Information Document, the Annual or Interim Reports1 and the Prospectus, which are available using the contact details shown.

1 As the Invesco the Invesco Summit Growth Range launched on 19 July 2018, the first reports will be issued on or before the following dates.

Interim: interim to 31 January 2019, Annual to 31 July 2019. Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henleyon-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.

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33

ECONOMICS

INESCAPABLE INVESTMENT TRUTHS FOR THE DECADE AHEAD

Our inescapable truths are the economic forces and disruptive forces likely to shape the investment landscape over the years to come. Schroders’ Charles Prideaux, Global Head of Product and Solutions, and Keith Wade, Chief Economist & Strategist, give their views.

It seems clear to us that the world investors have got used to over the last few years is very different to the one we need to get accustomed to in the years to come.

We have identified a number of economic forces and disruptive forces we think will shape the investment landscape ahead of us. They represent our “inescapable truths”.

DISRUPTIVE FORCES We think disruption will come from a number of angles in the years to come.

MARKET DISRUPTION

ECONOMIC FORCES We believe a confluence of factors will set the scene for a slowing global economy in the next decade: • • • • • •

Slower growth in the global labour force Poor productivity growth Ageing populations A growing role for China Low inflation Low interest rates

This backdrop is similar to the one we have seen since the global financial crisis, where equity and bond markets have performed well despite low growth and inflation. However, the big difference for the years to come is that there will no longer be the tailwind of ultra-loose monetary policy, where interest rates have been kept well below inflation.

As interest rates normalise and quantitative easing (QE) unwinds, we think there will be a greater focus on the reliability of corporate earnings as market volatility increases. Just because GDP growth will be lower, it does not necessarily mean that companies’ profit growth will be lower.

Returns from market indices will also be lower, we believe.

Investing passively (tracking a market index) is not likely to reap the returns investors have grown to expect.

The implication is simple: there will be greater need for active fund managers who can generate alpha – i.e. who can beat the market – in the period to come.

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• Changing patterns of finance. Banks are likely to play a reduced role in financing economic activity and other forms of funding will grow in importance. We expect the corporate bond market to expand along with private equity and alternatives such as peer-to-peer lending and crowdfunding.

• The end of QE. Other central banks are likely to follow the US’ lead in gradually reducing the assets on their balance sheets. These were assets bought via QE – a measure to ward off the fallout following the financial crisis. This unwinding will increase the supply of government bonds and corporate bonds to the private sector. It should be welcomed given the present shortage of these supposedly “safe” assets and with more retiring savers seeking investments that may offer greater financial security.

“Technology can bring greater efficiency in production, but can also increase displacement in the labour market as traditional jobs become obsolete.”

TECHNOLOGICAL DISRUPTION • Changing business models. Technology creates unique challenges for investors through its tendency to disrupt existing businesses and create winners and losers.

Clearly picking those who are on the right side of technological progress will continue to be key for investment performance.

• Displacement of jobs. Technology can bring greater efficiency in production, but can also increase displacement in the

labour market as traditional jobs become obsolete. The increased use of robotics and AI (artificial intelligence) will affect a wider range of professions. This may worsen the problems of inequality and potentially bring even greater political disruption.

ENVIRONMENTAL DISRUPTION • Rapid action is needed. Our views of the future are complicated by growing tensions between the real economy and the natural environment – and climate change in particular. The challenge has been centuries in the making, but remedial action will have to be far faster to avoid its worst impacts.

• Unchecked environmental damage will have severe economic and social consequences. While inaction implies significant long-term risks, steps to avoid the worst effects of climate change will also prove necessarily disruptive.

POLITICAL DISRUPTION • Government finances will come under pressure. The economic outlook will undermine government finances, while ageing populations will increase pension spending and demand for healthcare. The ability of governments to meet voter expectations will become increasingly challenged and may feed further populist unrest.

• Pressure on individuals will grow. Government challenges will mean people will have to take greater individual responsibility for funding their retirement and healthcare.

• The rise of populism will increase political complexity.

Policies to temper the impact of globalisation through restrictions on trade, immigration and capital flows are increasingly likely to emerge.

