DYNAMIC MULTI-ASSET SOLUTIONS - AllianceBernstein...TAPPING ALPHA POTENTIAL AND PASSIVE EFFICIENCY...
Transcript of DYNAMIC MULTI-ASSET SOLUTIONS - AllianceBernstein...TAPPING ALPHA POTENTIAL AND PASSIVE EFFICIENCY...
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DYNAMIC MULTI-ASSET SOLUTIONS
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DYNAMIC MULTI-ASSET SOLUTIONS 3
AB’s Multi-Asset Solutions team manages over $145 billion for institutions, individual investors and high-net-worth clients. The team has expertise in building sound multi-asset portfolios, including strategic asset allocation, investment selection and tactical portfolio shifts to adapt to changing environments.
COMPREHENSIVE OUTCOME-BASED PORTFOLIOSTHE AB DYNAMIC MULTI-ASSET PORTFOLIOS ARE BUILT TO HELP INVESTORS ACHIEVE THEIR LONG-TERM GOALS—WHETHER THEY’RE FOCUSED ON INCOME OR GROWTH
BROAD DIVERSIFICATION EXPERT DESIGN DYNAMIC RISK MANAGEMENT + The portfolios use solutions from AB
and third-party providers. This design allows investors to access an array of investments across markets, asset classes and vehicles.
+ AB’s multi-asset team uses actively managed funds in areas with the best opportunity to add value. They complement these building blocks with passively managed ETFs in markets where efficiency can help reduce costs.
+ Extensive capabilities and a proprietary tool set allow the multi-asset team to manage opportunity and risk across market cycles, using a combination of strategic exposures and tactical portfolio shifts.
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ALL MARKETSOUTCOME FOCUSED
As of September 30, 2019Source: AllianceBernstein (AB)
AB MULTI-ASSET PORTFOLIO MANAGEMENT A Deep, Experienced Multi-Asset Team Collaborates with Over 200 Research Analysts to Bring AB’s Best Investing Ideas to You.
50+Years Managing
Asset Allocations
36Dedicated Investment
Professionals Averaging 20 Years of
Experience
$145B+in Platform
Assets Under Management
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DIVERSIFICATION ACROSS SOURCES OF RETURN AND INCOME (PERCENT)
6.4
7.9 7.8 7.7
9.0
6.9
5.6
2.2
6.0
4.4
9.8
4.7
8.9
2.9
6.0
0.0
USHigh Yield
GlobalHigh Yield
EMDebt
USEquities
GlobalHigh Dividend
REITs EMEquities
Commodities
l Return l Yield
BROAD DIVERSIFICATIONINTEGRATING DIVERSE ASSET CLASSES AND MARKETS IN A PORTFOLIO EXPANDS POTENTIAL RETURN OPPORTUNITIES AND TAKES ADVANTAGE OF DIFFERENT PERFORMANCE PATTERNS
Past performance does not guarantee future results. *60/40 Benchmark: 60% MSCI All Country World Index/40% Bloomberg Barclays US Aggregate Index.US high yield, global high yield, emerging-market (EM) debt, US equities, global high dividend, real estate investment trusts (REITs), EM equities and commodities are represented by ICE BofAML US High-Yield, Bloomberg Barclays Global High Yield, J.P. Morgan EMBI Global, S&P 500, MSCI World High Dividend, S&P US REIT, MSCI Emerging Markets and MSCI ACWI Commodity Producers, respectively.Performance is calculated as annualized 20-year returns. As of December 31, 2018Source: Bloomberg Barclays, ICE Data Indices, IntercontinentalExchange, J.P. Morgan, Morningstar Direct, MSCI, S&P and AB
+ The portfolios diversify globally across asset classes and markets, including non-traditional strategies
+ This design provides exposure to a broad range of income and return generators
+ Integrating assets with lower correlations may help reduce volatility and drawdowns
Correlation (S&P) 0.64 0.66 0.49 1.00 0.88 0.58 0.75 0.67
Correlation (60/40)* 0.69 0.75 0.64 0.94 0.93 0.61 0.83 0.74
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DELIVERING RETURNS IN A STRONG RISK FRAMEWORK
US High-Yield
BondsGlobal Bonds
Core Bonds
Equity:30% to 50%
Active Overall Capture Ratio 1.10 1.22 1.25 1.28
Passive Overall Capture Ratio 1.00 1.00 1.00 1.00
Active Sharpe Ratio 1.26 0.61 1.31 0.91
Passive Sharpe Ratio 1.15 0.43 1.07 0.66
TAPPING ALPHA POTENTIAL AND PASSIVE EFFICIENCY
5.26.3
10.4
12.0
6.2
4.14.2 3.1 3.4
2.4
9.1 8.4
USHigh-Yield
Bonds
GlobalBonds
CoreBonds
EquityAllocation
30% to 50%
LargeValue
Long-TermUS Corporate
