alternative investments: benefits, risks & implementation€¦ · asset management equity and...

Alternative Investments: Benefits, Risks & Implementation

For registered representative use only; not for public viewing or distributionInvestment products: No bank guarantee I Not FDIC insured I May lose value

For registered representative use only. Not for public viewing or distribution. Investment products: No bank guarantee I Not FDIC insured I May lose value

Table of contents

01 Today’s asset allocation challenge

02 Alternative Investment: Hedge Fund Strategies

03 Alternative Investment: Real Asset Strategies

04 Portfolio Construction Utilizing Alternative Investments

05 Investment Outlook – Alternatives

06 Appendix


01 Today’s asset allocation challenge


Deutsche Asset Management

Equity and fixed income offer lower returns

3

Source: Morningstar as of 12/31/15. Performance is historical and does not guarantee future results. Asset class representations: U.S. stocks, S&P 500; U.S. bonds, Barclays U.S. Aggregate Index, and cash, 3-month U.S. Treasury bill. This chart is for illustrative purposes only. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directlyin an index.

Asset class total returns by decade

17.55% 18.21%

4.06%

12.43%

7.70%5.37%

8.89%4.92%

1.73%1980's 1990's 2000-2015

U.S. Stocks U.S. Bonds Cash



Investors need to take more risk for lower returns

4

Source: Morningstar as of 12/31/15. Performance is historical and does not guarantee future results. Balanced portfolio – 60% U.S. stocks, S&P 500 and 40% U.S. bonds, Barclays U.S. Aggregate Index. This chart is for illustrative purposes only. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

Risk and return of a balanced portfolio by decade

15.76% 15.90%

4.26%

12.03% 10.70% 11.66%

1980's 1990's 2000-2015Return Risk

A balanced fund investor would need to accept more than 11% volatility to achieve 4% total return



1 1 4 4 3

26 222 1

82

25 25

Number of days S&P 500 Index up >+ 4% Number of days S&P 500 Index down >- 4%

Volatility has increased

5

Source: Morningstar as of 12/31/15. Performance is historical and does not guarantee future results. This chart is for illustrative purposes only. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

The S&P 500 Index had more (+ or – 4%) trading days from 2008 through 2015 (47) as the previous 58 years combined (38).

Number of days the S&P 500 Index was up or down more than 4% (1950 to 2015)

1950s 1960s 1970s 1980s 1990s 2000s 2008–20153 2 4 12 5 51 47



And correlations have increased

6

Source: HFR Industry Reports, © HFR, Inc [Q3 2015], www.hedgefundresearch.com. Performance is historical and does not guarantee future results. This chart is for illustrative purposes only. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

Correlations to the S&P 500 by decade Name Correlation(1/1/2000-2/31/2015)

Moderate allocation funds 0.98Conservativeallocation funds

0.92

U.S. Small Cap 0.83Emerging markets 0.77U.S. High-Yield Bonds 0.65Long/Short Equity 0.64REITs 0.60Commodities 0.35Market Neutral 0.27Gold 0.07U.S. Bonds (0.07)

0.47 0.54

0.87

1980's 1990's 2000-2015International Large-Cap Equities



Let’s not forget the potential impact of inflation and the dollar

7

Source: Morningstar and www.inflationdata.com as of 12/31/15. Performance is historical and does not guarantee future results. This chart is for illustrative purposes only. Asset class representation is as follows: Equities, Ibbotson SBBI S&P 500 Index; fixed income, IA SBBI U.S. Government Index. Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

Growth of $10,000 (1/1/1971–12/31/15)

Fixed income Equities

$259,109

$41,240$0

$100,000

$200,000

$300,000

$400,000

Value before inflation Value after inflationSince the U.S. dollar became a fiat currency, in 1971, inflation has eroded

approximately 84% of fixed-income and equity returns

$100 in 2015 is worth only $16.37

in 1970.

