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The table below shows the total returns on each of the five Irish Life MAPS funds since launch (21st May 2013) and over the last 24 and 12 months. Irish Life MAPS is a long-term investment and we would always urge caution when looking at fund performances over time periods of less than five years.
Source: Irish Life Investment Managers (ILIM). Gross returns shown to 31 March 2016, before any fund management charge.
2016 may be remembered for many reasons. Unfortunately, one of them will be the worst January for stock markets on record. Uncertainty over China, the December rate rise in the US and renewed concerns over global growth prospects all contributed to double digit losses across most share indices. February was not much better but eventually the magnitude of the falls coupled with some silver linings brought buyers back and by the end of the quarter shares markets had recovered most of their losses. Needless to say, bonds had a vastly contrasting experience, rising steadily over the quarter.
Once again China proved to be a driving force behind sharp market falls. Significant selling pressure in Chinese shares from the first trading day of the year related to plans to remove trading bans for large shareholders of Chinese shares and the introduction of poorly designed circuit breakers quickly spilled over into global share markets. Weakness in the Chinese currency also had investors prepared for a potential devaluation but it never came to pass. Over the quarter however, fears eased as economic data stabilised.
The price of oil was very volatile through the first quarter, finally ending up +6.2%. Early concerns centred on continued increases in production, rising inventory levels and Iran returning to international markets after international economic sanctions had been lifted. While lower oil prices are generally a positive and boost consumer spending power, there was a broader concern that the slowdown in global growth was a contributing factor to the weak price not to mention the potential impact of banks being exposed to a highly indebted, and now less profitable, oil sector.
Questions were raised of the effectiveness of Central Bank communications and interventions in the markets. Investors were beginning to question what else they could do to address falling inflation and growth fears. However, more assertive and positive responses, most notably from the US Federal Reserve and European Central Bank (ECB) helped restore both credibility and confidence.
Over the quarter the MSCI ACWI share index fell 1.4% while Emerging Market shares rose 2.8% buoyed by more positive US Federal Reserve commentary. The US market rose 1% while the UK rose 0.2%. Japan however fell 12.5% impacted by disappointing economic releases. Meanwhile Eurozone >5 year bonds rose 5.4% as German 10-year yields fell to just 0.15% driven primarily by concerns over growth, low inflation and the ECB expanding their asset purchase programme. Over the quarter, the Euro rose against the US dollar from 108.6 to 1.14 and commodities rose 3.8% having been down 12.8% at one stage. Gold gained 16.4% benefitting from the general flight to safety.
The graphs below split out the performance for each Irish Life MAPS fund over the last two years (1st April 2014 to 31st March 2016) into each of the component asset classes.
Taking Irish Life MAP2 as an example, it is up 10% over this two-year period. This 10% can be broken down as shown with 3.5% coming from Low Volatility Shares, 2.8% from Bonds, 2.1% from Property, 1.7% from Global Shares and 0.2% from Emerging Market Shares.
The data above is based on Money Mate fund performance and the breakdown of the individual asset class returns is approximate. The data above allows for the effect of the annual reviews of the funds over that period, for example, the move from Minimum Volatility Shares to Low Volatility Shares, the change in External Managers in 2015, the move from Developed Market Shares to Global Shares etc. It also allows for the impact of tactical allocations over the period.
ILIM track the performance of the MSCI All Country World Index (ACWI)* created by Morgan Stanley Capital International to provide exposure to Global Shares. The index consists of over 2,480 individual companies which operate in 10 different sectors. We use the DSC model (explained on page 3) on Global Shares. Global Shares includes about 10% in Emerging Market Shares.
ILIM track the performance of the MSCI Emerging Markets Index* created by Morgan Stanley Capital International to provide exposure to Emerging Market Shares. The Index* consists of 2,700 individual companies which operate in 23 different markets.
Using a detailed, quantitative strategy, ILIM choose stocks from the MSCI World Index* which not only have shown lower volatility in the past but which are also screened for other indicators such as value, for example. ILIM choose around 150 stocks to make up their Low Volatility Shares fund.
ILIM currently track the performance of the JP Morgan Government Bond Index Emerging Markets (JP Morgan GBI EM) Global Diversified Bond Index to provide exposure to emerging market bonds. Within the bond allocation, ILIM choose the proportion to invest in emerging market bond.
ILIM currently track the performance of the Merrill Lynch 1-5yr Eurozone Index** to provide exposure to government bonds. Within the bond allocation, ILIM choose the proportion to invest in government bonds and have discretion in relation to the index which is tracked.
ILIM recognise the need to incorporate alternative strategies within the Irish Life MAPS funds and have an active pipeline of external managers they monitor on an on-going basis. ILIM currently give access to eight leading global real and absolute return managers making up each Irish Life MAPS fund’s External Managers / Alternatives portion. The percentage allocated to External Managers / Alternatives varies for each Irish Life MAPS fund and thelatest factsheet will show this percentage.
Within this percentage, the target split across the eight managers is shown below as well as details of the managers themselves and the fund we invest in.
ILIM actively look for managers that can bring diverse performance at the right price. They monitor this performance on an ongoing basis and may choose to change the allocation to external managers or the target allocation within the External Manager allocation. They may also choose to replace, add or remove External Managers as opportunities arise and market conditions change.
|Manager||Assets Managed||Fund Name|
|GMO Source www.gmo.com||$118 billion||GMO Real Return Fund|
|Putnam Source www.putnam.com||$156 billion||Putnam Total Return Fund|
|AQR Source www.aqr.com||$136 billion||AQR Global Risk Parity|
|AQR Style Premia|
|Blackrock Source www.blackrock.com||$4.7 trillion||Blackrock FIGO Fund|
|PIMCO Source www.pimco.com||$1.52 trillion||PIMCO Income Fund|
|JP Morgan Asset Management Source www.jpmorgan.com||€1.7 trillion||JP Morgan Systematic Alpha|
|Dunn Capital Management Source www.montlakeucits.com||$1.1 billion||Montlake Dunn WMA|
|Morgan Stanley Investment Management Source www.morganstanley.com||$2 trillion||MS Diversified Alpha Plus|
Information correct as at December 2015.
*The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
**Bank of America Merrill Lynch - “Source BofAML, used with permission. BofAML is licensing the BofAML indices “as is,” makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with their use, and does not sponsor, endorse, or recommend Irish Life, or any of its products or services.”