hope is not a retirement strategy

A Copia Investment Partner

Jason TehChief Investment Officer

Hope is not a retirement strategy Financial Standard Retirement Income Forum 2020

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This presentation is for general information purposes only and does not take into account the specific investment objectives, financialsituation or particular needs of any specific reader. As such, before acting on any information contained in this presentation, readersshould consider the appropriateness of the information to their needs. This may involve seeking advice from a qualified financial adviser.Copia Investment Partners Ltd (AFSL 229316, ABN 22 092 872 056) (Copia) is the issuer of the Vertium Equity Income Fund (ARSN) (Fund).A current PDS is available from Copia located at Level 25, 360 Collins Street, Melbourne Vic 3000, by visiting Vertium.com.au or by calling1800 442 129 (free call). A person should consider the PDS before deciding whether to acquire or continue to hold an interest in the Fund.Any opinions or recommendation contained in this document are subject to change without notice and Copia is under no obligation toupdate or keep any information contained in this presentation current.

Past performance is not a reliable indicator of future performance. The total return performance figures quoted are historical, calculatedusing end-of-month mid prices and do not allow for the effects of income tax or inflation. The performance is quoted net of all fees andexpenses. The indices do not incur these costs. This information is provided for general comparative purposes. Positive returns, which theFund is designed to provide, are different regarding risk and investment profile to index returns.

Disclaimer

Hope is not a strategy

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Wealth

Years

Retirementrisk zone

Pre-retirees& retirees

Wealth

Years

Retirementrisk zone

Pre-retirees& retirees

Lucky Unlucky

Do not leave retirement outcome to luck

Source: FactSet, Vertium

Corrections occur more often than you think9 global slowdowns in 30 years

All Ords Price Index

Global slowdown periodsPeak to trough

return

Peak to trough

duration (mths)

Trough to peak

duration (mths)

Global Recession (1990) -27% 16 31

Great Bond Massacre (1994) -21% 12 21

Asian Crisis (1997) -11% 11 5

US Recession (2002) -19% 20 15

Global Financial Crisis (2008) -51% 16 125

Euro Crisis (2011) -17% 6 17

China Slowdown (2015) -16% 12 13

Median -19% 12 17

Global Slowdown (2018) -11% 4 4

COVID Recession (2020) -28% 2 ?

Average of 1 correction every 3.3 years

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Source: FactSet, Vertium

Big corrections (-20%)12 large corrections over 84 years

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MINIMISE LONGEVITY RISK

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Retirement objectives

Capital Preservation

Minimisesequencing risk

Reasonable Return

Minimiseinflation risk

Higher Income

MinimiseDrawing on savings

MINIMISE LONGEVITY RISK

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Why equity income?

Capital Preservation

Low risk strategyis required

Reasonable Return

Equities provide hedge against inflation

Higher Income

Equities provide greater yield than cash

Source: RBA, Iress

Income from Aussie equities are superior

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The allure of dividends …

9 Source: Iress, Vertium

ASX 100 stocksJune 2020

Source: Iress, Vertium

… but dividends are not risk-free

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All Ordinaries income

Source: FactSet, Vertium

COVID crisis dividend cuts

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Source: FactSet, Vertium

Generating more income during crises

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Source: FactSet, Vertium

Rich income universe during COVID crisisPotential income = dividend + franking + option income

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Multiple income sources Long-term expectation

Dividends 4%

Franking 1%

Option income 2%

Total grossed-up income 6 - 8%

Diversity of income sources from equities

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Put income $0.501H Dividend $0.09Total income $0.59

Strike Price $8.72Income return 6.7%Days to 1H Dividend 3.6 monthsIncome return (ann.) 24.1%

Strike price $8.72Put income -$0.501H Dividend -$0.09Breakeven Price $8.13

Valuation is attractive around $8

Source: FactSet, Vertium

Using options to enhance incomeSelling put options on Coca Cola Amatil

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Source: FactSet

Telstra trapChasing yield can result in capital loss

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Extreme valuations = low long-term returns

Source: http://www.econ.yale.edu/~shiller/data.htm

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Beware of extreme valuations …

Source: Refinitiv

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… led by US tech companies

Source: FactSet

2x

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Aussie valuations are high …

Source: FactSet

… and there are pockets of extreme valuations

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The real recession is still out there

Source: Bank of International Settlements, Vertium

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Complex outlook

• Weak dividend environment during COVID crisis

• Economic recovery is fragile

• Speculation always ends in tears

• Expect more volatility

MINIMISE LONGEVITY RISK

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Active management is critical for retirement

Capital Preservation

Low betaoutcome

Reasonable Return

Equities is best to hedge inflation

Higher Income

DividendsFranking

Option income

Equity income

0.60

0.80

1.00

1.20

10% 12% 14% 16% 18% 20% 22%

Fun

d b

eta

(mar

ket

sen

siti

vity

)

Standard Deviation (annualised)

RiskApril 2017 - June 2020

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Accumulation funds are higher risk

Source: Morningstar. Past performance is not a reliable indicator of future performance

Index

AccumulationAustralian equity funds

Accumulation Australian equity funds: Perpetual, Bennelong, Schroder, Fidelity, Allan Gray, and Alphinity

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Decumulation funds are lower risk

Index

AccumulationAustralian equity funds

DecumulationEquity Income funds

Source: Morningstar. Past performance is not a reliable indicator of future performance

Vertium EIF0.60

0.70

0.80

0.90

1.00

1.10

1.20

10% 12% 14% 16% 18% 20% 22%

Fun

d b

eta

(mar

ket

sen

siti

vity

)

Standard Deviation (annualised)

RiskApril 2017 - June 2020

Accumulation Australian equity funds: Perpetual, Bennelong, Schroder, Fidelity, Allan Gray, and AlphinityDecumulation equity income funds: Vertium, Merlon, Plato, Investors Mutual, Legg Mason Martin Currie, First Sentier

Source: RBC Dexia, Morningstar, Iress

Hope is not a strategyPrepare for the next crisis

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Key take outs

Do not leave retirement outcome to luck

Retirees have unique objectives:1. Reasonable return2. Lower risk3. Higher income

Active management is critical- Passive investing considered high risk for retirees- Accumulation funds are not generally designed for retirees- Equity income funds designed to deliver more robust retirement outcomes

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