$879,839

$139,337$0

$150,000$300,000$450,000$600,000$750,000$900,000



Investors are not positioned to deal with these new challenges

8

Source: Morningstar as of 3/31/16. Sum may not total 100% due to rounding. Inflation includes the Bank Loan, Ultrashort Bond, Nontraditional Bond, Equity Energy, High Yield Bond, High Yield Muni, Natural Resources, Latin America Stock, Multisector Bond, Multialternative, Long/Short Equity, Convertibles, Short-Term Bond, Mid-Cap Growth, Foreign Small/Mid Value categories. Neither includes the Multicurrency, Mid-Cap Blend, Foreign Small/Mid Blend, Small Growth, Europe Stock, Foreign Small/Mid Growth, World Allocation, Diversified Emerging Mkts, Health, Large Growth, Conservative Allocation, Aggressive Allocation, Mid-Cap Value, Small Blend, Target Date 2046-2050, Target Date 2026-2030, Technology, Target Date 2051+, Target Date 2036-2040, Emerging Markets Bond, World Stock, Target Date 2021-2025, Moderate Allocation, Foreign Large Growth, Target Date 2011-2015, Target Date 2041-2045, Large Blend, Target Date 2031-2035, Target Date 2000-2010, Muni Single State Long, Tactical Allocation, Retirement Income, Small Value, Large Value, Target Date 2016-2020, Inflation-Protected Bond, Utilities, Financial, Market Neutral, Foreign Large Blend, Muni California Long, Foreign Large Value, Communications, Muni New York Long, Muni Minnesota, Muni New Jersey, Muni National Long, Consumer Cyclical, Muni Pennsylvania, Consumer Defensive, Muni Massachusetts, Industrials, Real Estate, Diversified Pacific/Asia, Global Real Estate, Japan Stock, Muni National Short, Preferred Stock, Pacific/Asia ex-Japan Stk, World Bond, India Equity categories. Deflation includes the Muni California Intermediate, Muni National Interm, Muni New York Intermediate, Muni Ohio, Bear Market, Muni Single State Interm, China Region, Intermediate-Term Bond, Equity Precious Metals, Corporate Bond, Muni Single State Short, Short Government, Long-Term Bond, Intermediate Government, Long Government categories. Categories are not inclusive; shown are all categories for which data was available.

Asset allocation by mutual fund andETF AUM

42.60%

21.67%16.37%

8.24%5.08%

4.55% 1.49% US EquityTaxable BondInternational EquityAllocationSector EquityMunicipal BondAlternative

Asset allocation by inflation-fighting potential based on Morningstar categories

74%

13%

13% Neither

Deflation

Inflation



How we break down alternatives

9

Alternative Definition

Hedge funds Seek to generate returns independent from the broader market

CommodityAllocates to basic materials across energy, base metals, precious metals, agriculture, timber and livestock

Real return Invests in securities that may provide a potential measure of protection against inflation


02 Alternative Investments: Hedge fund strategies



Hedge fund AUM by strategy

11

Source: HFR Industry Reports, © HFR, Inc [Q4 2015], www.hedgefundresearch.com as of 12/31/15.

Assets under management by strategy (in U.S. $bn)

0

1,000

2,000

3,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Q1-

15Q

2-15

Q3-

15Q

4-15

Equity Long/Short Equity Market Neutral Event Driven DistressedDiscretionary Macro CTA Credit Multi-Strategy



Strategy selection is keyImportance of portfolio construction

12

Source: Deutsche Asset Management. Bloomberg as of Apr 16, Past performance is historical and does not guarantee future results. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

13.37% 12.10% 28.67% 10.86% 10.60% 15.78% 11.11% 6.09% 60.17% 15.08% 9.24% 15.99% 32.36% 13.65% 4.31%

9.40% 9.05% 21.42% 9.03% 9.30% 12.89% 10.60% 4.83% 26.47% 13.07% 2.09% 10.59% 14.44% 6.32% 1.89%

8.92% 7.44% 20.54% 7.68% 6.79% 12.37% 9.96% (5.93)% 25.80% 11.73% 0.15% 8.58% 9.24% 6.17% 0.15%

6.87% 5.44% 19.55% 5.58% 6.22% 12.17% 8.94% (18.04)% 24.55% 10.58% (2.12)% 7.41% 7.79% 4.20% (0.26)%

6.71% 0.98% 9.93% 4.63% 6.02% 11.71% 7.75% (19.02)% 19.98% 10.49% (4.16)% 6.36% 6.98% 3.54% (0.73)%

4.62% (1.45)% 9.72% 4.54% 4.91% 8.15% 5.49% (26.65)% 4.81% 8.61% (5.16)% 5.07% 6.65% 3.33% (0.89)%

0.40% (4.71)% 5.07% 4.15% 2.55% 7.32% 5.33% (33.71)% 4.37% 6.99% (5.25)% 2.98% (0.22)% 2.05% (1.08)%

(11.85)% (22.09)% 2.44% 1.18% (1.86)% 4.07% 5.29% (36.99)% 1.43% 3.16% (8.38)% (0.06)% (2.47)% 1.97% (1.17)%

HFRI Fund Wghtd Comp

HFRI Equity Hedge

Barclays Gov't/Credit

HFRI Macro

S&P 500

HFRI Relative Value

HFRI EH: Eq Mrkt Ntrl

HFRI RV: ConvertArb



Through the cycle: Overview

13

Source: Deutsche Asset Management as of Apr 16. Past performance is historical and does not guarantee future results. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. HFR Indices: Equity Hedge: HFRI Equity Hedge (Total) Index; Event Driven: HFRI Event-Driven (Total) Index; Relative Value: HFRI Relative Value (Total) Index; CTA: HFRI Macro: Systematic Diversified.

