Fixed Income in an age of longevity Luc Froehlich, CFA, CAIA - PowerPoint PPT Presentation

Fixed Income in an age of longevity Luc Froehlich, CFA, CAIA Global Head of Investment Directing Fixed Income Fidelity International

Act I - The Diet

Consistency Total returns of equity and bond of CIFI Holdings Group 175 Rebased to 100 160 Total return (equity): +15.0% 145 130 115 100 Total return (bond): +11.2% 85 70 55 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 CIFIHG Equity CIFI HLDGS 7.75% 6/5/20 RGS Source: Fidelity International, Bloomberg, as of 21 June 2019. References to specific securities are for illustrative purposes and are subject to change without notice. They should not be taken as a recommendation or advice to transact in them. Past performance is not a reliable indicator of future results.

Consistency Liquidity solution vs Asia Equity and Asia High Yield 115 Rebased to 100 110 105 100 95 90 85 80 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 APAC Equity Asia Bonds HY Fidelity Enhanced Reserve Fund (gross) Source: Fidelity International, Bloomberg, as of 30 September 2019. *Fund launched on 26 March 2018. Performance returns on a NAV-NAV basis with dividends reinvested in USD terms of the A-ACC-USD share class. Asian Bonds HY: ICE BofAML Asian Dollar High Yield Index. APAC Equity: MSCI AC Asia Pacific Index. The Fund does not have a benchmark. Past performance is not an indicative of future performance

Timing the market S&P 500 3500 3000 2500 2000 1500 1000 500 0 Mar-68 Mar-72 Mar-76 Mar-80 Mar-84 Mar-88 Mar-92 Mar-96 Mar-00 Mar-04 Mar-08 Mar-12 Mar-16 Source: Fidelity International, Bloomberg.

Time in the market Fixed income to increase portfolio longevity Total portfolio distribution 1000K 2000K $1,813,985 $1,520,702 800K 1500K $1,282,594 600K 1000K 400K 30.0 years 500K 200K 26.5 years 23.4 years 0K 0K 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 High Volatility Mid Volatility Low Volatility High volatility Mid volatility Low volatility Source: Fidelity International, Goldman Sachs Research; High volatility portfolio: 85% Global Equity, 15% Global Fixed income; Medium vola: 70/30; Low vola: 55/45

Act II - The Balance

Striking an optimum: income vs volatility Asia High Yield returns 10% Volatility (*) : 6.8% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 1Q 10 1Q 12 1Q 14 1Q 16 1Q 18 Income return Capital return Source: ICE BofAML Asian Dollar High Yield Index and Asian Dollar Investment Grade Index, as of 30 September 2019. Past performance is not a reliable indicator of future results. (*) Annualised capital volatility is calculated based on quarterly capital return.

Striking an optimum: income vs volatility 70% Asia High Yield and 30% Asia Investment Grade Return 10% 8% Volatility (*) : 5.5% 6% 4% 2% 0% -2% -4% -6% -8% -10% 1Q 10 1Q 12 1Q 14 1Q 16 1Q 18 Income Return Capital Return Source: ICE BofAML Asian Dollar High Yield Index and Asian Dollar Investment Grade Index, as of 30 September 2019. Past performance is not a reliable indicator of future results. (*) Annualised capital volatility is calculated based on quarterly capital return.

Act III - The Token

Tokenisation simplified 01010101 01010101 • $ • 01011001 01011001 10011100 10011100 00100100 00100100 Company Smart Smart Digital information placed contracts coded on contracts coded on form of the on blockchain blockchain blockchain real asset Source: Fidelity

Fixed Income in an age of longevity Diet: Consistency + Time in market = Wealth build-up Balance: Income + Total return = Optimal allocation Token: Infrastructure + Mindset = New asset classes

Fixed Income in an age of longevity Diet: Consistency + Time in market = Wealth build-up Balance: Income + Total return = Optimal allocation Token: Infrastructure + Mindset = New asset classes

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