WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT CELEBRATING
WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? WHAT WOULD BE THE IDEAL CHARACTERISTICS OF A LIVING ANNUITY INVESTMENT? ■ Strong long term performance Client needs to fund an income for a potentially very long period Client would like to leave assets as part of estate Client wants competitive returns versus alternatives ■ No negative months Avoids having to make monthly withdrawals from reduced asset value Reduces urge to switch to conservative investments Easier conversations between planner and client ■ Liquid Client needs to make regular withdrawals to fund income Liquidity for income should not come at a cost ■ Managed by trusted company 1 This is client’s life savings and must sustain them for the rest of their life CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? IS THERE A SOLUTION THAT MEETS THESE CHARACTERISTICS? OLD MUTUAL SMOOTHED FUNDS ■ OLD MUTUAL ABSOLUTE SMOOTH GROWTH PORTFOLIO ■ OLD MUTUAL ABSOLUTE STABLE GROWTH PORTFOLIO ■ CORE GROWTH LIFE FUND 2 CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? Favourite non-Old Mutual Living Annuity Investments on Old Mutual Wealth Fund Name * Fund Category Coronation Balanced Plus SA MA High Equity Foord Balanced SA MA High Equity Allan Gray Balanced SA MA High Equity NGI Stable (Nov 2007) SA MA Low Equity Prudential Inflation Plus SA MA Low Equity Coronation Balanced Defensive SA MA Low Equity Investec Opportunity SA MA High Equity Allan Gray Stable SA MA Low Equity Coronation Capital Plus SA MA Medium Equity Coronation Strategic Income SA MA Income 3 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? Favourite non-Old Mutual Living Annuity Investments on Old Mutual Wealth Fund Name * Fund Category Coronation Balanced Plus SA MA High Equity Foord Balanced SA MA High Equity Allan Gray Balanced SA MA High Equity NGI Stable (Nov 2007) SA MA Low Equity Prudential Inflation Plus SA MA Low Equity Coronation Balanced Defensive SA MA Low Equity Investec Opportunity SA MA High Equity Allan Gray Stable SA MA Low Equity Coronation Capital Plus SA MA Medium Equity Coronation Strategic Income SA MA Income OM Absolute Growth Smooth Life Fund 4 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? WHAT WOULD BE THE IDEAL CHARACTERISTICS OF A LIVING ANNUITY INVESTMENT? ■ Strong long term performance Client needs to fund an income for a potentially very long period Client would like to leave assets as part of estate Client wants competitive returns versus alternatives ■ No negative months Avoids having to make monthly withdrawals from reduced asset value Reduces urge to switch to conservative investments Easier conversations between planner and client ■ Liquid Client needs to make regular withdrawals to fund income Liquidity for income should not come at a cost ■ Managed by trusted company 5 This is client’s life savings and must sustain them for the rest of their life CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? STRONG LONG TERM PERFORMANCE Fund Name * 1 Yr 3 Yr 5 Yr 10 Yr or sinception * High Equity Fund 1 7. 1% 7. 0% 12. 1% 10. 7% High Equity Fund 2 6. 8% 6. 5% 10. 8% 9. 9% High Equity Fund 3 5. 9% 8. 3% 12. 5% 10. 8% Low Equity Fund 1 (Nov 2007) 6. 0% 6. 7% 9. 0% 9. 6%* Low Equity Fund 2 5. 9% 7. 4% 10. 2% 9. 9% Low Equity Fund 3 7. 0% 7. 2% 9. 6% 10. 3% High Equity Fund 4 6. 2% 7. 8% 9. 6% 9. 5% Low Equity Fund 4 8. 1% 8. 9% 10. 0% 9. 5% Medium Equity Fund 6. 0% 5. 7% 9. 1% 9. 2% Income Fund 8. 6% 8. 4% 8. 2% 9. 