goodbody am investment: market outlook & current positioning
TRANSCRIPT
Classified as Public (Green)
Goodbody AM Investment:
Market Outlook & Current
Positioning
Andy Ivory-Corr – New Ireland
Paul O’Brien - Goodbody AM
4 November 2021
Classified as Public (Green)
Goodbody Asset Management
Campion
For Financial Advisors Only
GDI Multi Asset Funds Update
Paul O’Brien, CFA Head of Investments
November 2021
Classified as Public (Green)3
Performance – Strong Track Record
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg, New Ireland Fund Centre. *Since Inception, 3rd March 2016. Fund performance is gross of AMC.
As at 29/10/21 YTD % 1YR % 3YR% 5YR%Since
Inception %
Goodbody Dividend Income 3 +9.2 +10.8 +8.4 +6.4 +36.9
Goodbody Dividend Income 4 +17.0 +20.4 +13.7 +10.5 +66.4
Goodbody Dividend Income 6 +27.5 +37.0 +19.1 +15.6 +119.4
Goodbody Global Leaders +35.5 +46.1 +29.6 +23.3 +198.8
MSCI World Index +26.3 +41.4 +17.4 +14.2 +108.0
Goodbody Smaller Companies +36.0 +50.7 +27.1 +21.2 +185.4
MSCI World SMID Index +24.6 +44.6 +16.3 +13.3 +102.6
Classified as Public (Green)4
GDI 3&4 Performance vs. Peers
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Longboat analytics. Fund performance is gross of AMC.
Fund Peer Group YTD 1 Year 3 Years 5 Years
GDI 3 ESMA 3 - Multi Asset 1st 3rd 1st 1st
GDI 4 ESMA 4 - Multi Asset 1st 7th 1st 1st
Classified as Public (Green)5
2021 - The Story So Far
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg. As at 29/10/21. Property = NIAC Property Fund. Cash = 3month Euribor. Commodities = Bloomberg Commodity Index (LC).
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Global Equities – Some Context
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg. As at 29/10/21. 5YR CAGR 14.2%, 10 YR CAGR 14.3%, 20 YR CAGR 7.0%
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Key Questions Remain
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Inflation – The Major Focus
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg.
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The Trillion $ Question – Transitory, Or Not?
“The economy is beginning to move ahead with real
momentum. During this time of reopening, we are likely
to see some upward pressure on prices…
But those pressures are likely to be temporary as they are
associated with the reopening process.
An episode of one-time price increases, as the economy
reopens, is not the same thing as, and is not likely to
lead to persistently higher year-over-year inflation into
the future.”
US Fed Chairman Jerome Powell
April 2021
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Big Shift in Interest Rate Expectations
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg, WIRP.
Jun-21 1.0
Sep-21 1.0
Nov-21 2.4
FED - Interest Rate Policy
# Hikes Implied By Sept 2022
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…Less Transitory Than Expected
“It is becoming increasingly clear that the feature of this episode that has
animated price pressures - mainly the intense and widespread supply chain
disruptions - will not be brief.
Data from multiple sources point to these lasting longer than most initially
thought.
By this definition, then, the forces are not transitory”
Raphael Bostic, Federal Reserve Bank of Atlanta, October 12, 2021
Classified as Public (Green)12
Lead times at record highs
Source: Bloomberg. A reading below 50 indicates faster deliveries, while a reading above 50 indicates slower deliveries. Reflects suppliers’ difficulties in meeting demand due to (1)
ongoing hiring challenges, (2) extended raw materials lead times, (3) input material shortages, (4) stubbornly high prices, and (5) inconsistent transportation availability.
Warning: Past performance should not be taken as an indication or guarantee of future performance
“Lead times have worsened ..to now sit at 80
days, roughly two times normal".
