the many paths to real asset investing · the information herein reflects prevailing market...

The Many Paths to Real Asset Investing MODERATOR

Michael Underhill Chief Investment Officer Capital Innovations, LLC

PANELISTS

Jeff Sherman DoubleLine Capital LP

Chris Gaffney, CFA Everbank Wealth Management

Michael Weil American Realty Capital

The information herein reflects prevailing market conditions and our judgments as of the date of this document, which are subject to change. In preparing this document, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Opinions and estimates may be changed without notice and involve a number of assumptions which may not prove valid. There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.

Disclosure

100 91

45 50

61

36 29

23

11.2 6.8 5.1 4 3.8

0

10

20

30

40

50

60

70

80

90

100

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2012

Purchasing power in cents of an investment in 1900 of 1 USD

1.0 1.1 2.2 2.0 1.6

2.8 3.4 4.4

9.0

14.7

19.6

25.2 26.3

Rising prices in the USA

Consumer price inflation in the United States, 1900-2012

Most Bonds and Some Stocks Could Suffer from an Increase in Long-Term Rates

Price Impact of a 1% Increase in 10-Year Rates Price Impact of a 1% Increase in 10-Year Rates Fixed Income Sectors S&P 500 GICS

Convertibles

Glob

al Econo

my

-10% -8% -6% -4% -2% 0% 2% 4%

Source: Standard & Poor’s, US Treasury, FactSet, Barclays, Capital Innovations, LLC

High Yield

Floating Rate

EMD (LCL)

MBS

Muni’s

EMD (USD)

Core Bonds

Corporates

TIPS

10-year

3.2%

2.1%

0.6%

-0.3%

-1.5%

-1.8%

-2.4%

-3.1%

-3.3%

-4.1%

-7.9%

-3.0% -2.0% -1.0% 0% 1.0% 2.0% 3.0%

1.5%

2.1%

1.3%

1.0%

0.6%

-0.8%

-0.9%

-1.5%

-2.0%

-2.3%

Materials

Info Tech

Energy

Cons. Disc.

Industrials

Financials

Telecom

Cons. Staples

Health Care

Utilities

The Reliability of Inflation Hedges Percent of Rising Inflation Years with Positive Returns

1965-2012

One-Year TIPS

10-Year TIPS

Commodity Stocks

REITs Commodity Futures

Precious Metals Futures

96%

84%

76% 76%

54% 49%

Real Cash Real Bonds Real Assets

Historical analysis is not a guarantee of future results. Individuals cannot invest directly in an index. TIPS are calculated from synthetic Alliance Bernstein real yields estimated from actual inflation and nominal yield curve variables before 1999, and they are sourced from Federal Reserve real yields thereafter; commodity stocks and precious metals futures are sourced from the Ken French Data Library; and REITs are represented by the NAREIT Index. Commodity futures prior to 1990 are on a US consumption-weighted basis and are sourced from the AllianceBernstein series prior to 1970 and from the MJK Commodity Futures Database between 1970 and 1990; they are represented by DJ-UBS thereafter. Commodity futures and precious metals futures are fully collateralized by three-month T-bills. Source: BLS, Commodity Research Bureau (CRB), DJ-UBS, Federal Reserve, Ken French, GFD, International Monetary Fund (IMF), London Times, MJK Associates, NAREIT, National Bureau of Economic Research (NBER), The New York Times, USDA, US Geological Survey (USGS), The Wall Street Journal..