0% 6 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? STRONG LONG TERM PERFORMANCE Fund Name * 1 Yr 3 Yr 5 Yr 10 Yr or sinception * High Equity Fund 1 7. 1% 7. 0% 12. 1% 10. 7% High Equity Fund 2 6. 8% 6. 5% 10. 8% 9. 9% High Equity Fund 3 5. 9% 8. 3% 12. 5% 10. 8% Low Equity Fund 1 (Nov 2007) 6. 0% 6. 7% 9. 0% 9. 6%* Low Equity Fund 2 5. 9% 7. 4% 10. 2% 9. 9% Low Equity Fund 3 7. 0% 7. 2% 9. 6% 10. 3% High Equity Fund 4 6. 2% 7. 8% 9. 6% 9. 5% Low Equity Fund 4 8. 1% 8. 9% 10. 0% 9. 5% Medium Equity Fund 6. 0% 5. 7% 9. 1% 9. 2% Income Fund 8. 6% 8. 4% 8. 2% 9. 0% OM Absolute Growth Smooth (Apr 2008) 6. 3% 10. 1% 13. 2% 11. 0%* Inflation + 5% 7 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? Aggressive asset allocation for long-term growth, including alternative assets Global Assets Local Assets African Equities; 2. 0% Global Alternatives; 3. 0% Global Interest. Bearing; 4. 0% Growth Assets over long term Global Equities; 16. 0% 83% Local Equities; 47. 8% Local Interest. Bearing; 13. 3% Characteristics: Real returns over long term Local Property; 6. 5% 8 Local Alternatives; 7. 5% CELEBRATING 170 YEARS OF ENABLING DREAMS Volatile
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? ALTERNATIVE INVESTMENTS – WHY DO YOU NEED THEM? ■ Great diversifier from more conventional asset classes ■ Returns less correlated to stock market performance ■ Provide a more stable return pattern than equities ■ Access different sources of return ■ Not available in normal unit trusts 9 CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? WHAT WOULD BE THE IDEAL CHARACTERISTICS OF A LIVING ANNUITY INVESTMENT? ■ Strong long term performance Client needs to fund an income for a potentially very long period Client would like to leave assets as part of estate Client wants competitive returns versus alternatives ■ No negative months Avoids having to make monthly withdrawals from reduced asset value Reduces urge to switch to conservative investments Easier conversations between planner and client ■ Liquid Client needs to make regular withdrawals to fund income Liquidity for income should not come at a cost ■ Managed by trusted company 10 This is client’s life savings and must sustain them for the rest of their life CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? Traditionally you had to choose between high returns or stable returns Fund Name * Volatility Max # Neg Drawdown Months High Equity Fund 1 9. 3% -20. 3% 38 High Equity Fund 2 8. 6% -19. 0% 39 High Equity Fund 3 7. 4% -10. 2% 35 Low Equity Fund 1 (Nov 2007) 4. 6% -4. 4% 23 Low Equity Fund 2 5. 8% -8. 6% 34 Low Equity Fund 3 4. 2% -2. 6% 25 High Equity Fund 4 7. 5% -18. 2% 34 Low Equity Fund 4 4. 4% -3. 3% 32 Medium Equity Fund 6. 2% -8. 4% 36 Income Fund 1. 8% -0. 8% 9 11 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? STRONG LONG-TERM PERFORMANCE AND LOW RISK Fund Name * Volatility Max # Neg Drawdown Months High Equity Fund 1 9. 3% -20. 3% 38 High Equity Fund 2 8. 6% -19. 0% 39 High Equity Fund 3 7. 4% -10. 2% 35 Low Equity Fund 1 (Nov 2007) 4. 6% -4. 4% 23 Low Equity Fund 2 5. 8% -8. 6% 34 Low Equity Fund 3 4. 2% -2. 6% 25 High Equity Fund 4 7. 5% -18. 2% 34 Low Equity Fund 4 4. 4% -3. 3% 32 Medium Equity Fund 6. 2% -8. 4% 36 Income Fund 1. 8% -0. 8% 9 OM Absolute Growth Smooth (Apr 2008) 2. 1% 0%* 0* *Negative returns are possible on Absolute Growth portfolios. 12 CELEBRATING 170 YEARS OF ENABLING DREAMS Top funds (by AUM) used by planners for Living Annuity clients. 10 years or sinception monthly returns used to end Sep 2017. Source: Fund factsheets, Profile Media Fund Analytics for UT funds. AGP Smooth factsheet. .