Hedge fund performance during crises

MSCI World Equity Hedge Event Driven Relative Value CTA

40

90

140

190

240

290

(17.06)%(10.90)%(7.69)%(3.69)%

3.57%

(8.92)% (3.73)%(3.28)%

0.24%

(1.08)%

(6.81)%

1.35% 0.52% 1.43%

(0.51)%

Asia Crisis (Aug-97)September 11 (Sep-01) Summer 2011 (Jul-11 – Sep-11)

(13.45)%(7.65)%(8.90)%

(5.80)%

0.66%

Russian Crisis (Aug-98)

(43.09)%(23.91)%

(22.49)% (13.91)%

23.90%

Credit Crunch (Jun-07 – Dec-08)

40

90

140

190

240

290



Through the cycle: Overview

14

Source: Deutsche Asset Management, Bloomberg as of Apr 16. Past performance is historical and does not guarantee future results. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. The S&P 500 stands for the Standard and Poor 500. It is a stock market index that tracks the 500 most widely held stocks on the New York Stock Exchange or NASDAQ. It seeks to represent the entire stock market by reflecting the risk and return of all large cap companies.

15 largest monthly losses of the S&P 500 Index versus the HFRI Composite Index

(20)%

(15)%

(10)%

(5)%

0%

Oct

-08

Feb-

09

Sep

-08

Jun-

08

Jan-

09

May

-10

Nov

-08

Sep

-11

May

-12

Aug

-15

Jan-

08

Aug

-11

Jun-

10

Jan-

16

Aug

-10

S&P 500 HFRI Fund Composite



Adding alternatives to a traditional portfolio

15

Source: Deutsche Asset Management as of Apr 16. Past performance is not a reliable indicator of future performance. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. HF Portfolio: Equality weighted Portfolio of: HFRI Equity L/S Index, HFRI Equity Market Neutral Index, HFRI Event Driven index, HFRI Macro Index, HFRI Systematic Trading Index, HFRI Fixed Income Corporate Index. 60/40 Portfolio: 60% Barclays GlobalAgg Total Return Index Value Unhedged USD, 40% MSCI World.

Sharpe ratio (rolling 36m) – 12/02-04/16

(1)01234

Dec

-02

Oct

-03

Aug

-04

Jun-

05

Apr

-06

Feb-

07

Dec

-07

Oct

-08

Aug

-09

Jun-

10

Apr

-11

Feb-

12

Dec

-12

Oct

-13

Aug

-14

Jun-

15

Apr

-16

Sha

rpe

ratio

100% Hedge Funds 20% 60/40, 80% Hedge Funds 40% 60/40, 60% Hedge Funds60% 60/40, 40% Hedge Funds 80% 60/40, 20% Hedge Funds 100% 60/40


03 Alternative Investments: Liquid Real Assets



What are liquid real assets?

17

Source: Deutsche Asset Management as of 3/31/16.

— There is not a market definition or standard benchmark for Real Assets

— We believe REITs and Listed Infrastructure are the foundation for a Liquid Real Assets strategy

— These five core sectors can maximize the benefits of a Real Assets allocation

Real Assets

Infrastructure

Commodities

Natural Resource Equities

TIPS RealEstate



Examples of real assets

18

Real assets span a variety of categories

Infrastructure Real estate Commodities

Transportation: Bridges, toll roads,airports, railCommunication: Cell towers, satellite systemsEnergy: Gas networks, electrical networks, power generation, renewable energy

RetailOfficeApartmentsHealth careIndustrialSelf storageHotels

Energy: Natural gas, light or Brent crude, heating oilAgriculture: Soybeans, corn, wheat, sugar,Livestock: Cattle, hogsIndustrial: Aluminum, copper, zinc, nickel



Real assets relative returns vary according to economic scenarios and capital market environments

19

This information is a forecast and due to a variety of uncertainties, and assumptions made in our analysis, actual events or results or the actual performance of the markets covered may differ from those presented.

