multi-asset investing with “grit”conferences.pionline.com/uploads/...wages rise, more fiscal...
TRANSCRIPT
Maura T. Murphy, CFAPortfolio Manager Loomis Sayles & Co.
Multi-Asset Investing With “GRIT”
Navigating the Changing Macro Landscape
Multi-Asset Investing
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
Seek to Maximize Risk Adjusted Returns
Source: Loomis Sayles as of 10/12/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.The chart presented above is shown for illustrative purposes only. Data and analysis does not represent the actual, or expected future performance of any investment product.Past performance is no guarantee of future results.
MLPs
REITs
US Agg
US HY
US IG
CEMBI
Preferreds
MSCI WorldMSCI EM
Loans
S&P 500
MULTI-ASSET MODEL PORTFOLIO
0
2
4
6
8
10
12
14
16
18
20
0 2 4 6 8 10 12 14 16
3-Ye
ar R
etur
n
3-Year Volatility
RETURN VS VOLATILITY
Multi-Asset Investing: Strategic AllocationsEconomic Cycle
Views as of 9/30/2018. Green shading denotes asset classes the presenter expects to appreciate and red shading denotes asset classes the presenter expects to depreciate at each point in the economic cycle. This material is provided for informational purposes only and should not be construed as investment advice. Investment decisions should consider the individual circumstances of the particular investor. This reflects the current opinions of the presenter and views are subject to change at any time without notice. Other industry analysts and investment personnel may have different views and opinions.
-32%
-54%
7%
-13% -10%-18%
21%28%
7%
18%25%
35%11%
14%
3% 3%
8%
13%
9% 9%
4%
0%
4%6%
MSCI EMMSCI World
Bloomberg Commodity Index Bloomberg Barclays HY
Bloomberg Barclays Agg
FTSE NAREIT All Equity REITS Index
Euro Area
China
Latin America
EM Asia
EM Europe
India
United StatesUnited Kingdom
Japan
Multi-Asset Investing: Strategic Allocations
Source: Loomis Sayles as of 12/31/2017.Credit cycle regime periods: Expansion late cycle; 1/1/1997-8/31/2000, 3/1/2006-12/31/2007, 1/1/2014-12/31/2017; Downturn; 9/1/2000-10/31/2002, 1/1/2008-3/31/2009Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Data and analysis does not represent the actual, or expected future performance of any investment product.Past performance is no guarantee of future results.
0
1
2
3
4
5
6
7
8
9
10
Return Volatility
EXPANSION / LATE CYCLEBB B CCC
-50
-40
-30
-20
-10
0
10
20
30
Return Volatility
DOWNTURNBB B CCC
Multi-Asset Investing: Tactical allocations with a focus on GRIT
G R I TGROWTH RATES INFLATION TURMOIL
Scenario Analysis with GRIT
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
-15%
-10%
-5%
0%
5%
10%
15%
Tail Risk Low Medium High
Probability
Ret
urn
% 12
3
45
6
Base Case Return
Growth rising, inflation stable
EM inflows
Trade war escalates
EM capital flight
Italy leaves the Euro
1
2
3
4
5
6
Source: Loomis Sayles Charts are illustrative for presentation purposes. Market scenarios have inherent limitations and should not be viewed as predictions of future events. They rely on opinions, assumptions and mathematical models which can turn out to be incomplete or inaccurate. Past market performance is no guarantee of future results.
GRIT Growth
47
49
51
53
55
57
59
61
63
47
49
51
53
55
57
59
61
63
2014 2015 2016 2017 2018
IndexInde
x
US ISM Manufacturing PMI Euro Area Manufacturing PMI Emerging Markets Manufacturing PMI
Source: Institute for Supply Management, IHS Markit, Haver Analytics, as of 10/8/2018.
-6.10% -6.70% -6.60%
-16.50%
-2.10% -1.40% 0.00%
-11.90%
-4.90% -3.70%
-21.10%
-4.50%
-30%
-20%
-10%
0%
S&P500 DividendEquity
MSCIWorld
MSCI EM Preferreds US HY BankLoans
REITs CEMBI US IG MLPs USTreasury
Drawdown
S&P500 DividendEquity
MSCIWorld
MSCI EM Preferreds US HY BankLoans
REITs CEMBI US IG MLPs USTreasury
GRIT Growth
Source: Loomis Sayles, as of 9/30/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Data and analysis does not represent the actual, or expected future performance of any investment product.Past market performance is no guarantee of future results.
