london borough of hounslow - meetings, agendas, and minutes

Baring AssetManagement Limited155 Bishopsgate,London EC2M 3XY

Tel +44 (0)20 7628 6000Fax +44 (0)20 7638 7928

www.barings.com

Authorised and regulated by theFinancial Services Authority March 2012

For Professional Investors / Advisers only

London Borough of Hounslow

Claire Glennon

Baring Dynamic Asset Allocation FundSupporting Information

1

History of Multi-Asset Investing at Barings

Multi Asset Team formed in 2002

Transition of balanced segregated mandates completed in 2003

Launched pooled solution for DB pension fund clients in January 2007

Launched pooled solution for DC pension fund clients in March 2009

Strategy has delivered its risk/return objective since 2003

DAA/MAF Fund assets under management £4.5bn

Total strategy assets under management £5.4bn as at 29.02.12*

Dynamic Emerging Market Fund launched June 2011, currently £133.9m AUM**

An important part of our business with an established track record

Source: Barings as at 29.02.12* Source: Barings draft assets only. **Source: Barings as at 29.02.12

2

Why a cash or RPI + target?

Source: Barclays Equity Gilt Study 2009, 1899 – 2009Cumulative ~ Annual, log scale** UK Equities

Cash +4% = equity return with less risk

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

1899

1904

1909

1914

1919

1924

1929

1934

1939

1944

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

2004

2009

-60-40-20020406080100120140

UK equity returns % (RHS)~UK Equity Nominal TR Index (LHS)*UK Cash + 4% Index (LHS)*UK Cost of Living + 5% Index (LHS)*

% change year on year**Log scale

Gilt Annual Returns (RHS)~

3

Who is responsible?The Baring Multi Asset team

Team formed in 2002

- Average 19 years’ industry experience

- Average 11 years’ tenure at Barings

Drawing on 88 investmentprofessionals*

188 clients invested in the DAA Fund

DAA Fund assets undermanagement £4.4bn

Source: Barings DAA Fund as at 29.02.12*Investment professionals as at 01.02.12

4

10 year optimal strategy

Investment process and resources

Start with blank sheet of paper

Identify best asset classes

Anticipate and respond to events:Dynamic Allocation

Choose the best investments

RISK

MA

NA

GEM

ENT

5

Strategic Asset AllocationForecast returns & risk

10 year asset class forecasts (GBP)

Source: Barings as at 23.03.12* Risk = standard deviation of 10 years of monthly annualised returns from asset allocation

Predicted Risk* 10.8%

Property7%

GlobalGov't

Bonds12%

CorporateBonds20%

Alternatives4%

Intl Equity29%

UK Equity28%

Risk (% per annum)

UK 3 Mth Cash

UK Gilts

UK Index Linked

EM Bonds

UK Equities

US Equities

Fund of Hedge FundsProperty

Europe Equities

Japan Equities

Emerging Europe Equities

LATAM Equities

Emerging Asia Equities

Gold

UK Coporates

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Return %

6

Tactical Asset AllocationProcess overview

PortfolioConstruction

Multi Asset Team (11)

Setting risk budget

Allocating the risk budget, based on SPG scores

Relative attractiveness acrosscountries and sectors

Where are the opportunities and risks?

Country & SectorSub Groups (6)

Research

Collation &

Interpretation

Economic Sub Group (7)

Growth, inflation, interest rates,economic policy

Where are economies in their cycle?

Strategic Policy Group (7)

Ranking asset classes and identifying themes

Risk Sub Group (6)

Risk/ valuation measurements

Are we being paid to own anasset class

Implementation Choosing the best investments

Brackets = number of people in that team, Source Barings as at 01.02.12

7

Example of ImplementationGold

Source: Barings/ Bloomberg as at 10 February 2012

0

50

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400

Aug

-07

Nov

-07

Feb-

08

May

-08

Aug

-08

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-08

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May

-09

Aug

-09

Nov

-09

Feb-

10

May

-10

Aug

-10

Nov

-10

Feb-

11

May

-11

Aug

-11

Nov

-11

Feb-

12

(£)

Gold Bullion Securities / Source Gold ETFGold Miners Equity Fund

Bought Gold Miners Equity Fund

Bought BullionBought Bullion

Collation &Implementation

PortfolioConstruction

Implementation

ResearchGreater economic uncertainty/experimental monetary policy

Increased demand for realassets/inflation protection

Very good diversifier in 2007uncorrelated with other riskassets, less so in 2010

Relationship between goldmining shares and bullionprice provides tacticalopportunities