Bonds
l Average Active Fund Return (Percent) l Average Passive Fund Return (Percent)
EXPERT DESIGN USING ACTIVE MUTUAL FUNDS AND PASSIVE ETFS COMBINES ALPHA POTENTIAL, COST-EFFICIENCY, FLEXIBILITY AND RISK MANAGEMENT
Past performance does not guarantee future results. Represented by active and passive funds within the respective Morningstar categories. Performance is from January 2009 through December 2018.Overall capture is the ratio of up-market capture to down-market capture.Source: Morningstar and AB
+ Use active strategies where managers have historically added the most alpha
+ Deploy cost-efficient passive strategies in other asset classes
+ Maintain broad diversification globally while limiting portfolio concentrations
+ Focus on asset classes where asset managers have delivered the most value
+ Use funds with unique construction where no passive option exists
+ Use ETFs in complementary way—to capture returns in efficient asset classes, manage costs and implement tactically
Active Mutual Funds
+ Cost-effective exposure to some of the most efficient asset classes
+ Tactically manage portfolios intraday without having to trade mutual fund holdings
+ Potential tax advantages versus open-end mutual funds
Passive ETFs
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MANAGING DRAWDOWNS CAN MAKE A BIG DIFFERENCE OVER TIME
Volatility ManagedS&P 500
S&P 500
5,000
2003 2006 2009 2012 2015 2018
4,000
3,000
2,000
1,000
Growth of US$1,000
During the Global FinancialCrisis, the S&P 500 fell 51%,while the Volatility ManagedS&P 500 declined by 39%.
DYNAMIC RISK MANAGEMENTFLEXIBILITY AND THE ABILITY TO RESPOND RAPIDLY TO CHANGING CONDITIONS ENABLE THE TEAM TO MANAGE OPPORTUNITY AND RISK ACROSS MARKET CYCLES
Past performance and historical analysis does not guarantee future results.For Illustrative purposes only. Showing a representative model portfolio. 60/40 benchmark consists of 60% MSCI All Country World 40% Bloomberg Barclays US Aggregate.Through December 31, 2018Volatility Managed S&P 500 is represented by the S&P 500 Daily Risk Control 15%.Source: Morningstar Direct, S&P and AB
Case Study: Managing Market Volatility in Late 2018TACTICAL ADJUSTMENTS IN 60/40 STRATEGY(October–December 2018)
DECEMBER 2018 PERFORMANCE
5
3
1
–1
–3
–5
–7
–9
Chan
ges
in R
etur
n-Se
ekin
g A
lloca
tion
(Per
cent
)
October 1, 2018 November 30, 2018 December 31, 2018
MSCIWorld Index
–7.6%
l MSCI World Drawdown l Allocation Change (Left Scale)
–3.7%
Multi-AssetModerate Growth
–3.0%
60/40Strategy
OVERWEIGHT
0
–5
–10
–15
–20
–25
–30
–35
MSCI W
orld % Draw
down
UNDERWEIGHT
November 29: IncreasedEquity UnderweightRisk has intensified
November 14: InitiatedEquity UnderweightRisk rose and has broadened toother asset classes, including credit
+ Real-time portfolio analysis using proprietary risk and opportunity signals
+ Tactical shifts across and within asset classes to control downside risks
+ Full participation in market opportunities when signals turn bullish
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DESIGNED FOR INCOME
Past performance does not guarantee future results. Portfolio allocations shown are for illustrative purposes only and subject to change.As of September 30, 2019Source: AB
Portfolios focused on delivering long-term growth and income by combining diverse investments: interest-rate exposure, credit sectors and growth assets
AB DYNAMIC MULTI-ASSET INCOME AB DYNAMIC MULTI-ASSET INCOME AND GROWTH
Investment Objective Income with Moderate Growth Growth with Income
Investment Strategy Income Generation Income Generation
Stock/Bond Mix 40 / 60 60 / 40
SEC Yield 4.11% 4.56%
RATES
GROWTH
CREDIT
RATES
GROWTH
CREDIT
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DESIGNED FOR GROWTH
Past performance does not guarantee future results. Portfolio allocations shown are for illustrative purposes only and subject to change.As of September 30, 2019Source: AB
Portfolios focused on delivering long-term capital growth by combining diverse investments, including return-seeking bonds and stocks
AB DYNAMIC MULTI-ASSET MODERATE GROWTH AB DYNAMIC MULTI-ASSET GROWTH