NIKE, Results Call, Sept 21
Classified as Public (Green)13
The Yield Curve in Focus (again)
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg
10 Year Yield 2 Year Yield Yield Curve/Spread
Dec-20 0.91% 0.12% 0.79%
Mar-21 1.74% 0.16% 1.58%
Jun-21 1.47% 0.25% 1.22%
Sep-21 1.49% 0.28% 1.21%
Oct-21 1.55% 0.50% 1.06%
October vs. March -0.19% 0.33% -0.52%
US Bond Market
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The Challenge: Cost Push vs. Demand Pull
“In considering how to use monetary policy, it is also important to
understand the nature of the shocks that are causing higher inflation.
The shocks that we are seeing are restricting supply in the economy
relative to the recovery of demand.
This is important because monetary policy will not increase the supply of
semi-conductor chips, it will not increase the amount of wind (no, really),
and nor will it produce more HGV drivers.
Moreover, tightening monetary policy could make things worse in this
situation by putting more downward pressure on a weakening recovery
of the economy”
Andrew BaileyGovernor BOE
September 27, 2021
Classified as Public (Green)15
Markets Already Pricing Tightening
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: Bloomberg
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So What Happens Next?
Growth rates will start to decelerate but should remain strong in absolute terms.
Expect c.4.5% global GDP growth in 2022 and approx. 7% earnings growth y/y.
Uncertainty around the trajectory of inflation is the key wildcard.
The speed and magnitude of interest rate hikes is now being re-assessed.
Bond yields are likely to grind higher – a headwind for fixed income investors.
Equity valuations have de-rated YTD, the asset class can advance further but
earnings need to be supportive.
Be Selective – Quality/Growth Equities well placed.
Classified as Public (Green)17
Earnings as Ever Are Key
MSCI World Index (F) 2022 EPS Growth Y/Y
Energy 18.3Materials -5.9Industrials 16.0Cons. Discretionary 22.8Cons. Staples 8.1Healthcare 7.2Financials -1.4Technology 10.5Communications 9.4Utilities 8.9Real Estate 4.5
World Equity Market 7.9
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: JP Morgan, 18th October 2021
Classified as Public (Green)
Goodbody Dividend Income Suite
Classified as Public (Green)19
Goodbody Dividend Income – 3 Funds
GDI 6 GDI 4 GDI 3
Dividend Equities Other Assets
100%
Benchmark MSCI World Index NA NA
Risk Rating 6 4 3
70% +/-
15%40% +/-
15%Risk
ManagedRisk
Managed
Equity Multi Asset Multi Asset
Classified as Public (Green)20
Goodbody Dividend Income – Multi Asset
Growth Engine
~40 Global Dividend
Paying Companies
Stabiliser/ Diversifier Assets
Government Bonds
Corporate Bonds
Cash
REITS
Gold
Classified as Public (Green)21
What Are We Doing – Positioning For
1. Inflation – we have increased equities
2. Rising Bond Yields – reduced government bond exposure
3. Volatility – we have extended and increased index put options
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GDI Multi Asset Funds - Mix Trends
Source: Goodbody Asset Management, Bloomberg. CACEIS.
Warning: Past performance should not be taken as an indication or guarantee of future performance
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GDI 3&4 - Key Mix Changes YTD
Global Dividend Equity Exposure
Corporate Bond Exposure
Downside Protection Levels via Index Put Options
Cash
Government Bonds
Gold
Classified as Public (Green)24
GDI 3/4 – Three Lines of Defence
1. Actively Managed, Quality Equities – likely to outperform the equity market
during a period of heightened volatility or during a significant drawdown.
2. Stabiliser Assets – traditional diversifiers including IG Government/ Corporate
bonds, cash and Gold - used to preserve capital and smooth the journey.
3. Downside Protection – index put options (exchanged traded) that offer
‘insurance’ against a significant equity market drawdown.
Classified as Public (Green)25
Why GDI? An Ideal Solution?