Most investment programs are under-allocated to assets that perform well in inflation and stagflation

Growth accelerating, inflation deceleratingStocksCreditReal Estate

Growth and Inflation acceleratingStocks

CommoditiesReal Estate

Infrastructure

Growth and inflation deceleratingNominal bondsCashInfrastructure

Growth decelerating, inflation acceleratingTIPS/Inflation-linkers

CommoditiesReal Estate

Inflation

Inflation

Growth

OverextensionExpansion

Recession Stagflation

Base case

Capital allocation and risk budgeting



The strategic benefits of liquid real assets

20

Source: Deutsche Asset Management as of 4/29/16. Past performance is historical and does not guarantee future results. No assurance is made that investment objectives will be met.

Attractive return potential ― Historically predictable and stable income streams― Hybrid security with equity-like appreciation and bond-like yields

Diversification potential ― Underlying return drivers of real assets have offereddiversification potential.

― Adding real asset strategies to a portfolio of stocks and bonds may help mute volatility.

An inflation hedge ― May provide a measure of potential protection of investors’ purchasing power over the long term

― Offered relatively higher correlations to inflation over time, particularly when there were surprises on the upside.



Performance across the four quadrant market environments (3/31/03 to 3/31/16)

21

Sources: Bloomberg and Deutsche Asset Management for the period 3/31/03 to 3/31/16. Performance is historical and does not guarantee future results. Asset class representation: global infrastructure, DJ Brookfield Global Infrastructure Index; global real estate, FTSE EPRA/NAREIT Developed Index; commodities, Bloomberg Commodity Index; TIPS, Barclays U.S. Treasury Inflation Note 1-10 Year Index; global bonds, Barclays Global Aggregate Index; global equities, MSCI World Index. Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

Sequ

entia

l Yea

r-ove

r-yea

r cha

nge

in re

al G

DP

Quad #1 Quad #2Growth accelerating, inflation decelerating

Growth accelerating,Inflation accelerating

Quad #4 Quad #3Growth decelerating,Inflation decelerating

Growth decelerating,inflation accelerating

Sequential Y/Y% change in Inflation

7.0%4.5% 4.3%

1.6% 1.5%

0.0%2.0%4.0%6.0%8.0%

Globalinfrastructure

Globalequities

Globalreal estate

Commodities Global fixedincome

2.6%0.7% 0.4% 0.4%

–4.2%-6.0%

-2.0%

2.0%

6.0%

Global realestate

Global fixedincome

Globalequities


Commodities

0.9% 0.4% 0.4%

–0.5% –0.7%-2.0%

0.0%

2.0%

Global fixedincome


Commodities Global realestate

Globalequities

8.1% 6.4% 4.8% 2.7% 1.6%0.0%4.0%8.0%

12.0%

Globalreal estate

Globalequities


Commodities Global fixedincome



Infrastructure and REIT cash flows have been resilient

22

(1) Source: Bank of America Merrill Lynch as of 12/31/15. Data is the latest available. Global equities are represented by the MSCI World Index. Global infrastructure equities are represented by the Dow Jones Brookfield Global Infrastructure Index. Past performance is historical and does not guarantee future results. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product.

Annual EBITDA growth (local currency)1

8.2%

7.6% 8.6% 12

.3%

14.5

%

15.9

%

12.7

%

8.1%

4.6%

11.2

%

7.7%

5.4% 7.0% 11

.7%

5.1%

15.0

%

–1.4

%

7.9% 12

.5%

16.1

%

14.6

%

15.2

%

12.3

%

–6.3

%

6.2%

17.1

%

8.2%

6.3% 7.7%

7.8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Global Infrastructure Equities Global Equities



Infrastructure and REIT cash flows have been resilient (cont’d)

23

(1) Sources: Bloomberg, Factset, Deutsche Asset Management as pf 12/31/15. Data is most recent available. REIT FFO Growth = REIT funds from operations growth. S&P 500 EPS Growth = S&P 500 earnings per share growth.Past performance is historical and does not guarantee future results. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. The opinions and forecasts expressed herein do not necessarily reflect those of Deutsche Asset Management, are as of 12/31/15 and may not come to pass.

Weighted average year-over-year REIT FFO growth vs. S&P 500 EPS growth1

3.1% 5.8%

–0.7

%

3.4% 5.3% 9.8%

4.5% 19

.3%

–8.3

%

–6.6

%

23.7

%

13.0

%

7.0% 10

.5%

11.3

%

8.8%12

.8%

-26.

2%

14.1

%

18.8

%

13.7

%

13.9

%

15.3

%

-0.1

%

-18.