Sold Bullion

Sold Gold Miners Equity Fund

Bought Gold Miners Equity Fund

Sold Bullion

8

Current Portfolio & ThemesAs at March 2012

Potentially attractive risk premia onItalian bonds

European Central Bank policy leadsto self help cycle for Europeanfinancials

Diversification trades still essential –hold gold/government bonds

Higher volatility caused bybanking/sovereign risk and periodiccredit droughts

Valuation and momentum supportmodest exposure in local marketsHard or soft landing in China?

Equity valuations (US & UK) remainattractive

Resilient US recovery, combined withexcessive investor pessimism

In the PortfolioConcern

9

Guidelines and risk focus

Predicted Risk- Value at Risk (VaR)

- 70% of predicted equity volatility

Experienced risk- Actual standard deviation of return

Stress Testing- Drawdown in market crisis

NO LEVERAGE

Guidelines Risk Management

Source: Barings as at 31.12.11* Equities and Commodities, aggregate maximum 80%

Efficiently reducing volatility

0 – 40Foreign Exchange

0 – 50Alternatives

60%Min £ Exposure

0 – 25Cash/Near Cash

0 – 30Property

0 – 80Bonds

0 – 30Commodities*

0 – 65Equities*

AllocationRange (%)Guidelines

10

Does our solution work?DAA Fund return & risk: Since Inception Annualised16 January 2007 – 31 March 2012

Source: Barings, as at 31.03.12. DAAF performance figures are shown in Sterling on a NAV per share basis, with net income reinvested. Referenceto the index is for comparative purposes only. *Risk = Standard deviation of monthly returns over the stated period (annualised)

DAA Fund LIBOR +4% FTSE All Share FTSE All World

Return (%) Risk (%)*

7.1 6.92.3

5.0

Past performance is not a guide to future performance

7.5

0.7

17.0 17.5

11

Does our solution work?Composite return & risk annualised:1 January 2003 – 31 March 2012*

Source: Barings as at 31.03.12 * Provisional figures only, subject to change. Net of fees. Reference to the index is for comparative purposes only. Thecomposite returns should be considered as supplemental information which complements the Multi Asset GBP Inflation/Cash Targeted Solutions: HighReturn Composite presentation as provided in appendix. **Risk = Standard deviation of monthly returns over the stated period (annualised)

Baring Composite Libor +4% FTSE All Share FTSE All World

Return (%) Risk (%)**

9.77.7 8.8 9.2

7.7

0.6

14.4 14.8


12

Stress Testing Example

1 da

y As

ian

Cris

is '9

7

5 da

y

10 d

ay

1 da

y Bl

ack

Mon

day

'87

5 da

y

10 d

ay

1 da

y G

ulf W

ar '9

0

5 da

y

10 d

ay

1 da

y M

exic

an C

risis

'95

5 da

y

10 d

ay

1 da

y R

ussi

an C

risis

'98

5 da

y

10 d

ay

1 da

y Se

pt 1

1 '0

1

5 da

y

10 d

ay

Cre

dit C

runc

h

Com

mod

ity C

rash

Equi

ty G

row

th B

ull M

arke

t

Equi

ty V

alue

Bul

l Mar

ket

2.92

23.32

-5.86

7.14

-2.49-1.84-1.22-1.87-1.80-0.85-0.81-1.06-0.47-1.43-1.47-0.87

-5.71-5.54-5.22-3.57-3.03-0.99

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

% Return

Source: Barings, as at 31.12.11

Shocking the portfolio

13

7.1 6.9

2.3

5.0

Baring Dynamic Asset Allocation Fund performance*As at 31 March 2012

1 year Since Inception**annualised

Source: Barings, as at 31.03.12. *DAAF performance figures are shown in Sterling, net, on a NAV per share basis, with net incomereinvested. **Inception date of the fund is 16.01.07. Reference to the index is for comparative purposes only. ***Risk = Standarddeviation of monthly returns over the stated period (annualised)