50%

10%

40% No Real Assets

Risk (%)

6.5

5.5

5.0

4.5

4.0

3.5

6.0

3.0

9.75 9.80 9.85 9.90

36%

7% 26%

9% 6%

5% 3% 8%

40%

8% 32%

6% 4%

3% 2% 5%

45%

9%

36%

3% 2% 1% 1% 3%

30% Real Assets 5.81% Return 9.83% Standard Deviation


3.99% Return 9.85% Standard Deviation

Source: Credit Suisse 2012 Survey


U.S Stocks International Stocks U.S. Bonds TIPS U.S. REITs Natural Resources MLPs Commodities

A diversified allocation to real assets within a portfolio has historically offered lower risk and potential for enhanced returns Historical Effect of Allocating to Real Assets (January 2001- December 2012)

Improved Risk Return Profile with Real Assets

Traditional Allocation Inflation-Protected Allocation 0

20%

60%

80%

40%

100%

Diversified Stocks

Diversified Stocks

Diversified Bonds

Diversified Bonds

Cash Cash Real Cash

Real Assets

Real Bonds

“Traditional” vs. Inflation-Protected Allocation

Commodities, Real Estate, FX, Commodity-Related Equity Investments

Intermediate-Term Inflation-Linked Bonds

Short-Term Inflation-Linked Bonds

Real Investments Complement Traditional Counterparts

The Many Paths to Real Asset Investing MODERATOR

Michael Underhill Chief Investment Officer Capital Innovations, LLC

PANELISTS

Jeff Sherman DoubleLine Capital LP

Chris Gaffney, CFA Everbank Wealth Management

Michael Weil American Realty Capital

CURRENCIES AS AN ALTERNATIVE INVESTMENT STRATEGY

CHRIS GAFFNEY, CFA SENIOR VICE PRESIDENT, EVERBANK WORLD MARKETS

(A DIVISION OF EVERBANK)

© EverBank 2013. All rights reserved.

WHY ADD CURRENCIES?

Largest Asset Class in the global markets Market is dominated by trade related transactions Historically low correlation with equity markets

Modern Portfolio Theory

©2013 EVERBANK. ALL RIGHTS RESERVED

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Asset Class Returns vs. The "Average Investor" 20 Years Annualized (12/31/1991-12/31/2011)

Source: Richard Bernstein Advisors LLC., Bloomberg, MSCI, Standard & Poor's, Russell, HFRI, BofA Merrill Lynch, Dalbar, FHFA ,FRB, FTSE. Total Returns in USD. Average Investor is represented by Dalbar's average asset alloca]on investor return, which u]lizes the net of aggregate mutual fund sales, redemp]ons and exchanges each month as a measure of investor behavior. Tiburon CEO Conference presenta]on April 2013. 1

2

HOW TO INVEST?

FOREX markets – leveraged spot trading ETFs Direct investments in currency deposit accounts BRL, CNY, MXN, CHF, AUD Sovereign / Supranational debt issues European peripheral debt, BRL, PLN Un-hedged Foreign Equity exposure Managed Currency Funds EIIMX,

CHINESE RENMINBI

SOURCE: BLOOMBERG


Fundamental Snapshot Debt to GDP 22.9%

CA to GDP 2.6%

Budget Deficit to GDP -1.1%

Real GDP Growth 7.5%

Cash Target 6.0%

Inflation Rate 2.4%

Highlights • Growth Policies & Economic Reform • Controlled Revaluation & Currency Integration • Closely monitor “real” data and social unrest