15.87%12.05% 10.82% 10.54% 9.80%
7.67%5.77% 4.92%
3.01% 2.70% 1.37% 1.22%0%
5%
10%
15%
20%
RETURNS & DRAWDOWNS IN RISING GROWTH DURING LATE EXPANSION PART OF THE CYCLE
Annualized Return
Forces for higher rates are gaining momentum, still expected to be gradual
Data source: Loomis Sayles illustration, as of 10/9/2018. This depiction shown above is for illustrative purposes only. This reflects the current opinions of the presenter and views are subject to change at any time without notice. Other industry analysts and investment personnel may have different views and opinions.
GRIT Rates
Global Strength
FED Pace Increases
High Inflation
Balance Sheet Normalization
Weak Growth
Supply Dynamics
Deflation Pressures
Negative Demographics
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Returns10
YrY
ield
VALUE VS 10 YR YIELD (LAST 10 YRS)
10 Yr Yield (LHS) Value Return (RHS)
Level of rates impacts style rotation
Data source: Loomis Sayles illustration, as of 6/30/2018. This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Past market performance is no guarantee of future results.
GRIT Rates
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
Yield Curve impacts equity sector allocations
Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the presenter only, and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. This information is subject to change at any time without notice.Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Past performance is no guarantee of future results.
GRIT Rates
Source: Thomson Reuters Datastream, data as of 10/8/2018
10 Year Yield less Fed Funds Rate
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025-6%
-4%
-2%
0%
2%
4%
yen
-6%
-4%
-2%
0%
2%
4%
US Recession Loomis Forecast through 2019
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
Yield Curve impacts equity sector allocations
Data source: Loomis Sayles illustration, as of 9/30/2018.This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.
GRIT Rates
-50
-40
-30
-20
-10
0
10
20
30
40
TECH S&P 500 FINANCIALS
%
NORMAL YIELD CURVE
RETURN DRAWDOWN
-50
-40
-30
-20
-10
0
10
20
30
40
TECH S&P 500 FINANCIALS
%
INVERTED YIELD CURVERETURN DRAWDOWN
GRIT Inflation
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
Data source: Bloomberg, as of 9/30/2018. Indices represented are from the CPI Index.This depiction shown above is for illustrative purposes only. There can be no assurance that developments will transpire as shown and actual results may likely be different. Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Commodity interest and derivative trading involves substantial risk of loss.Past market experience is no guarantee of future results.
-
0.6
1.2
1.8
2.4
3.0
3.6
Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
%
ENERGY CONTRIBUTION WENT FROM 17% OF CPI TO 34% IN 1YR
food energy commodities shelter medical services transportation svces recreation
-3
-2
-1
0
1
2
3
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Index Points
ENERGY PRICES CONTRIBUTING TO CPI
WTI yoy energy contrib to cpi
Scenario Shock with GRIT
GRIT Inflation
-0.98
-0.57
-0.38
-0.25
-0.09
0.01
0.05
0.11
0.13
-1.5 -1 -0.5 0 0.5
PORTFOLIO
REITs
US HY
S&P500
BANK LOANS
US IG
INTERNATIONAL EQUITY
CEMBI
MLPs
EXPECTED P/L (EXCLUDING CARRY)
Data source: Loomis Sayles illustration, as of 1/1/2002 through 9/30/2018.Charts are illustrative for presentation purposes. Market scenarios have inherent limitations and should not be viewed as predictions of future events. They rely on opinions, assumptions and mathematical models which can turn out to be incomplete or inaccurate. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past market performance is no guarantee of future results.
GRIT Turmoil
4.8 10.11-YR MAX1-YR MIN
High Yield 6.25.3 6.5
NOW
2.62.1
NOW
2.5
5.0 12.1MLPs 7.97.1 8.9
2.2 2.9MSCI World 2.3 2.52.2
NOW
NOW
019.2
NOW
16.1
9.5
NOW
6.51 –YR AGO
YIELD VOLATILITY
1 –YR AGO
1 –YR AGO
5-YR MAX5-YR MIN
1-YR MAX1-YR MIN
1-YR MAX1-YR MIN
Data source: Bloomberg, as of 9/30/2018. Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization. Data and analysis does not represent the actual, or expected future performance of any investment product.Past market performance is no guarantee of future results.
GRIT Turmoil
Stronger Global Economy
Wages Rise, More Fiscal
Policy, Faster Fed Hikes ?
