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INTECH GLOBAL DIVIDEND LOW VOLATILITY PRODUCT SUMMARY
As of June 30, 2014
PRODUCT OVERVIEW AND INVESTMENT PHILOSOPHY
GLOBAL DIVIDEND LOW VOLATILITY Global High Dividend Strategy
Yield Equity Low Volatility MSCI World High
Investment Universe
Dividend Yield Index
Primary Benchmark
MSCI World Index MSCI World High
Secondary Benchmark
Dividend Yield Index Modest above-market
Excess Return Objective* Risk Reduction Objective
returns *
Expected Annual Turnover
Up to 50% less than the index 30%-65% Approximate the yield of
Dividend Yield
the MSCI World High Dividend Yield Index
Absolute-Risk Equity AUM (as of 6/30/2014) Global Equity AUM (as of 6/30/2014)
$2.5 Billion
For more than 25 years, we have been using the power of math to construct portfolios, which over time, have the potential to outperform their benchmarks, with less risk. Using Volatility as a Source of Reward At INTECH, we approach stock-market volatility as the fuel to generate returns greater than the benchmark with similar or lower risk, or market-like returns with significantly less risk. Protecting Your Portfolios Risk management is a key to generating alpha. The risk controls embedded in INTECH’s process have helped to protect the portfolios on the downside through many different market cycles. Providing Value to You We offer a consistent and repeatable risk-managed investment process, which, over time, has the potential to generate alpha.
$12.1 Billion
*Annualized long term, gross of fees. The excess return and risk reduction objectives are based on mathematical projections that are reflective of what the strategy attempts to achieve during the optimization process. Actual results may vary, and the objectives should not be considered or relied upon as a performance guarantee. The risk reduction objective includes an effort to monitor and manage risk compared to the benchmark index, which should not be confused with and does not imply low investment risk or the ability to control risk. AUM may include custom solutions accounts that are based on the product, which may have different benchmarks than shown.
WHY INTECH FOR GLOBAL DIVIDEND LOW VOLATILITY?
INTECH has simply extended the process from minimizing the tracking error of the portfolio to minimizing the absolute standard deviation of the portfolio. The low-volatility strategy seeks to approximate the dividend yield of the MSCI World High Dividend Yield Index, while providing modest above-market returns. The Global Dividend Low Volatility strategy attempts to provide lower absolute volatility levels, greater downside protection and superior risk-return tradeoff (higher Sharpe Ratios). The strategy outperformed both the MSCI High Dividend Yield Index and the MSCI World Index over time.* INTECH’s Global Dividend Low Volatility strategy seeks to manage the portfolio’s absolute risk, approximate the dividend yield of the MSCI World High Dividend Yield Index, and provide potential for above-market returns, net of fees. *INTECH strategy data is based on simulated results. See Simulations Disclaimer at the end of this presentation for additional information regarding simulated performance.
C-0714-1216 11-15-14
FOR INSTITUTIONAL INVESTOR USE ONLY
INVESTMENT PROCESS
Integrated Risk Controls
STEP 1 Estimate
STEP 2 Optimize
STEP 3 Rebalance
Robustly, accurately and timely estimate stock-price volatilities and correlations
Find the most efficient portfolio configuration and determine trading bands for stocks
Efficiently capture gains via a proprietary trading system as stocks hit trading bands
INTECH’s process has been successfully implemented and refined for over 25 years.