RET

UR

NR

ISK

***

12.5

4.9

18.817.1

5.2

0.1

13.3 13.1

6.4

0.1

15.0 14.6

7.5

0.7

17.0 17.5

DAA Fund LIBOR +4% FTSE All Share FTSE All World Equity Index

4.6 5.0

1.4

-0.2

3 years annualised

Targeting equity like return within 70% of equity risk


14

Client Service & Fees

Dedicated contacts and deputies in both client service and investment

Transparent and effective reporting is key

Quarterly Reporting and conference call

Cash +4% performance target is net of all costs

- Competitive management fee of 55bps and admin/custody fee currently at 2bps

- Estimated 3rd party/fund costs 20 to 35 bps

Keeping costs down and client service up

Source: Barings, as at 31.12.11

15

The Firm’s claim of GIPS compliance has been verified by our Independent Examiners (KPMG Audit plc) for the period from 1st July 1999 to31st December 2010. Inception of the Firm is 1st July 1999. KPMG’s opinion is available upon request.The firm as defined herein, has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). Acomplete list and description of all composites is available on request by sending an email to [email protected]

Baring Multi Asset Targeted ReturnComposite Performance as of 31st December 2011

16

Baring Multi Asset Targeted ReturnComposite Performance as of 31st December 2011

The Firm’s claim of GIPS compliance has been verified by our Independent Examiners (KPMG Audit plc) for the period from 1st July 1999 to31st December 2010. Inception of the Firm is 1st July 1999. KPMG’s opinion is available upon request.The firm as defined herein, has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). Acomplete list and description of all composites is available on request by sending an email to [email protected]

17

Biographies

Percival Stanion

Head, Global Multi Asset Group

Location: LondonInvestment Experience: 32 Years

Percival is the Head of the Global Multi Asset Group. He is also Chairman of the Strategic Policy Group (SPG), our global macro research and Asset Allocation Team.Percival joined Baring Asset Management in 2001 from BNP Paribas Asset Management, where he was Head of Asset Allocation and Strategy. From 1993 to 1998,Percival managed the Global Diversified Accounts team at Pictet Asset Management. His prior fund management experience includes management of North Americanand international equities at National Provident and Invesco, respectively. Percival is a graduate of Pembroke College, Oxford University.

Claire Glennon

Institutional SalesAssistant Director

Location: LondonIndustry Experience: 12 Years

Claire is responsible for business development in the UK institutional market, working with UK pension funds and investment consultants. Claire joined Baring AssetManagement in 2002, initially working in UK Client Services before joining the Fixed Income Portfolio Control Team in 2004. She became an Institutional Sales Managerin 2007. Prior to Barings, she spent two years at M&G Asset Management in the Retail Sales department. Claire holds a BA (Hons) in Media Studies and was awardedthe Investment Management Certificate in 2003.

18

Biographies

Andrew Cole

Investment DirectorGlobal Multi Asset Group


Andrew is a member of the Global Multi Asset Group responsible for the management of Multi Asset portfolios. He is lead manager of the Baring Multi Asset Fund and anumber of segregated portfolios. Andrew was appointed to the Strategic Policy Group (SPG), the company’s global macro research and Asset Allocation Team in 2005.He is chair of the SPG Risk Sub Group and a member of the Economic Group. Both groups provide key inputs to the debate of the monthly SPG meetings. Andrewjoined the Fixed Income department at Baring Asset Management in 1986. He was appointed a Director in 1994 and joined the Multi Asset Portfolio Group in 1995.

Malcolm Herring

Investment DirectorGlobal Multi Asset GroupHead of Charities


Malcolm is a member of the Global Multi Asset Group. Malcolm's broad experience has included being involved in the management and marketing of charitablefunds services for over 15 years. His current responsibilities include managing the Targeted Return Common Investment Fund and the Baring Portfolio Fund. Healso has responsibility for Financials research, heading the Global Financial Sector Team. Malcolm joined the UK Equity research department in 1979 and theportfolio management team in 1981 when he started managing pension fund portfolios. He was appointed Divisional Director in 1989. He joined Baring AssetManagement after graduating from the London School of Economics in 1979 with a BSc. (Econ). Monetary Economics.