Potential for higher Inflation
G4 Balance Sheet Normalization
5.09%3.38% 2.54%
-1.05%-2.94% -3.19%
-4.57% -4.96%
-11.46%-13.73%
-14.82% -15.08% -15.64%
-20%
-15%
-10%
-5%
0%
5%
10%
TSY AGG IG CEMBI MLP LOANS HY PFD Stock DIV Equity EM Equity SPXT MSCI World REIT
AVERAGE QUARTERLY RETURN WHEN S&P 500 IS DOWN AT LEAST 10% IN A QUARTER
S&P500Preferreds
Data source: Bloomberg, as of 9/30/2018. Data is historical and based on the period from 1/1/2002-9/30/2018.Information, including that obtained from outside sources, is believed to be correct, but Loomis cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization.Data and analysis does not represent the actual, or expected future performance of any investment product.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.
DividendEquity
Multi-Asset InvestingFocus on diversified sources of income with attractive total return potential while managing drawdown risk
Multi-Asset Model Portfolio Equity Fixed Income Alternative Sources of Income
AVG YIELD (%)
3-YR AVG ANNUAL DRAWDOWN (%)
3.99 1.80 2.32 2.745.76
2.95 4.07 6.24 5.17 5.82 4.067.86
-5.06 -4.95 -6.56
-19.97
-7.06-3.51 -3.53 -3.87
-1.67 -3.46-9.72
-42.27-50.00
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
Multi-AssetModel
Portfolio
S&P 500 MSCI World MSCI EM Preferreds US Treasury US IG US HY Bank Loans EM Debt REITs MLPs
Data source: Zepher Analytics as of 9/30/2018.Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index. The hypothetical model portfolio is a blend of the indices shown excluding those that have the largest drawdown in each asset class (MSCI EM, US HY, MLPs). The model portfolio is not intended to represent the actual or expected future performance of any account managed by Loomis Sayles. The hypothetical model portfolio has inherent limitations. Material economic and market factors may affect investment decisions differently when the managers are investing actual client assets. It is shown for illustrative purposes only.
G R I TGROWTH RATES INFLATION TURMOIL
Euro Area
China
Latin America
EM Asia
EM Europe
India
United States
United Kingdom
Japan0
2
4
6
8
10
12
14
16
18
Sep-
66
Sep-
68
Sep-
70
Sep-
72
Sep-
74
Sep-
76
Sep-
78
Sep-
80
Sep-
82
Sep-
84
Sep-
86
Sep-
88
Sep-
90
Sep-
92
Sep-
94
Sep-
96
Sep-
98
Sep-
00
Sep-
02
Sep-
04
Sep-
06
Sep-
08
Sep-
10
Sep-
12
Sep-
14
Sep-
16
Sep-
18
Yiel
d
10 Year Treasury
10-YEAR TREASURY
MLPs
REITs
US Agg
US HY
US IG
CEMBI
Preferreds
MSCI WorldMSCI EM
Loans
S&P 500
MULTI-ASSET MODEL
PORTFOLIO
0
2
4
6
8
10
12
14
16
18
20
0 5 10 15 20
3-Ye
ar R
etur
n
3-Year Volatility
RETURN VS VOLATILITY
The hypothetical model portfolio has inherent limitations. Material economic and market factors may affect investment decisions differently when the managers are investing actual client assets. It is shown for illustrative purposes only. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.Past performance is no guarantee of future results.
REDEFINING MULTI-ASSET INVESTING TAKES GRIT.
Past performance is no guarantee of future results.This is not an offer of, or a solicitation of an offer for, any investment strategy or product. Any investment that has the possibility for profits also has the possibility of losses. Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.This presentation is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein, reflect the subjective judgments and assumptions of the authors only, and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. Data and analysis does not represent the actual, or expected future performance of any investment product. Information, including that obtained from outside sources, is believed to be correct, but Loomis can not guarantee its accuracy. This information is subject to change at any time without notice.This material cannot be copied, reproduced or redistributed without authorization. Principal Investment Risks: Investments in bonds can lose their value. When interest rates rise, bond prices usually fall and vice versa. High yield securities are subject to a high degree of market and credit risk, including risk of default. In addition, the secondary market for these securities may lack liquidity which, in turn, may adversely affect the value of these securities and that of the portfolio. Foreign investments involve special risks including greater economic, political and currency fluctuation risks, which may be even greater in emerging markets. Currency exchange rates between the US dollar and foreign currencies may cause the value of the investments to decline. Commodity-related investments, including derivatives, may be affected by a number of factors including commodity prices, world events, import controls and economic conditions and therefore may involve substantial risk of loss. Equity securities are volatile and can decline significantly in response to broad market and economic conditions.MALR022699
Disclosure