SIMULATED PORTFOLIO CHARACTERISTICS (as of 12/31/2013) *
*
PORTFOLIO CHARACTERISTICS
COUNTRY EXPOSURES
Characteristics Number of Securities
Simulated Global Dividend Low Volatility
MSCI World High Dividend Yield Index
87
296
Japan United Kingdom
United States Hong Kong
Beta (Since 1/1/1996)**
0.57
1.00
R-Squared (Since 1/1/1996)**
0.74
1.00
Australia
Price/Earnings Ratio (Trailing 12 Mos)
15.96
17.64
Singapore
Dividend Yield (Current)
4.11%
3.85%
Canada
EPS Growth (5 Yr. Historical)
2.94
2.79
Switzerland
Price/Book Ratio
3.30
2.68
France
Weighted Average Market Cap
$37.2 B
$102.2 B
Other
Weighted Median Market Cap
$19.0 B
$86.4 B
0%
20%
40%
Simulated Global Dividend Low Volatility
PORTFOLIO MARKET CAPITALIZATION Market Capitalization Range > $100B
*
60%
80%
MSCI World High Dividend Yield Index
*
SECTOR EXPOSURES Simulated Global Dividend Low Volatility
MSCI World High Dividend Yield Index
7.73%
42.68%
$25B - $100B
30.77%
36.53%
$15B - $25B
34.60%
8.22%
$2B - $15B
26.90%
12.57%
< $2B
0.00%
0.00%
Total
100.00%
100.00%
Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom Services Utilities 0%
5%
10%
15%
*Portfolio characteristics for individual accounts may differ from the simulated portfolio. Simulated Global Dividend Low Volatility **Beta and R-squared are calculated for the entire period that simulations are available (1/1/96-12/31/13). Portfolio characteristics are as of the date shown and may change at any time. See Simulations Disclaimer at the end of this presentation for additional information. Portfolio characteristics source: FactSet/INTECH.
20%
25%
30%
35%
MSCI World High Dividend Yield Index
SIMULATED CUMULATIVE LOG RETURN Simulated Global Dividend Low Volatility MSCI World High Dividend Yield Index MSCI World Index January 1, 1996 – December 31, 2013 200% Simulated Global Dividend Low Volatility MSCI World High Dividend Yield Index MSCI World Index
180% 160%
Cu mulative Log Return
140% 120% 100% 80% 60% 40% 20%
Sim ulated Global Dividend Lo w Vo latility Absolute Return (Annualized) Standard Deviation (Annualized)
M SC I W o rld High Dividend Yield Index
Sim ulated Glo bal Dividend Low Volatility
1/2013
1/2012
M SC I W o rld Index
10.83%
9.09%
10.83%
6.96%
10.30%
15.51%
10.30%
15.83%
0.79
0.41
0.79
0.27
Sharpe Ratio
1/2011
1/2010
1/2009
1/2008
1/2007
1/2006
1/2005
1/2004
1/2003
1/2002
1/2001
1/2000
1/1999
1/1998
1/1997
1/1996
0%
See Simulations Disclaimer at the end of this presentation for additional information.
RISK CONTROL IS IMPORTANT Simulated Global Dividend Low Volatility MSCI World High Dividend Yield Index MSCI World Index January 1, 1996 – December 31, 2013
30%
36- Month Rolling Standard Deviation of Returns
Simulated Global Dividend Low Volatility - 1/1/1996 MSCI World High Dividend Yield Index - 1/1/1996
25%
MSCI World Index - 1/1/1996
20%
15%
10%
5%
Absolute-risk strategies attempt to provide lower absolute volatility levels, greater downside protection and superior risk-return tradeoff. Rolling periods calculated monthly. Results are annualized. See Simulations Disclaimer at the end of this presentation for additional information.
12/2013
12/2012
12/2011
12/2010
12/2009
12/2008
12/2007
12/2006
12/2005
12/2004
12/2003
12/2002
12/2001
12/2000
12/1999
12/1998
0%
DIVIDEND YIELD OVER TIME (as of 12/31/2013)
10.0% Simulated Global Dividend Low Volatility MSCI World High Dividend Yield Index MSCI World Index
Dividend Yield
8.0%
6.0%
4.0%
2.0%
9/2013
3/2013
9/2012
3/2012
9/2011
3/2011
9/2010
3/2010
9/2009
3/2009
9/2008
3/2008
9/2007
3/2007
9/2006
3/2006
9/2005
3/2005
0.0%
INTECH’s Global Dividend Low Volatility strategy uses the MSCI World High Dividend Yield investment universe. Over the past eight years, our simulations show that the strategy’s dividend yield has been, on average, approximately 99% of the dividend yield of the MSCI World High Dividend Yield Index.