Additional Downside Protection
Active Management
Quality/ Transparent Assets that Deliver
26Classified as Public (Green)
• Our unique Death Benefit applies to the
following single premium policies:
• Single Premium Pension Plans
• Personal Retirement Bonds (PRBs)
• Approved Retirement Funds (ARFs) and
Approved Minimum Retirement Funds (AMRFs)
• Smart Funds
Our Unique Death Benefit
27Classified as Public (Green)
• Our unique Death Benefit applies to the following single
premium policies:
• Single Premium Pension Plans
• Personal Retirement Bonds (PRBs)
• Approved Retirement Funds (ARFs) and Approved Minimum
Retirement Funds (AMRFs)
• Smart Funds
Our Unique Death Benefit
28Classified as Public (Green)
• Our unique Death Benefit applies to the following single
premium policies:
• Single Premium Pension Plans
• Personal Retirement Bonds (PRBs)
• Approved Retirement Funds (ARFs) and Approved Minimum
Retirement Funds (AMRFs)
• Smart Funds
Our Unique Death Benefit
Classified as Public (Green)
New Ireland Assurance Company plc.
5-9 South Frederick Street, Dublin 2.
T: 01 617 2000 F: 01 617 2075
E: [email protected] W: newireland.ie
New Ireland Assurance Company plc is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group.
Classified as Public (Green)
Classified as Public (Green)
Appendix
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Why Goodbody Asset Management?
Transparency
SolutionsTeam
Performance
Goodbody AM
Classified as Public (Green)33
2021 – A Record Setting Year
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5 Year Asset Return Thoughts
Cash
Government Bonds
Corporate Bonds
Property (selective)
Gold
Global Equities
Quality/Growth Companies (Active Management)
Warning: Past performance should not be taken as an indication or guarantee of future performance
Classified as Public (Green)35
Strong Economic Rebound
Source: Bloomberg
Warning: Past performance should not be taken as an indication or guarantee of future performance
Classified as Public (Green)36
Dramatic CB Liquidity Provision
Warning: Past performance should not be taken as an indication or guarantee of future performance
2019 2020 2021 2022
FED 4.1 7.3 8.8 9.7
ECB 5.2 8.5 9.8 10.7
BOE 0.8 1.3 1.5 1.5
BOJ 5.3 6.8 7.0 7.2
Central Bank Balance Sheets ($ Trillions)
Source: JP Morgan Global Strategy
Classified as Public (Green)37
Earnings - Much Better Than Expected
Source: JP Morgan Global Strategy, Nov 21.
Warning: Past performance should not be taken as an indication or guarantee of future performance
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Global Equities – Valuation De-rating
Warning: Past performance should not be taken as an indication or guarantee of future performance
Source: JP Morgan Global Strategy, Nov 2021.
Jan-21 Current Change YTD
World 21.0 19.4 -1.6
US 23.4 21.2 -2.2
Eurozone 17.7 15.8 -1.9
UK 14.1 12.3 -1.8
Japan 18.2 15.1 -3.1
YTD Change in (F) 12m FWD P/E Ratios
Classified as Public (Green)39
The Yield Curve in Focus (again)
“Of all the fashionable alarm bells that market-
watchers keep an eye on, the yield curve is the
most timeless. It is Coco Chanel’s proverbial “little
black dress” of economic indicators”
Financials Times, June 20th 2018
Classified as Public (Green)40
The Challenge
Not all inflation is the same
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Peer Group Comparison Fund Listings
**ESMA 3 Funds: New Ireland Prime 3, New Ireland iFunds 3, Zurich Prisma 2, Aviva MAF Cautious, Aviva L&G Multi Index III, Friends First Magnet Cautious, Friends First Compass Cautious, Irish Life MAPS 2, Standard Life MyFolio Active I, Standard Life MyFolio Market I, New Ireland iFunds Alpha 3.
**ESMA 4 Funds: New Ireland Prime 4, New Ireland iFunds 4, Zurich Prisma 4, Aviva MAF Strategic, Aviva Merrion Multi Asset 50, Aviva L&G Multi Index IV, Friends First Magnet Stable, Friends First Compass Stable, Irish Life MAPS 3, Standard Life MyFolio Active III, Standard Life MyFolio Market III, Aviva Merrion Multi Asset 30, Zurich Prisma 3, New Ireland iFunds Alpha 4.
Classified as Public (Green)42
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