Investment Objective Growth with Income Growth
Investment Strategy Capital Appreciation Capital Appreciation
Stock/Bond Mix 60 / 40 80 / 20
SEC Yield 1.58% 1.69%
BONDS
STOCKS
BONDS
STOCKS
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In the LPL Financial Model Wealth Portfolios (MWP) Program, LPL Financial Overlay Portfolio Management Group is the client’s investment manager and implements trades for the client’s account based on the model portfolio investment recommendations it receives from AllianceBernstein Investments, Inc. (ABI). LPL Financial may select investments for a client’s account that differ from ABI’s model recommendations. Securities offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity. LPL Financial and AllianceBernstein are not affiliates of each other and make no representation with respect to each other.
There is no assurance that a separately managed account will achieve its investment objective. Separately managed accounts are subject to market risk: the market values of securities owned will fluctuate so that your investment, when redeemed, may be worth more or less than its original cost.
A WORD ABOUT RISKMarket Risk: The market values of the portfolio’s holdings rise and fall from day to day, so investments may lose value. Foreign (non-US) Risk: Non-US securities may be more volatile because of the political, regulatory, market and economic uncertainties associated with such securities. Fluctuations in currency exchange rates may negatively affect the value of the investment or reduce returns. These risks are magnified in emerging or developing markets. Interest-Rate Risk: As interest rates rise, bond prices fall and vice versa—long-term securities tend to rise and fall more than short-term securities. Diversification Risk: Portfolios that hold a smaller number of securities may be more volatile than more diversified portfolios, since gains or losses from each security will have a greater impact on the portfolio’s overall value. Credit Risk: A bond’s credit rating reflects the issuer’s ability to make timely payments of interest or principal—the lower the rating, the higher the risk of default. If the issuer’s financial strength deteriorates, the issuer’s rating may be lowered and the bond’s value may decline. Leverage Risk: Trying to enhance investment returns by borrowing money or using other leverage tools magnifies both gains and losses, resulting in greater volatility. Derivatives Risk: Derivative instruments such as options, futures, forwards or swaps can be riskier than traditional investments, and may be more volatile, especially in a down market. Below-Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. Real Estate Risk: Investments in real estate can decline due to a variety of factors affecting the real estate market, such as economic conditions, mortgage rates and availability. REITs may have additional risks due to limited diversification and the impact of tax law changes. Commodity Risk: Commodity-linked investments may experience greater volatility than investments in traditional securities. The value of commodity-linked investments may be affected by financial factors, political developments and natural disasters. ETF Risk: Investments in ETFs bear the share of the ETF’s expenses and run the risk that the ETF may not achieve its investment objective. Asset-Allocation Risk: Diversification and asset allocation may not protect against market risk. All investments have inherent risks, and investors may experience a loss. Sector Risk: Investing a significant portion of assets in any one sector may cause a fund to be more volatile, as securities within a specific sector can be prone to regulatory action, be more sensitive to interest-rate fluctuations, and be the target of increased competition. Alternative Investment Risk: An alternative investment is subject to a number of risks and is not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing to bear the high economic risk associated with such an investment.
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