Andy Ivory-Corr - Brexit - Waterford - 17th May 2016
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Transcript of Andy Ivory-Corr - Brexit - Waterford - 17th May 2016
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EDUCATING
SUPPORTING
REPRESENTING
www.charteredaccountants.ie
“Investment in a
complex world!”
April 2016
Andy Ivory-Corr, QFA, Grad Dip, CFP®
Head of Investments
New Ireland Assurance
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Since March 2009, long term recovery has been strong!
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09/03/09 to 10/05/16Warning: Past performance is not a reliable guide to future performance.
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+15%
-4%
2015 saw a return to volatility with Q1 providing all returns!
Global Equity Markets
+11%Q1
Q2 – Q4
Warning: Past performance is not a reliable guide to future performance.
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Some risks were not as obvious as others!
Currency
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To Hedge or not to Hedge…that is the question!
Scenario 1: Weak Euro
$ Company Share Price + 10%
$ vs € + 10%
€ Return with Currency Hedging
Scenario 2: Strong Euro
$ Company Share Price + 10%
$ vs € - 10%
€ Return without Currency Hedging
We believe that currency adds additional risk to equity market
investing which is not rewarded with additional returns over
the long termSource: SSGA
+10% +10%
+20% 0%
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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A difficult start to 2016, but we’ve been here before!
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Source: Citi Research, Datastream
(YoY Perf means year-over-year performance, which is a way of measuring results from one time period to another on an annualisedbasis.)
Warning: Past performance is not a reliable guide to future performance.
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What’s affecting markets?
Oil China Policy
£Exit
Brexit?
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Policy distortions: QE = EPO for equities!
Warning: Past performance is not a reliable guide to future performance.
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Lowest rates in UK in over 300yrs of history!
Warning: This information does not constitute investment advice or a recommendation. It has been provided for discussion purposes only. You should
seek professional investment advice with your financial advisor
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Leading to the great Migration – in search of yield!
Investors have been encouraged to go on a hunt for yield …Source: Shutterstock, February 2015.
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Euro-Treasury Euro-Treasury (AAA)
Source: Barclays, SSGA, as of 31 December 2015. Past performance is not a guarantee of future results.
Source: Davy 16/05/2016
Bond yields as low as they’ve been in a generation!
Proportion of total return from yield
declines
Ireland: 10yr 0.81% Germany: 10yr 0.12% US: 10yr 1.72%
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With 2015 demonstrating the extent of duration risk facing investors!
Volatility Gilt Fund 9.0%Volatility ARB 1.4%Source: Moneymate Dec 15
Germany: 10yr 0.05%
Germany: 10yr 1.05%
Warning: Past performance is not a reliable guide to future performance.
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Short term noise, shouldn’t impact long term objectives!
“The Stock Market is a device for transferring money from the impatient to the patient”
- Warren Buffett
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Managing the emotions of Investment!
Source: Carl Richards
9%
5%
15
Warning: Past performance is not a reliable guide to future performance.
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The power of stable returns…..
Year 1 Year 2 Year 3 Total return
A +20% +20% -10% +29.6%
B +35% -10% +5% +27.6%
C +10% +10% +10% +33.1%
Source: Newton
A +20% +20% -10% +29.6%
B +35% -10% +5% +27.6%
C +10% +10% +10% +33.1%
“I have two basic rules to investment, Rule no1: Never lose money.
Rule no 2: Never forget rule no 1”!! …… Warren Buffett
Warning: Past performance is not a reliable guide to future performance. 16
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Investment Offers no Free Lunch: More Return = More Risk
Cash
Deposits
Stocks &
Shares
Return
Ris
k
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Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Risk profiling will help but we can’t define risk as a single number!
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Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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‘Volatility and risk are not the same thing’Annual letter to Berkshire Hathaway shareholders - 2015
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Property REIT v Direct – volatility and short term risk!
REIT
26.9%
DIRECT
3.6%
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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IREPRS-0516
Risk Profile:How much risk can/will you take to achieve it?
Timeframe: How long do you have to achieve it?
Objectives: What do you want to
achieve?
3 key considerations for every investor!
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Primary objective – generate a real return
The information contained above is for illustrative purposes only.
Can anyone guess the commonality of these three?
Irish Inflation (CPI) = 0.10% Source: Inflation.eu Dec 15.
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Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Inflation in a different format?!
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Current interest rates don’t offer us much opportunity for growth!
2011
> 5%
2012
> 4%
2013
<2%
2014
<1%
2015
<0.5%
Warning: Past performance is not a reliable guide to future performance.
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Generating returns probably requires some measured risk taking!
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Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Diversification of assets: a better long term solution!
Equity
Commodities Infrastructure
CashBonds
Real Estate
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Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Alternative Components can vary but typically will include the following options
Alternatives
Cash
BondsEquities
Property
Commodities/Gold
Infrastructure
Emerging Mkt Debt
Hedge Funds
Private Equity
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor
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Where to from here?
Markets are likely to become more volatile (normalise?).
Deposit rates, lower for longer!
Duration and illiquidity remain a real risk in Bond markets.
Generating returns, likely to require taking some level of risk.
Objectives need to be realistic and achievable.
Equities looking mildly expensive.
Risk Management should be a priority depending on time scale!
2016 know what you own, know why you own it!
Warning: This information does not constitute investment advice or a recommendation. It has been provided for
discussion purposes only. You should seek professional investment advice with your financial advisor