4%

-4.2

%

29.3

%

16.9

%

2.9% 5.8% 9.8%

-2.3

%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

REIT FFO Growth S&P EPS Growth



Diversification benefits Real assets seek to provide diversification benefits to a mixed asset portfolio

24

Source: Morningstar as of 12/31/15. Asset-class representations are as follows: global infrastructure, MSCI World Infrastructure Index; global real estate, FTSE EPRA/NAREIT Developed Index; commodities, Bloomberg Commodity Index; global equities, MSCI World Index; materials, MSCI World/Materials Index; energy, MSCI World/Energy Index; global bonds, Barclays Global Aggregate Index; TIPS, Barclays U.S. Treasury Inflation Note 1-10Y Index.

Calendar Year Performance

Annualized Total Return(2003-2015)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

10.8% 44.9% 38.0% 28.7% 42.4% 33.2% 4.8% 61.5% 21.3% 8.9% 28.7% 26.7% 15.9% 0.1%8.0% 40.7% 28.1% 21.4% 32.7% 29.8% –2.4% 38.3% 20.4% 5.6% 15.8% 21.5% 7.4% –0.5%7.5% 33.1% 21.7% 19.2% 28.7% 21.1% –30.7% 30.0% 16.8% 0.3% 11.3% 18.1% 4.9% –0.9%7.4% 26.1% 17.7% 15.4% 20.1% 16.2% –35.6% 26.2% 11.9% 0.2% 5.0% 4.4% 0.9% –3.2%6.6% 25.9% 14.7% 9.5% 17.9% 11.5% –38.1% 18.9% 11.8% –5.5% 5.0% 3.4% 0.6% –6.2%4.1% 23.9% 9.3% 1.9% 6.6% 9.5% –40.7% 12.0% 5.5% –5.8% 4.3% –2.6% –5.1% –15.3%3.9% 12.5% 9.1% 0.7% 2.1% 9.0% –47.7% 10.6% 5.2% –13.3% 1.9% –5.6% –11.6% –22.8%

–1.3% 7.1% 7.1% –4.5% 1.6% –7.0% –50.1% 6.9% 5.0% –19.8% –1.1% –9.5% –17.0% –24.7%

Global Infrastructure Global real estate Global Equities Materials

Energy Global Bonds TIPS CommoditiesAsset Class



Inflation linkage to listed infrastructure assets

25

Source: Deutsche Asset Management as of 3/31/16. With explicit inflation pass through, inflation protection is inherently built in to underlying infrastructure contracts and leases because companies can raise prices to pass on increased costs. With implicit inflation pass through, inflation protection is not inherently built in to underlying infrastructure contracts and leases, but companies’ earnings adjust to inflation on a lagging basis. With fixed price bumps, underlying contracts have usage rates that increase over time, but these rates are not tied to an inflation measure. With market-based pricing, companies earn revenues subject to market rates, which reflect inflationary pressures. With no inflation pass through, assets are not inflation protected. There can be no assurance that objectives will be met.

96% of pure-play infrastructure has full or partial inflation protection—and 81% has full inflation protection, as the chart below shows.

42.5%

38.7%

11.4%4.1%

3.3%Explicit inflation passthrough

Implicit inflation passthrough

Fixed bumps

No passthrough

Market based pricing



Real asset class returns remained strong when inflation accelerated

26

(1) Global Infrastructure returns shown from 9/30/08 through 3/31/16, due to index inception date. All other returns shown from 12/31/02 to 3/31/16.Source: Bloomberg and Deutsche Asset Management as of 3/31/16. Past performance is historical and does not guarantee future results. Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. See slide 10 for asset class representation

Average quarterly returns with inflation (as of 3/31/16)

2.76%

1.20% 1.18%0.96% 0.85% 0.85%

0%

1%

2%

3%

Global infrastructure¹ TIPS Global bonds Global equities Global real estate Commodities


04Portfolio Construction Utilizing Alternative Investments



The role of alternatives in a portfolio

28

Source: Deutsche Asset Management. For illustrative purposes only. Performance is historical and does not guarantee future results. There can be no assurance that objectives will be met.

— Historically attractive returns over time

— Low correlation to equities and bonds

— Add diversification to the portfolio

— Designed to minimize losses in down markets and participate in up markets

Alternatives can be considered a distinct asset class Sample diversified alternatives portfolio