19

Biographies

Khiem Do

Investment DirectorGlobal Multi Asset GroupChair of Asia Multi Asset Team

Location: Hong KongInvestment Experience: 35 Years

Khiem is responsible for the management of a number of specific Asian portfolios and all Multi Asset portfolios for clients located in Asia. He was appointed tobecome a member of the Strategic Policy Group (SPG), the company’s global macro research and asset allocation team in 2006. He is a member of the SPG Risk,Economic and Country Sectors Sub Groups. Khiem was Head of the Asia Pacific Specialist Investment Team from 1997 until 2006. Khiem joined Baring AssetManagement in 1996 from Citicorp Global Asset Management in Sydney, where he was the Australian Chief Investment Officer, the chair of the Australian AssetAllocation Committee and a member of the CGAM International Asset Allocation Committee. Khiem’s prior experience includes seven years at Bankers TrustAustralia and seven years at Equitilink Australia Ltd. Khiem received his BA (Hons) in Economics from Macquarie University (Australia). He was designated anAssociate Member of the Securities Institute of Australia (the Australian CFA equivalent) in 1979. Khiem is fluent in English, Vietnamese, and French.

Alison Huang, CFA

Investment Manager*Global Multi Asset GroupLocation: LondonInvestment Experience: 7 Years

Alison joined Barings in January 2012 as an Investment Manager* in the Global Multi Asset Group, to assist with the management of Charityportfolios. Alison spent over 7 years at TT International Investment Management, initially as a risk and performance analyst, before becoming ageneral Pan-European Equity Analyst in 2008 (also covering renewable energy and property). Alison has a first class MSc in Physics from theUniversity of Bristol and was awarded the CFA designation in 2007.

*Subject to regulatory approval.

20

BiographiesC. Hayes Miller, CFA

Investment DirectorGlobal Multi Asset GroupHead of North American Multi-AssetLocation: BostonInvestment Experience: 32 Years

Hayes is responsible for managing Multi-Asset products in North America, which include the Active Passive range of international equity portfolios and the absolutereturn Global Dynamic Asset Allocation funds. Hayes has been a member of the Strategic Policy Group (SPG) since 2000, and is also the chair of SPG Country/SectorSub-group. In this capacity he has been responsible for the development and maintenance of the country and sector screening models used by the SPG, as well asmodels for risk budgeting and style allocation. Hayes also was instrumental in creating our Active Passive international equity product range which he continues tomanage. Hayes joined Baring Asset Management in 1994 as a Portfolio Manager with responsibility for Global Equities. Prior to joining Baring Asset Management,Hayes worked in international investment research in London and New York. He began his career as an investment consultant with Meidinger, now part of William M.Mercer. Hayes has a B.A. in Political Science from Vanderbilt University and a M.S. in Banking and Financial Management from Boston University. He was awarded hisCFA designation in 1989 and is FINRA Series 7 and 24 registered. He is a frequent guest on CNBC and Bloomberg TV.

Matthew S. Whitbread, CFA, CAIA

Investment ManagerGlobal Multi Asset Group

Location: BostonInvestment Experience: 13 YearsMatthew is an Investment Manager in the Global Multi Asset Group. He assists with the management of Multi Asset products in North America, which include theActive/Passive range of International Equity portfolios and the absolute return Global Dynamic Asset Allocation strategy. Matthew joined Barings in November 2011from FundQuest Incorporated where he was a Portfolio Manager. Prior to this he worked at Pyramis Global Advisors as a Senior Portfolio Analyst for over twoyears. He also spent six years at MFS Investment Management where he started as a Corporate Actions Specialist before becoming an Equity Research Associate.Matthew began his career at Investors Bank and Trust where he spent a year as a Mutual Fund Custody Accountant. Matthew has a Bachelor of Science inEconomics and Finance from Boston College and was awarded the CFA designation in 2005. He has also been awarded the Chartered Alternative InvestmentAnalyst (CAIA) and Financial Risk Manager (FRM) designations.

21

Biographies

Shaniel Ramjee, CFA

Multi Asset Investment Manager


Shaniel is an Investment Manager in the Global Multi Asset Group. He is responsible for global macroeconomic and multi asset research as well asportfolio construction. Shaniel joined Baring Asset Management in December 2007. Shaniel graduated from University of St. Andrews, Scotland, with anMSc. in Finance, which he was awarded with distinction. He was also awarded a BA (Hons) in Economics and International Studies from the University ofNorth Carolina at Chapel Hill, in the USA and he was awarded the CFA designation in 2011.

