Risk-Rated Portfolio Solutions Agenda Agenda Introduction 1. o - PowerPoint PPT Presentation

RI RIVE VERS RS CA CAPIT ITAL AL MANA NAGEMENT GEMENT Risk-Rated Portfolio Solutions

Agenda Agenda Introduction 1. o The Rivers Approach to Investment o Working with Advisors The Investment Process 2. o Risk Rated Growth or Income Focused Portfolios o Tactical Asset Allocation o Fund Selection o Portfolio Oversight & Compliance Key Biographies 3. 2

Introduction Rivers Capital Management Introduction A fresh and dedicated approach to Multi-Asset Investment Founded in 2016 to provide platform based model solutions to Advisors  Founders Richard Bonnor-Moris and Eduardo Tomacelli combine over 50 years investment experience  • Worked together successfully managing platform based model portfolios since 2011 • Previously Richard specialised in risk rated portfolio construction and tactical adjustment • Eduardo has managed investment portfolios through funds and segregated mandates since 1988 Rivers is backed by private high net worth individuals and former clients  The investment team is supported by third party compliance, external research and an investment  committee of industry experts “Dedicated to discretionary portfolio management Rivers will never provide financial planning or individual wealth management . Our ideal client is an advisor who fully understands what we’re doing and why we are doing it, we don’t do surprises. We want clients who communicate with us as a partner, a partner who is independent and can therefore be objectively assessed…” Richard Bonnor-Moris - Citywire 3

Rivers Investment Principles Introduction Seeking financial advisors who understand and share our values Consistent Returns - Protecting capital and avoiding loss will lead to superior investment returns  Transparent Portfolios – All tactical decisions, costs and fund selection is made available to all clients   Managed Investments - Markets are inefficient and require continuous monitoring Dynamic Allocations – As well as risk the active/passive allocation should vary with the market cycle  Efficient Pricing - Long-term value to clients not cost, should drive investment decisions  “ Ever erythin hing should ld be made ade as simp mple le as possible sible, , but not ot simp mpler ler ” - Albert Einstein “ Honest esty is the best st policy icy – when en there is money in it. ” – Mark Twain 4

The Rivers Approach to Investment Introduction What makes Rivers different We provide solutions exclusively through advisors and do not manage client funds directly  We offer tailored investment portfolio solutions and direct access to portfolio managers   We combine independent fund selection research with extensive in house expertise We dynamically manage a blended approach between passive and active fund strategies  We optimise every portfolio to the specific funds available on platform at each level of risk and cost constraint  “You can’t do the same things others do and expect to outperform” – Howard Marks “ Pric ice e is what at you pay, , Value lue is what at you get et ” – Warren Buffet 5

Working for Advisors.. Investment Process .. to provide differentiated client focused risk rated solutions • Rivers provides all reporting, trade and rebalancing information • Rivers investment team is directly available to answer advisor queries • Our objective is to offer a differentiated personalised investment management service for advisors • Rivers offers no financial planning service but will tailor solutions for financial advisors’ needs Financi ncial l Ad Advisor sor Individ vidual ual Client nt • Clients are linked on platform to selected and assessed Rivers Portfolio Solutions • Advisor can communicate Rivers updates according to specific client needs • Client benefits from objective analysis from trusted and independent advisor 6

Investment Process Overview Investment Process An ongoing process to achieve long term investment objectives Using proprietary risk model all portfolios start with a strategic asset allocation which will primarily Risk Rated Growth th or determine portfolio characteristics Incom ome e Focused ed Po Portfolios olios Consistency of return and the avoidance of loss remain the primary objective. Independent compliance overview ensures regulatory risk is avoided Po Portfolio olio Ove versight ight & Tactic ical al Adjus ustme tment nt Complianc liance Tactical adjustment to adjust risk, avoid expensive assets and alter the active/passive allocation depending on Rivers meet with all active investment Fund d Selec ection ion the market cycle managers and take advantage of robust third party and internal research to maximize opportunity but control risk 7

Risk Rated Growth, or Income, Focused Portfolios The Investment Process Looking to the long term with forward looking Strategic Asset Allocation Forward looking estimates for asset risk and return take account of risk free rates of return, expected risk  premia and the covariance and correlation between assets  History, especially recent history, is a terrible forecaster for returns although the long-term characteristics of risk appear to remain consistent over long investment periods By considering a neutral market cycle set of returns, we seek to create robust portfolios for long-term  investment Market ket Value Actual Market et Value Full Cycle e 5-10 Years rs Time “The long term differs from all time periods apart from the long term” 8

Risk Rated Growth or Income Focused Portfolios The Investment Process Built with a proprietary risk focused approach to portfolio construction The construction of a portfolio should begin with broad, non market correlated allocation to low risk, low  return assets – the Anchors  To improve the return characteristics it is necessary to take (mainly) equity market risk and allocate to assets with expected long term high returns - the Enhancers To add diversification and limit market volatility it is necessary to add a proportion of non correlated  diversifying assets to lower the overall portfolio return volatility - the Diversifiers  The number of Anchors, Enhancers and Diversifiers in each portfolio is determined by risk optimisation The Strategic Asset Allocation for each portfolio is seen as a starting point for benchmark allocation  RISK RETURN ANCHORS 9

Tactical Asset Allocation The Investment Process Portfolios are rebalanced to optimise long term risk adjusted return Markets are generally efficient but discrepancies in valuation justify asset allocation adjustments   Asset classes with attractive valuations are preferred to expensive asset classes where risk is often high The optimal blend between passive and active funds varies within the market cycle and is also adjusted  We will report portfolio rebalances 2-4 times a year aimed to improve cost, improve return and optimise risk  Some examples that justify reallocation of capital OVERWEIGHT The oversold and the unpopular The overbought and the most popular Active management at the end and Active management if breadth and beginning of the market cycle leadership is narrow Interesting themes prior to them Headline making assets that are likely UNDERWEIGHT making headlines to form bubbles Underperforming managers with Managers with unjustifiably strong excellent long term records returns Uncorrelated funds when sentiment is Assets where liquidity is concerning excessively optimistic Risk when sentiment is excessively Risk when sentiment is fearful optimistic We rebalance portfolios according to on-going market conditions 10

An Active Approach to Passive Investment The Investment Process The time to be more passive and the time to be more active Excess Return from Active  The last 12 months have seen a sharp under- performance of active fund managers against a wide Managed Funds Since 1998 range of investment benchmarks.  Equity and Fixed income indices have continued to 1 Year MSCI World Performance (GBP) perform despite rising concern from investors. 20 60 At Rivers we believe the allocation to passive  50 investments needs to be dynamic and depends on 15 40 the ongoing market cycle. 10 30 Statistics show that Active management tends to  20 5 perform most effectively at the beginning and 10 during the first half of a market cycle. 0 0 Tactical adjustment of active and passive portfolio  -10 -5 allocation increases efficiency and reduces overall -20 costs to clients. -10 -30 98 00 02 04 06 08 10 12 14 Maximum cost constraints will restrict the  Investment Date maximum allocation to active management for any portfolio. Source: Financial Express – . Shows the aggregate excess return of high tracking error equity and fixed income funds since Q1 1998. High Tracking error for this purpose is over 5% for equity funds and over 3% for Fixed Income funds. The excess return is calculated from funds own listed benchmark. This data is for illustrative purposes and was prepared by Rivers Capital Management. Funds were restricted to those currently available on Ascentric and therefore subject to survival bias 11