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An introduction to the tactical
asset allocation process15 February 2011
Olaf van den Heuvel - Head of Tactical Asset Allocation
Gerard Moerman - Senior portfolio manager, TAA teamJean-Louis Guillaume - Head of Institutional Sales,
French European speaking countries
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Agenda
o AEGON Asset Management
o AEGON Tactical Asset Allocation (TAA) performance
o The Tactical Asset Allocation team
o Our philosophy
o Our Tactical Asset Allocation process
o 2011 market outlook
o Conclusion
o Illustration case
2
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AEGON Asset Management
o We are a global organisation with investment teams in the UK, Continental Europe and the US
o AEGON Asset Management manages215 billion
o We excel at client service and investment performance
o Award-winning expertise in equities and fixed income investment and a distinguished record inmanaging ethical and property funds
3
AEGON
Life Insurance Pension
Asset Management
AEGON Asset Management
Source: AEGON Asset Management as at 30 September 2010
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The Tactical Asset Allocation team
1. Rogier Van Aart
Real Estate/FX2. Jacob Vijverberg
Rates/Risk Management
3. Gerard Moerman
Commodities/Equities
4. Olaf van den Heuvel
Head of Tactical Asset Allocation
5. Robert-Jan van der Mark
FX/Commodities
4
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279.4
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
%
Short commodities
Long Credits (CDS)
Long equities Short equities
Long real estate/short bonds
Long equities
Long USDLong v
AEGON TAA historical performance
5
Source: AEGON Asset Management as at 31 December2010. Gross of fees. Cumulative performance of the GTAA+ overlay fund managed by the Tactical Asset Allocation team, applying the
strategies of the Reference Portfolio. This fund is an alpha provider for the allocation used by our Dutch insurance company. Examples above highlight our team capabilities. For illustrative purposes
and directed only at investment professionals. This should not be distributed to, or relied upon by, private investors.
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Our philosophy
o Markets are inefficient
o This offers opportunities
o Discipline is key to succeed
6
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Our tactical asset allocation process
7
Step1: Ideas generation
Step 2: Ideas screening
Step 3: Reference portfolio
Step 4: Monitoring
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Step 1: Idea generationThe Investment Clock
8
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Step 2: Ideas screening
9
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Total
Score
Conviction
level
>=5 25%
+4 20%
+3 15%
+2 10%
+1 5%
0 0%
Step 3: Reference portfolio
10
Valuation
+2.0
Macro
Economics
+1.5
Technicals
+0.5
Qualitative
+0.0
Total Score
= 4 Strategies Description Allocation
Paired
Strategies
Long Equity markets
Short Commodities20%
Fixed Income Long Credit 12.5%
Flattener USD Curve 12.5%
Currencies FX Carry model G10 Currencies 10%
FX Carry model Emerging mkts 12.5%
Long South African Rand
Short Chilean Peso5%
CommoditiesLong Palladium/Platinium
Short Commodities10%
Equity Long DaxShort S&P 7.5%
High Dividend Stocks Basket 10%
Real Estate 0%
Total Portfolio 100%
Source: AEGON Asset Management. The above example is provided for illustration purposes only.
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Step 4: Monitoring
o Constant update of the quadrants leading to allocation adjustments
o VaR and diversified portfolio VaR approach to set the risk budget
o Soft stop loss / Soft stop gain
o Stress tests Review coupled with tail risk hedging
11
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2011 market outlook
o Recovery continues
o Inflation pressures in many parts ofthe world
o Uncertainty about stability Middle-east
o Attractive valued investments can still
be found
12
Source: AEGON Asset Management as at 31 January 2011. Based on the AEGON Global Opportunities Fund.