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? HOW SMOOTHING WORKS *Negative returns are possible on Absolute Growth portfolios. 13 CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? Bonus Smoothing Reserve History Long Term Expected Average Absolute Growth Portfolio 2012 2014 Dec Sep Jun CELEBRATING 170 YEARS OF ENABLING DREAMS Mar < -15% 2017 Dec -15% to -10% Sep -10% to -5% Jun -5% to 0% Mar 0% to 5% 2016 Dec 5% to 10% Sep 10% to 15% Jun 15% to 20% Mar > 20% 2015 Dec Sep Jun Mar BSR Range 2013
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? WHAT WOULD BE THE IDEAL CHARACTERISTICS OF A LIVING ANNUITY INVESTMENT? ■ Strong long term performance Client needs to fund an income for a potentially very long period Client would like to leave assets as part of estate Client wants competitive returns versus alternatives ■ No negative months Avoids having to make monthly withdrawals from reduced asset value Reduces urge to switch to conservative investments Easier conversations between planner and client ■ Liquid Client needs to make regular withdrawals to fund income Liquidity for income should not come at a cost ■ Managed by trusted company 15 This is client’s life savings and must sustain them for the rest of their life CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? FULL LIQUIDITY FOR DEFINED BENEFIT PAYMENTS ■ Defined benefit payments will always pay the full fund value Defined benefit payments include: Retirement (including ill-health retirement) Annuity Income Payments Death Disability ■ A market value adjustment (MVA) may be applied to voluntary disinvestments MVA might be applied if the Bonus Smoothing Reserve is negative. MVAs are only expected during extreme market downturns. MVAs do not impact those who leave due to defined benefit events. MVAs are applied to protect the investors who remain in the fund. 16 CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? WHAT WOULD BE THE IDEAL CHARACTERISTICS OF A LIVING ANNUITY INVESTMENT? ■ Strong long term performance Client needs to fund an income for a potentially very long period Client would like to leave assets as part of estate Client wants competitive returns versus alternatives ■ No negative months Avoids having to make monthly withdrawals from reduced asset value Reduces urge to switch to conservative investments Easier conversations between planner and client ■ Liquid Client needs to make regular withdrawals to fund income Liquidity for income should not come at a cost ■ Managed by trusted company 17 This is client’s life savings and must sustain them for the rest of their life CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? OLD MUTUAL IS THE CLEAR LEADER IN SMOOTHING IN SA and has been for 50 years 30 June 2017 Old Mutual Absolute Growth 113. 1 Momentum MM SGF (Global) Old Mutual Core. Growth 8. 4 Liberty Stable Bonus 8. 4 Sanlam Monthly Bonus Fund 7. 5 Sanlam Stable Bonus Portfolio 7. 4 Old Mutual Guaranteed Fund Momentum SGF (Global) 18 12. 2 4. 4 2. 5 Liberty Corporate Balanced Bonus 0. 9 Liberty Corporate Advanced Bonus 0. 5 Sanlam MM Vesting 0. 3 Momentum MM SGF (Local) 0. 3 Momentum Secure Growth Fund Global 0. 0 CELEBRATING 170 YEARS OF ENABLING DREAMS Absolute Growth 68. 2% of SA market Absolute Growth R 113. 1 bn as at June 2017 Old Mutual 75. 9% of SA market
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? OUR CAPITAL STRENGTH MEANS YOUR INVESTMENT IS SECURE Capital Strength R’bn 19 Dec 2016 Net Assets 570. 0 Liabilities 524. 0 Surplus 46. 0 Statutory Capital Requirement 14. 3 Statutory Capital Cover 3. 2 x CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH ALSO AN IDEAL PRE-RETIREMENT INVESTMENT Reduces uncertainty without reducing returns The Power of Compound Interest Investment Amount 5 years from 2007 Utopia Aggressive 5 years from 5 years 2009 from 2007 5 years from 2009 Aggressive AGP Smooth 5 years from 2007 from 2009 Conservative R 100, 000. 00 R 100, 000. 00 Year 1 12% -2% 20% 24% 4% -2. 7% 12. 3% Year 2 12% -21% 14% 3% 9% -8. 9% 11. 3% Year 3 12% 20% 8% 4% 10% 12. 3% 8. 8% Year 4 12% 14% 19% 9% 17% 11. 3% 18. 6% Year 5 12% 8% 22% 10% 19% 8. 8% 18. 1% R 176 234 R 113 889 R 213 918 R 160 763 R 174 228 R 120 541 R 190 475 Total No smoothing – can be a lot more or a lot less than expected 20 CELEBRATING 170 YEARS OF ENABLING DREAMS With Smoothing= more predictable outcome
OLD MUTUAL WEALTH WHAT IS AN IDEAL LIVING ANNUITY INVESTMENT? THE SMOOTHED OPTIONS ON OM WEALTH Fund Name Capital Guarantee Capital Charge Fund Fee Target Return (after fund fees) Absolute Growth Portfolio Smooth 50% 0. 2% 0. 95% CPI + 4%-5% Absolute Growth Portfolio Stable 80% 0. 7% 0. 95% CPI + 4%-5% Core. Growth Life Fund 100% 1. 8% 0. 50% CPI + 2%-3% Find the funds under the TARGET FUNDS category on Old Mutual Wealth fund list 21 CELEBRATING 170 YEARS OF ENABLING DREAMS
OLD MUTUAL WEALTH ANY DOUBTS? To offer your clients the OM Smoothed Bonus range of funds, speak to your OM consultant or contact me at fred. Liebenberg@omwealth. co. za 22 CELEBRATING 170 YEARS OF ENABLING DREAMS
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