Hartwig Kos, CFA

Investment ManagerGlobal Multi Asset Group


Hartwig joined Baring Asset Management in 2005. He is an Investment Manager in the Global Multi Asset Group and he is the co-manager of the Baring DynamicEmerging Market Fund. He also manages a number of segregated portfolios. He has macro research responsibilities for the Barings Top down process and he is alsoresponsible for developing proprietary quantitative tools to support the Multi Asset investment process. Hartwig holds an MSc (with distinction) in InvestmentManagement from Cass Business School, London and was awarded the Lic.rer.pol (Magna cum laude) in Business Administration and Economics from the University ofBasle (Switzerland). He passed his IMC examinations in 2007 and was awarded the CFA designation in 2009.

22

Biographies

Mehvish Ayub

Senior Fund AnalystMulti Asset Investment Analyst


Mehvish is a Senior Fund Analyst in the Global Multi Asset Group responsible for research of Alternative investments and UK and Emerging Market equities. Mehvishjoined Baring Asset Management in July 2010 from Buck Consultants where she was a Senior Investment Analyst for over 2 years, responsible for the facilitation ofAlternative investment research with a macro focus. Prior to this, she was at Morgan Stanley Investment Bank for 4 years as a Foreign Exchange associate rotating insales, FX options trading and FX strategy. Mehvish holds a First Class honours degree in Management Sciences from the London School of Economics and is currentlystudying for the CFA qualification.

Luca Dal Mas

Senior Fund AnalystMulti Asset Investment Analyst


Luca is a Senior Fund Analyst in the Global Multi Asset Group. He is responsible for the research of Fixed Income, Alternatives and has partial responsibility on Equityfunds. Luca joined Baring Asset Management in September 2007 from Darta Saving Life Ltd Dublin (Allianz Group) where he worked for four years as an AssistantFinancial Manager, responsible for the investment business of the company. Prior to this, he worked in the set up of the Hedge Fund operation of Banca IMI,Milan. Luca holds a Master Degree in Financial Economics from Bocconi University in Milan (Italy) and is a CFA Charterholder.

23

Important InformationFor Professional Investors/Advisers only. It should not be distributed to or relied on by Retail Investors.This document is approved and issued by Baring Asset Management Limited, authorised and regulated by the Financial Services Authority and in jurisdictions otherthan the UK it is provided by the appropriate Baring Asset Management company/affiliate whose name(s) and contact details are specified herein. The information inthis document does not constitute investment, tax, legal or other advice or recommendation. It is not an invitation to subscribe and is for information only.

Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance is not aguide to future performance. Where yields have been quoted they are not guaranteed. Changes in rates of exchange may have an adverse effect on the value,price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging ordeveloping markets. Investments in higher yielding bonds issued by borrowers with lower credit ratings may result in a greater risk of default and have a negativeimpact on income and capital value. Income payments may constitute a return of capital in whole or in part. Income may be achieved by foregoing future capitalgrowth. We reasonably believe that the information contained herein from 3rd party sources, as quoted, is accurate as at the date of publication. The information andany opinions expressed herein may change at any time. Companies and employees of the Baring Asset Management group may hold positions in the investment(s)concerned.

This document may include internal portfolio construction guidelines. As guidelines the fund is not required to and may not always be within these limits. Theseguidelines are subject to change without prior notice and are provided for information purposes only.

This document may include forward looking statements which are based on our current opinions, expectations and projections. We undertake no obligation to updateor revise any forward looking statements. Actual results could differ materially from those anticipated in the forward looking statements. This document must not beused, or relied on, for purposes of any investment decisions. Before investing in any product, we recommend that appropriate financial advice should be sought andall relevant documents relating to the product, such as Reports and Accounts and Prospectus should be read. Compensation arrangements under the FinancialServices and Markets Act 2000 of the United Kingdom will not be available in respect to any Offshore Fund.

Research MaterialBaring Asset Management only produces research for its own internal use. Where details of research are provided in thisdocument it is provided as an example of research undertaken by Baring Asset Management and must not be used, or relied upon, for the purposes of anyinvestment decisions. The information and opinions expressed herein may change at anytime.

For data sourced from Morningstar: © Morningstar, Inc. all rights reserved. The information contained herein: (1) isproprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. NeitherMorningstar nor its content providers are responsible for any damages or losses arising from any use of this information.Version 07/SD

Compliance (London): 16 March 2012

london borough of hounslow - meetings, agendas, and minutes

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