Technical Snapshot

Spot Price 6.14

3-‐YR STDev 1.92%

Est. Downside Risk -‐1.45%

6.00 6.50 7.00 7.50 8.00 8.50

7/12/2013

5/3/2013

2/22/2013

12/14/2012

10/5/2012

7/27/2012

5/18/2012

3/9/2012

12/30/2011

10/21/2011

8/12/2011

6/3/2011

3/25/2011

1/14/2011

11/5/2010

8/27/2010

6/18/2010

4/9/2010

1/29/2010

11/20/2009

9/11/2009

7/3/2009

4/24/2009

2/13/2009

12/5/2008

9/26/2008

7/18/2008

5/9/2008

2/29/2008

12/21/2007

10/12/2007

8/3/2007

5/25/2007

3/16/2007

1/5/2007

10/27/2006

8/18/2006

6/9/2006

3/31/2006

1/20/2006

11/11/2005

9/2/2005

6/24/2005

4/15/2005

2/4/2005

11/26/2004

9/17/2004

7/9/2004

4/30/2004

2/20/2004

12/12/2003

10/3/2003

7/25/2003

China Spot 10 Yr

NORWEGIAN KRONE

SOURCE: BLOOMBERG


Fundamental Snapshot

Debt to GDP 34.1%

CA to GDP 12.4%

Budget Deficit to GDP 13.9%

Real GDP Growth -2.7%

Cash Target 1.5%

Inflation Rate 2.0%

Highlights

• Rock solid fundamentals • Commodity driven economy – oil revenues • NOT a part of the euro zone

Technical Snapshot

Spot Price 6.06

3-‐YR STDev 13.3%


4.90 5.40 5.90 6.40 6.90 7.40 7.90

7/12/2013

5/3/2013

2/22/2013

12/14/2012

10/5/2012

7/27/2012

5/18/2012

3/9/2012

12/30/2011

10/21/2011

8/12/2011

6/3/2011

3/25/2011

1/14/2011

11/5/2010

8/27/2010

6/18/2010

4/9/2010

1/29/2010

11/20/2009

9/11/2009

7/3/2009

4/24/2009

2/13/2009

12/5/2008

9/26/2008

7/18/2008

5/9/2008

2/29/2008

12/21/2007

10/12/2007

8/3/2007

5/25/2007

3/16/2007

1/5/2007

10/27/2006

8/18/2006

6/9/2006

3/31/2006

1/20/2006

11/11/2005

9/2/2005

6/24/2005

4/15/2005

2/4/2005

11/26/2004

9/17/2004

7/9/2004

4/30/2004

2/20/2004

12/12/2003

10/3/2003

7/25/2003

Norway Spot 10 Yr

BRAZILIAN REAL

SOURCE: BLOOMBERG



Debt to GDP 68.5%

CA to GDP -‐3.0%

Budget Deficit to GDP -‐2.6%


Cash Target 8.5%

InflaZon Rate 6.6%

Highlights

• InflaZon could lead to rate Zghtening • Commodity play with some rate protecZon • Closely monitor government intervenZon

Technical Snapshot

Spot Price 2.22

3-‐YR STDev 15.35%


1.50 2.00 2.50 3.00 3.50

7/12/2013

5/3/2013

2/22/2013

12/14/2012

10/5/2012

7/27/2012

5/18/2012

3/9/2012

12/30/2011

10/21/2011

8/12/2011

6/3/2011

3/25/2011

1/14/2011

11/5/2010

8/27/2010

6/18/2010

4/9/2010

1/29/2010

11/20/2009

9/11/2009

7/3/2009

4/24/2009

2/13/2009

12/5/2008

9/26/2008

7/18/2008

5/9/2008

2/29/2008

12/21/2007

10/12/2007

8/3/2007

5/25/2007

3/16/2007

1/5/2007

10/27/2006

8/18/2006

6/9/2006

3/31/2006

1/20/2006

11/11/2005

9/2/2005

6/24/2005

4/15/2005

2/4/2005

11/26/2004

9/17/2004

7/9/2004

4/30/2004

2/20/2004

12/12/2003

10/3/2003

7/25/2003

Brazilian Real Spot 10 Yr

MEXICAN PESO

SOURCE: BLOOMBERG



Debt to GDP 43.5%

CA to GDP -‐1.3%

Budget Deficit to GDP -‐2.5%


Cash Target 4.0%

InflaZon Rate 4.5%

Highlights

• Growth Policies & Economic Reform • Sustainable and Constant Debt Levels • PosiZve Current Account Trends