25%

30%

25%

15%5%

Credit Suisse Hedge Fund

FTSE Developed Core Infrastructure

Barclays U.S. TIPS Index

FTSE EPRA/NAREIT Develped RealEstate Index

Bloomberg Commodity Index



A diversified portfolio of alternatives may help minimize volatility

29

Source: Morningstar as of 3/31/16 (merger arbitrage as of 12/31/15). This data is for illustrative purposes and does not represent any Deutsche Asset Management product. Volatility is represented by standard deviation. Asset-class representations are as follows: gold, S&P Global Gold Broad Market Index; global real estate, FTSE EPRA/NAREIT Developed Index; commodities, Bloomberg Commodity Index; U.S. stocks, S&P 500 Index; global infrastructure, MSCI World Infrastructure Sector Capped Index; long/short equity, Morningstar Long/Short Equity category; managed futures, Credit Suisse Managed Futures Index; diversified alternatives, 25% Credit Suisse Hedge Fund, 30% FTSE Developed Core Infrastructure, 25% Barclays U.S. TIPS Index,15% FTSE EPRA/NAREIT Developed Real Estate Index, 5% Bloomberg Commodity Index; currency, Morningstar Currency category; merger arbitrage, Morningstar MSCI Merger Arbitrage category; U.S. bonds, Barclays U.S. Aggregate Index; market neutral, Morningstar market neutral category.

Asset-class volatility (4/01/06–3/31/16)

38.2%

21.5% 18.1% 15.3% 13.8% 11.5% 11.0% 9.0% 8.6% 3.3% 3.2% 3.2%0.0%

10.0%20.0%30.0%40.0%50.0%

Gol

d

Glo

bal

real

est

ate

Com

mod

ities

U.S

.st

ocks

Glo

bal

Infra

stru

ctur

e

Long

/sho

rteq

uity

Man

aged

futu

res

Cur

renc

y

Div

ersi

fied

alte

rnat

ives

Mer

ger

arbi

trage

Mar

ket

neut

ral

U.S

.bo

nds



U.S. stock calendar-year returns (as of 12/31/15)

15.79% 5.49% –37.00% 26.46% 15.06% 2.11% 16.00% 32.39% 13.69% 1.38%

How alternative asset classes stack up (2006-2015)

30

Source: Morningstar. Performance is historical and does not guarantee future results. Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses. It is not possible to invest directly in an index. Returns during certain time periods were negative. See slide 28 for index descriptions.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

42.35% 19.58% 18.33% 38.26% 34.22% 5.54% 28.65% 19.51% 18.37% 5.40%

29.06% 17.71% –-2.38% 34.91% 20.40% 4.10% 10.64% 14.62% 15.89% 0.05%

19.50% 16.23% –3.41% 18.91% 16.83% 4.04% 6.65% 5.67% 10.26% –0.12%

16.75% 9.06% –4.34% 18.40% 12.46% –2.81% 5.15% 5.20% 9.22% –0.93%

10.90% 6.01% –15.40% 14.75% 12.22% –3.33% 4.51% 4.39% 3.38% –2.02%

8.05% 5.50% –21.12% 12.51% 6.60% –4.19% 3.88% 2.24% 2.92% –3.61%

7.23% 4.42% –23.64% 10.46% 5.30% –4.23% 3.34% –2.56% 2.01% –5.01%

5.95% 3.61% –32.66% 0.48% 4.13% –5.82% –1.06% –3.28% –1.64% –12.34%

4.47% 0.80% –35.65% –1.73% –0.02% –13.32% –2.93% –9.52% –12.67% –21.56%

2.07% –6.96% –47.72% –6.57% –1.66% –17.93% –14.31% –53.02% –17.01% –24.66%

Global real estate Gold Managed futures CommoditiesCurrency Alternatives Merger arbitrage Market Neutral Long/short

Infrastructure



How traditional asset classes stack up vs. alternatives (2006-2015)

31

Source: Morningstar and Deutsche Asset Management. Performance is historical and does not guarantee future results Asset allocation includes 48% S&P 500 Index, 25% Barclays U.S. Aggregate Index, 12% MSCI EAFE Index, 9% Russell 2000 Index (which represents the 2,000 smallest companies in the broad Russell 3000 Index) and 6% cash. Alternatives includes 25% Credit Suisse Hedge Fund, 30% FTSE Developed Core Infrastructure, 25% Barclays U.S. TIPS Index,15% FTSE EPRA/NAREIT Developed Real Estate Index, 5% Bloomberg Commodity Index. This chart and performance are for illustrative purposes only and do not represent the performance of any Deutsche Asset Management fund. Equity index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses. It is not possible to invest directly in an index.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