In summary, after almost a decade of strong returns many investors have become complacent about the outlook. This assessment suggests that in a more challenging future environment, factors such as asset allocation, access to multiple sources of return, active stock selection and risk management will be critical in meeting the goals of investors over the next decade.

As we enter the next phase of the post-global financial crisis era, these inescapable truths can help guide investors through a time of unprecedented disruption.

View the full paper at: www.schroders.com/insights

Important Information: Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. All investments involve risks including the risk of possible loss of principal. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors. The views and opinions contained herein are those of Schroders’ Economics team and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds and may change. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Any data has been sourced by us and is provided without any warranties of any kind. It should be independently verified before further publication or use. Third party data is owned or licenced by the data provider and may not be reproduced, extracted or used for any other purpose without the data provider’s consent. Neither we, nor the data provider, will have any liability in connection with the third party data. Any references to securities, sectors, regions and/or countries are for illustrative purposes only. Issued

by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

35

RESPONSIBLE INVESTING

Will Oulton First State Investments

MILLENNIALS: TOMORROW’S INVESTORS Will Oulton, Global Head of Responsible Investment, First State Investments, asks whether the investment ecosystem IS ready to meet the needs of the next generation of investors?

Much has been made of the demographic changes underway in each generation but none more so than that of millennials who may be far from being old enough to retire but have reached working age. They not only have a major influence on consumption trends, particularly in the digital arena, but also disposable incomes that will grow with age and look set to have their own demands and characteristics in terms of financial services. This applies equally to individuals’ savings and pension funding, which though maybe a distant concern for most millennials, are an important financial consideration of our current time.

Last summer, First State Investments and Kepler Cheuvreux undertook a joint research project of millennials and non-millennials to test the views and preferences of millennials regarding their understanding and attitudes towards sustainable and responsible investment (RI) that yielded interesting and thought-provoking results: 1. Over 80% of millennials in our survey that don’t already invest in RI are either ‘interested’ or ‘very interested’.

2. The majority (79%) of millennial respondents thought friends/colleagues of their age are more easily convinced than previous generations of the importance/reach/interest of responsible investments. There is significant potential for this drive for responsible purchasing to be applied to financial services.

3. The majority of both millennial and non-millennial respondents (81%) want more education on the topic of RI. This presents an opportunity for those in the industry to make responsible investments as a whole more accessible and easily understood by a wider consumer market.

4. Well-established specialisms in RI are a major factor in encouraging investment in a particular provider. The majority (78%) of respondents say that expertise in RI would be a reason for choosing an asset manager/financial services provider over another.

5. Environmental concerns still reign with over a third choosing this as the most important broad thematic in ESG (environmental, social and governance).

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6. In our survey, a slight majority of respondents thought the application of ESG investment methodologies would boost long-term returns. This applied almost equally for millennials as it did for all respondents, including all age groups at 57% and 56% respectively.

7. We asked how many controversial company incidents over a 12-month period would cause an investor to change an investment fund. The majority (58%) replied that it would only take between two to five controversies to sway their choice. RI products may have a greater potential vulnerability around perceived corporate controversies than is currently realised.

8. Almost half believed going digital could be a driver in increasing uptake of RI products. This could be via easier access to investment platforms or a higher level of information on the RI characteristics of a specific product.

Read the full report and our analysis of the RI views of the next generation here: go.firststateinvestments.com/millennial-research This document is not a financial promotion and has been prepared for general information purposes only and the views expressed are those of the writer and may change over time. Unless otherwise stated, the source of information contained in this document is First State Investments and is believed to be reliable and accurate.

References to “we” or “us” are references to First State Investments. First State Investments recommends that investors seek independent financial and professional advice prior to making investment decisions. In the United Kingdom, this document is issued by First State Investments (UK) Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 143359). Registered office: Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB, number 2294743.

Outside the UK within the EEA, this document is issued by First State Investments International Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 122512). Registered office 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063. The Financial Conduct Authority (registration number 143359). Registered office: Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB, number 2294743. Outside the UK within the EEA, this document is issued by First State Investments International Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 122512). Registered office 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063. On 31 October 2018, MUFG’s trust banking entity, Mitsubishi UFJ Trust and Banking Corporation (MUTB) announced its intentions to acquire 100% of Colonial First State Global Asset Management/First State Investments (CFSGAM/ FSI) from the Commonwealth Bank of Australia (Transaction). The Transaction is expected to complete in mid-2019, subject to regulatory approvals.