Technical Snapshot

Spot Price 12.67

3-‐YR STDev 13.2%


10.00 11.00 12.00 13.00 14.00 15.00 16.00

7/12/2013

4/26/2013

2/8/2013

11/23/2012

9/7/2012

6/22/2012

4/6/2012

1/20/2012

11/4/2011

8/19/2011

6/3/2011

3/18/2011

12/31/2010

10/15/2010

7/30/2010

5/14/2010

2/26/2010

12/11/2009

9/25/2009

7/10/2009

4/24/2009

2/6/2009

11/21/2008

9/5/2008

6/20/2008

4/4/2008

1/18/2008

11/2/2007

8/17/2007

6/1/2007

3/16/2007

12/29/2006

10/13/2006

7/28/2006

5/12/2006

2/24/2006

12/9/2005

9/23/2005

7/8/2005

4/22/2005

2/4/2005

11/19/2004

9/3/2004

6/18/2004

4/2/2004

1/16/2004

10/31/2003

8/15/2003

Mexican Peso Spot 10 Yr

18

CURRENCY RETURNS

2007 2008 2009 2010 2011 2012 Thru 6/28/2013 Gold 30.94% 5.80% 24.37% 29.53% 10.61% 6.96% -‐26.74% Silver 14.57% -‐23.25% 48.03% 82.94% -‐9.35% 8.91% -‐35.59% Pla]num 36.74% -‐42.50% 54.22% 12.27% -‐21.15% 10.43% -‐13.13% Palladium 8.31% -‐52.61% 108.09% 79.07% -‐17.70% 7.74% -‐6.44% S&P 500 3.53% -‐38.49% 23.45% 12.78% 0.00% 13.41% 13.09%

Currencies in order of return for YTD 2013 (Rank): 2007 2008 2009 2010 2011 2012 2013 Chinese Renminbi 6.96% 6.97% 0.01% 3.33% 4.96% 1.13% 1.52% Hong Kong $ -‐0.28% 0.65% -‐0.05% -‐0.23% 0.04% 0.22% -‐0.08% Mexican peso -‐0.84% -‐21.10% 4.44% 6.17% -‐12.10% 8.29% -‐1.20% Danish krone 10.67% -‐4.29% 2.48% -‐6.67% -‐2.71% 1.62% -‐1.43% Euro 10.52% -‐4.48% 2.51% -‐6.56% -‐2.99% 2.00% -‐1.46% Hungarian forint 11.16% -‐9.38% 0.58% -‐9.49% -‐14.47% 9.97% -‐2.63% Swedish krona 5.89% -‐17.59% 9.41% 6.70% -‐2.71% 6.13% -‐3.07% Swiss franc 7.48% 5.86% 3.24% 10.69% -‐0.50% 2.67% -‐3.26% Singapore $ 6.62% 0.24% 1.79% 9.38% -‐0.91% 6.16% -‐3.68% Czech Koruna 15.57% -‐5.58% 4.08% -‐1.64% -‐5.03% 3.70% -‐4.87% Canadian $ 16.99% -‐18.07% 15.72% 5.49% -‐2.69% 2.70% -‐5.62% Bri]sh pound 1.33% -‐26.76% 10.81% -‐3.34% 0.35% 4.78% -‐6.58% New Zealand 8.93% -‐23.75% 24.79% 7.90% 0.49% 6.47% -‐6.74% Polish zloty 18.43% -‐16.74% 3.73% -‐3.36% -‐14.18% 11.65% -‐7.12% Indian Rupee 12.29% -‐19.24% 4.90% 4.28% -‐15.74% -‐3.07% -‐7.40% Brazilian Real 20.04% -‐23.09% 32.67% 5.01% -‐11.77% -‐8.78% -‐7.61% Norwegian 14.69% -‐21.97% 20.03% -‐0.94% -‐2.47% 7.58% -‐8.63% Australian $ 11.06% -‐19.30% 27.77% 13.95% 0.40% 1.57% -‐12.23% Japanese yen 6.78% 22.96% -‐2.56% 14.68% 6.28% -‐11.35% -‐12.61% South Africa 2.21% -‐26.61% 28.75% 11.48% -‐18.08% -‐4.71% -‐14.50%

the many paths to real asset investing · the information herein reflects prevailing market...

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