26.34% 11.17% 5.24% 31.78% 15.06% 7.84% 17.32% 32.39% 13.69% 1.38%

16.75% 9.06% 1.77% 26.46% 12.90% 4.04% 16.00% 22.78% 9.22% 0.55%

15.79% 6.97% –21.12% 20.95% 12.46% 2.11% 12.53% 20.79% 7.93% 0.50%

13.81% 5.92% –26.57% 18.40% 7.75% 1.30% 10.64% 5.67% 5.97% 0.03%

4.80% 5.49% –37.00% 5.93% 6.54% 0.07% 4.21% 0.05% 0.02% –0.81%

4.33% 4.78% –43.38% 0.15% 0.13% –12.14% 0.08% –2.02% –4.90% –5.01%

Intl. equity U.S. equity CashFixed income Asset allocation Alternatives



4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

0.0% 5.0% 10.0% 15.0% 20.0%

Ret

urn

Volatility

Alternatives can complement a traditional portfolio(10 years as of 3/31/16)

32

Source: Morningstar as of 3/31/16. Performance is historical and does not guarantee future results. This chart is for illustrative purposes only. Standardized performance: one-, five-, 10-year returns: U.S. stocks (1.78%, 11.58%, 7.01%); U.S. bonds: (1.96%, 3.78%, 4.90%).

100% U.S. bonds3.21% volatility / 4.90% return

40% U.S. stocks, 35% U.S. bonds, 25% Diversified alternatives

8.91% volatility / 6.30% return

100% U.S. stocks15.28% volatility / 7.01% return

60% U.S. stocks, 40% U.S. bonds11.30% volatility / 5.73% return


05 Investment Outlook – Alternatives



Diversification benefitsA new GICS Sector = potentially more diversification and lower correlations

34

Sources: Deutsche Asset Management, Dow Jones, Raymond James, Standard & Poor’s. As of November 2015 (latest data available). The opinions and forecasts expressed herein do not necessarily reflect those of Deutsche Asset Management, are as of 11/15 and may not come to pass.

— S&P Dow Jones announced in November 2014 that as of August 31, 2016, Real Estate will become the 11th sector in the Global Industry Classification Standard (“GICS”)

— Real estate will no longer be a sub-industry within the financials sector

— This move could reduce correlations to broader equities, improve the diversification benefits, and lower the cost of capital

— Real estate is 2.5% of the S&P 500 and approximately 15% of the financials index

— Financials are approximately 16.3% of the S&P 500— Real estate is the 2nd largest sub-industry in the S&P

Mid-Cap 400, at 10% of the index and 42% of financials

— We estimate approximately $4-$5 billion of REIT exposure exists within funds benchmarked to the XLF Index (S&P U.S. Select Financial Sector Index).

Real estate is a new GICS Sector

— Raymond James REIT team produced the below estimates showing how underweight broader equity mutual fund managers are to REITs relative to their respective benchmarks

— The $95 billion estimate equates to over 10% of the REIT index market capitalization

— More fund managers will be forced to pay attention to REITs when they become the 11th GICS sector

Real estate is a new GICS Sector

Category REIT Weighting Estimated Underweight

Mutual Funds BenchmarkMid-Cap Growth 1.2% 1.6% $1 billionMid-Cap Growth 1.7% 2.9% $3 billionSmall Blend 6.3% 9.1% $6 billionMid-Cap Blend 5.6% 8.2% $6 billionSmall Value 7.1% 15.3% $9 billionLarge Growth 0.6% 1.7% $14 billionMid-Cap Value 5.3% 13.4% $16 billionLarge Value 2.0% 4.4% $21 billionLarge Blend 1.6% 3.0% $25 billion



Potentially attractive returnsIs there a buying opportunity in energy infrastructure?Yes, but exposure must be very selective

35

(1) This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security.Source: Deutsche Asset Management.

Commodity volatility impact on organic growth for energy infrastructure is affecting sentiment for the overall asset class. Will future CAPEX growth be put on hold until there is a clearer view on oil prices?

Key considerations in energy

Volatility will likely continue in energy infrastructure, but the fund will remain very selective. We have sought to eliminate exposure to companies with revenues directly tied to commodity prices.

How we are managing going forward1

The recent sell off was indiscriminate across the entire energy complex and has resulted in attractive valuations for certain energy infrastructure stocks.

Companies with no counterparty risk and fully funded 2016 capital needs could prove successful. We expect to focus on highest-quality energy infrastructure companies with long-term committed projects and contracts in high-quality assets.

Historically, almost all energy infrastructure stocks benefitted from the “energy renaissance” tailwind. This is no longer the case as lower commodity prices weigh on growth and potentially volumes.

We have removed exposure to what we view as riskier companies with speculative shadow pipelines that are dependent upon smaller, regional production trends.