Source: FactSet. Dividend yield reflects trailing annual dividends calculated at each month-end for the period shown. INTECH strategy data is based on simulated holdings. There is no guarantee that dividend-paying stocks will continue to pay dividends. Dividend yield observations for Simulated Global Dividend Low Volatility constituents use MSCI reported constituent dividend yields, if available. If MSCI yields are not available, the FactSet reported yield is used. If the FactSet yield is missing, that position is excluded from the calculation altogether, and the remaining weights are normalized. Otherwise the yield is set to zero. Dividend yields for MSCI indexes are obtained from FactSet. See Simulations Disclaimer at the end of this presentation for additional information.
SIMULATIONS DISCLAIMER All simulated performance results have been compiled solely by INTECH and have not been independently verified. Simulations potentially allow investors to understand and evaluate INTECH’s investment process by seeing how a strategy/product would have performed hypothetically during certain time periods. This material is provided for illustrative purposes only and should not be construed as an offer to sell, or the solicitation of offers to buy, or a recommendation for any security. It has been prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by INTECH or its affiliates. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of INTECH. Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. Simulated results are hypothetical, not real. They do not reflect the results or risks associated with actual trading or the actual performance of any account. Simulated performance results are prepared with the benefit of hindsight. As a result, the simulations may be theoretically changed from time to time to obtain results that are more favorable. Simulation results do not reflect material, economic, and market factors that may have impacted INTECH’s trading or decision-making in the actual management of a client’s account. Simulated returns should not be considered indicative of INTECH’s mathematical process, as INTECH may not have managed money during some of the periods shown or may not have managed money for the particular strategy/product shown. INTECH’s mathematical optimization process was applied to historical data to produce the simulations. Unlike traditional simulations that do involve fundamental estimates, INTECH’s do not. In addition, the proprietary mathematical investment process used by INTECH may not achieve the desired results. INTECH’s simulated performance results have inherent limitations, including, among other things: 1) simulated performance results are prepared with the benefit of hindsight; 2) no price-based or volume-based deleted list; 3) no posted list; 4) index constituent changes done as a group at the beginning of the month (typically done once or twice a year based on the index changes); 5) simulated trades take place at the closing price (+80 bps for countries in the MSCI Emerging Markets Index and +40 bps for developed countries), while INTECH actually trades intra-day (historically, INTECH's domestic trading costs have been below the 40 bps used in the simulations); and 6) six trading tranches are simulated with the average of the six tranches being reported as the result for the period. Past performance of simulated data is no guarantee of future results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal to either the simulated performance results shown or any corresponding historical index. In particular, simulations do not reflect actual trading in an account, so there is no guarantee that an actual account would have achieved the results shown. In fact, there may be differences between simulated performance results and the actual results subsequently achieved. In no circumstances should simulated returns be regarded as a representation, warranty, or prediction that investors will achieve or are likely to achieve the performance results displayed, or that investors will be able to avoid losses. Investing involves risk, including fluctuation in value, the possible loss of principal and total loss of investment. There are numerous other factors related to the markets in general or to the implementation of any specific trading strategy, which cannot be fully accounted for in the preparation of simulated performance results, all of which can adversely affect actual trading results. Any clients invested in the strategy/product may have experienced investment results during any relevant periods that were materially different from those portrayed in the simulations. The simulated results include the reinvestment of all dividends, interest, and capital gains, but do not reflect deduction of investment advisory fees. Thus, simulated returns will be reduced by advisory fees and any other expenses that may be incurred in the management of an account, which will materially lower returns over time. An index is unmanaged, is not available for direct investment, and does not reflect the deduction of management fees or other expenses. If shown, MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report has not been approved, reviewed, or produced by MSCI. Data Source: The Center for Research in Security Prices ("CRSP") Deciles are market value weighted benchmarks of common stock performance provided by the CRSP at the University of Chicago Booth School of Business. The CRSP universe includes common stocks listed on the NYSE, AMEX, and the NASDAQ National Market excluding the following: preferred stocks, unit investment trusts, closed-end funds, real estate investment trusts, Americus Trusts, foreign stocks and American Depositary Receipts.