EMERGING MARKETS

Thomas Smith Neptune Investment Management

REFORMING BRASILIA

Thomas Smith, Investment Director, Neptune Investment Management, discusses the changes seen under new President Jair Bolsonaro.

Ever since Jair Bolsonaro was elected President of Brazil, the primary focus has been on the progress being made with the much-needed pension reform. Not only is the Brazilian pension system fiscally unsustainable, it disproportionately favours public sector employees. Highly unpopular when first introduced in 2016, it is now widely acknowledged that a comprehensive pension reform is essential to ensure fiscal stability for Brazil.

Following the appointment of Paulo Guedes as Minister of the Economy, the government announced a wide-ranging reform agenda and a comprehensive pension reform. The proposal will generate R$1.1tn in savings over ten years and includes the establishment of a minimum retirement age (Brazil is one of few countries without one) and unifying social security rules for public and private sector employees.

There are a number of developments that further illustrate the business-friendly nature of the current government. There have been ongoing privatisations with asset sales at Petrobras, Eletrobras and Banco do Brasil and a number of bills that will create opportunities for foreign and domestic private investors.

Other proposed bills will cut the number of ministries and increase autonomy at the central bank and regulatory agencies.

The scope of reforms will help to lower the cost of capital, stimulate investment and support higher long-term growth.

Meanwhile, the economy is gradually recovering from the deepest recession in decades. The downturn left material spare capacity in the economy which has allowed for a recovery without creating inflationary pressures, and the central bank arenâ&#x20AC;&#x2122;t expected to raise interest rates this year. As corporates were forced to slash costs and strengthen balance sheets, a high degree of operating leverage is feeding through into a sharp earnings recovery. Additionally, Brazil has been one of the few areas within emerging markets to see consistent upward revisions to earnings estimates in recent months.

One might expect the Brazilian market to be trading at premium valuations much like India did following the election of Modi back in 2014. However, at 10x forward earnings the Brazilian market is trading at a discount to its historical levels and to emerging markets. Current valuations are providing a number of excellent long-term opportunities where strong short-term earnings momentum is combined with medium-term growth opportunities as Bolsonaro and Guedes deliver their broad reform agenda.

CUMULATIVE PERFORMANCE TO 31.05.2019 (%) Name

Neptune Latin America Fund

MSCI Emerging Markets Latin America

Latin America funds

Rank

1yr 3yrs 5yrs

19.5 83.7 44.3

14.6 65.5 26.2

13.5 55.8 20.1

2/15 1/15 2/15

Source: FE Analytics, data to 31/05/2019 primary share class performance, in pound sterling, net income reinvested and no initial charges.

The performance of other share classes may differ and past performance is not a guide to future performance. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted.

Investment risks The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the original amount invested. Investments in emerging markets may be higher risk and potentially more volatile than those in developed markets. References to specific securities and sectors are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities and sectors.

The content of this is formed from Neptuneâ&#x20AC;&#x2122;s views as at the date of issue. We do not undertake to advise you as to any change of our views. Neptune does not give investment advice and only provides information on Neptune products. Please refer to the Prospectus for further details.

37

See the world through the eyes of the investor

bnymellonim.com

38

PARTNER DETAILS AVIVA INVESTORS t: 020 7809 6521 e: avivaciss@avivainvestors.com w: avivainvestors.com/en-gb

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FIRST STATE INVESTMENTS t: 020 7332 6500 e: enquiries@firststate.co.uk w: firststateinvestments.com

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GOLDMAN SACHS ASSET MANAGEMENT t: 020 7774 7779 e: fundinfo-uk@gs.com w: gsamfunds.com

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Tel: 020 3004 4479 Email: enquiries@adviser-hub.co.uk Adviser-Hub 4th Floor, 33 Sun Street London, EC2M 2PY ADVISER-HUB IS FOR FINANCIAL ADVISERS ONLY AND IS SUBJECT TO TERMS AND CONDITIONS. FOR FULL DETAILS, SEE WWW.ADVISER-HUB.CO.UK OR EMAIL ENQUIRIES@ADVISER-HUB.CO.UK 40