06 Appendix



Global real estate securities Investment universe

37

(1) Diversified includes multiple property sectors.(2) Weighted average.Source: Global Real Estate Securities represented by FTSE EPRA/NAREIT Developed Index; Global ex-U.S. Real Estate Securities represented by FTSE EPRA/NAREIT Developed Ex-US Index; U.S. Real Estate Securities represented by FTSE EPRA/NAREIT North America Index. excluding Canada. Market capitalization figures in USD millions. Source: FactSet As of 3/31/16.Past performance is not a reliable indicator of future performance. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

Index breakdown by sector1 Index breakdown by region

25.2%18.2%

17.2%

15.1%7.2%

5.3%4.7%3.9% 1.9%

1.1%0.2%

RetailResidentialOfficeDiversifiedHealthcareIndustrialStorageHotelsresrtsOtherIndustrial Office MixedSpecialty

2.8%

53.5%

9.1%6.2%

11.5%

11.4%5.5%

CanadaUnited StatesAsia Ex JapanAustraliaEurope Ex UkJapanUnited Kingdom

Holdings Market Cap Average Market Cap2 Yield

Global Real Estate Securities 330 $1,357,167 $13,557 3.6%Global ex-U.S. Real Estate Securities 199 $631,041 $9,089 3.4%U.S. Real Estate Securities 152 $764,289 $16,717 3.8%



Global infrastructure securities Investment universe

38

(1) Diversified includes multiple infrastructure sectors.(2) Weighted average.Global Infrastructure Securities represented by Dow Jones Brookfield Global Infrastructure Index. Market capitalization figures in USD millions. Source: Factset. As of 3/31/16.Past performance is not a reliable indicator of future performance. This chart is for illustrative purposes only and does not represent any Deutsche Asset Management product. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

Index breakdown by sector1 Index breakdown by region

Holdings Market Cap Average Market Cap2 Yield

Global Infrastructure Securities 94 $898,800 $20,778 3.8%

21.9%

21.0%

17.0%

13.3%

6.4%6.2%

5.1%

4.6%3.5% 1.1% Power T&DPipelinesGas DistributionCommunicationsToll RoadsWaterAirportsMidstreamDiversifiedPorts

48.2%

12.8%5.5%2.2%

5.8%

14.9%

10.6%AmericasCanadaAsia ex JapanJapanAustraliaEurope ex UKUnited Kingdom



Global commodities Investment universe

39

Global Commodities represented by the Bloomberg Commodities Index; Global Materials Equities represented by the MSCI World Materials Index. Global Energy Equities represented by the MSCI World Energy Index. Natural Resource Equities are represented by a 50/50 blend of the MSCI World Energy Index and the MSCI World Materials Index. Market capitalization figures in USD millions. Source: Bloomberg, MSCI. As of 3/31/16.

Natural Resource Equities Index breakdown by sector Global Commodities Index breakdown by sector

29.9%

31.0%

16.9%

16.5%5.6%

Agriculture

Energy

Industrial Metals

Precious Metals

Livestock

29.5%

27.6%9.7%

9.2%

7.4%5.1%

4.5%

3.6% 3.4% 0.1% ChemicalsIntegrated Oil & GasMetals & MiningOil & Gas Drilling, Exploration & ProductionContainers and Paper ProductsOil & Gas Equipment & ServicesOil & Gas Storage & TransportationOil & Gas Refining & MarketingPrecious MetalsCoal & Consumable Fuels

Holdings Market Cap Average Market Cap

Global Commodities 22 — —Global Materials Equities 136 $1,614,897 $11,962Global Energy Equities 90 $2,196,821 $24,141



Bond investments are subject to interest rate, credit, liquidity and market risks to varying degrees. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Portfolios that typically hold both long and short positions, may suffer both when there is a general market advance and the portfolio holds significant short positions, or when there is a general market decline and the portfolio holds significant long positions. Investment strategies employed by the portfolio’s investment management teams are intended to be complementary, but may not be. The interplay of the various strategies may result in the portfolio holding a significant amount of certain types of securities and could increase the portfolio’s portfolio turnover rates which may result in higher transactional costs and/or capital gains or losses. Some money managers will have a greater degree of correlation with each other and with the market than others. The degree of correlation will vary as a result of market conditions and other factors. Certain portfolios are non-diversified and can take larger positions in fewer issues, increasing their potential risk. Portfolios may lend securities to approved institutions. Short sales - which involve selling borrowed securities in anticipation of a price decline, then returning an equal number of the securities at some point in the future - could magnify losses and increase volatility. Stocks may decline in value.

Important risk information

40



Investment products offered through Deutsche AM Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc.

Deutsche Asset Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries.

Deutsche AM Distributors, Inc.222 South Riverside Plaza Chicago, IL 60606-5808www.deutschefunds.com [email protected] (800) 621-1148

Important information

41

©2016 Deutsche Bank AG. All rights reserved. R-046246-3 (6/16)

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