Strategy% risk
budget
Currency
Carry Trades 12.5%
Long Mexican Peso v Short Columbian Peso 2.5%
Multi AssetsLong Equity 12.5%
Short Commodities 12.5%
RatesLong Australian Linker 2.5%
Long Investment Grade Credits 10.0%
EquitiesLong High dividend basket 7.5%
Long Dax/Short S&P 7.5%
Commodities Long WTI, Short Brent 2.5%
Use of risk budget 70%
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Conclusion
Accessing AEGON Asset Managements
Tactical Asset Allocation capabilities
o AEGON Global Opportunities
UCITS III Dublin domiciled fund
EUR share class ISIN: IE00B51NFJ61
o Managed account for an amount in excess of50m
13
Provide a new
source of alpha
with minimal
human emotion
involved
in a well-defined
investment process
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Illustration case
14
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Illustration case: Long DAX, Short S&P 500
o Investment clock is in phase 3, which supports the trade
15
Macro score: +1.0
-12,00%
-10,00%
-8,00%
-6,00%
-4,00%
-2,00%
0,00%
2,00%
4,00%
6,00%
8,00%
Long Dax, Short S&P
Performance of the DAX Index v S&P500 Index
Phase1 Phase2 Phase3 Phase4
Source: AEGON Asset Management. The above example is provided for illustration purposes only.
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Illustration case: Long DAX, Short S&P 500
16
Valuation score: 0
Cur rent Average Difference Cur rent Average Difference
WORLD 21.1 16.9 4.2 OVERVALUED 16.0 17.1 1.1- FAIRLY VALUED 13.2 16.5 UNDERVALUED
US 22.1 15.8 6.3 OVERVALUED 17.7 16.2 1.5 FAIRLY VALUED 15.1 15.5 FAIRLY VALUED
EU 15.7 13.5 2.2 OVERVALUED 15.2 13.6 1.6 FAIRLY VALUED 8.8 12.2 UNDERVALUED
GERMANY 16.4 14.0 2.4 OVERVALUED 15.4 15.2 0.3 FAIRLY VALUED 10.8 13.4 UNDERVALUED
Current Average Difference Current Average Difference Current Average DifferenceWORLD 2.3 2.8 0.5- FAIRLY VALUED 1.9 2.1 0.1- FAIRLY VALUED 12% 11% 1% AVERAGE
US 1.7 3.1 1.4- OVERVALUED 2.5 2.5 0.0- FAIRLY VALUED 14% 15% -1% AVERAGE
EU 2.8 3.7 0.8- FAIRLY VALUED 1.6 1.7 0.1- FAIRLY VALUED 11% 12% -1% AVERAGE
GERMANY 2.5 2.6 0.1- FAIRLY VALUED 1.8 2.0 0.2- FAIRLY VALUED 11% 12% -1% AVERAGE
Region
Region
Graham-Dodd PE 1year PE PE using max trailing earnings
Dividend yield Price/Book Return on Equity
o Valuation screen (+0.5)
Germany: The German market is fairly valued on all measures. The US: is overvalued on G&D PE and dividend yield
o The Regional Equity model ranks the US only slightly above EU (-0.5).
o This difference decreasedSource: AEGON Asset Management. The above example is provided for illustration purposes only.
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Illustration case: Long DAX, Short S&P 500
17
Technicals score: 1.0
o Positive trend (6-months moving average moving upgreen line)
DAX lost clearly vs SPX, 6-month momentum turns negativescore -1 MDAX still has a positive uptrend versus the SPXscore 1
o DAX/SPX is oversold with an RSI of 26 (+1)
o SP500 is overbought with an RSI of 75, while DAX (48) and MDAX (57) are not (+0.5)Source: AEGON Asset Management. The above example is provided for illustration purposes only.
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Illustration case: Long DAX, Short S&P 500
o Pro Additional analysis would say that Germany could profit from the current situation (+1) Economic surprises score much better for Europe than for the US (+0.5)
o Con Positioning slightly higher in EU than US (-0.5) FED is more supportive for markets (QE2), while ECB does not want to increase purchases (-0.5)
Teams view (-0.1)o Neutral
Our proprietary profit model forecasts the same level of profit (13%)
18
Qualitative score: 0
United States
-85
-60
-35
-10
15
40
65
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10
-225
-175
-125
-75
-25
25
75
125
175
225vs. Priorvs. ThresholdSurprise
Europe
-85
-60
-35
-10
15
40
65
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10
-225
-175
-125
-75
-25
25
75
125
175
225vs. Prior
vs. ThresholdSurprise
Source: AEGON Asset Management. The above example is provided for illustration purposes only.
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Illustration case: Long DAX, Short S&P 500
19
Valuation
0
Macro
Economics
+1.0
Technicals
+1.0
Qualitative
+0.0
Total Score
= 2
Total Score Conviction level
>=5 25%
+4 20%
+3 15%
+2 10%
+1 5%
0 0%
Conclusion: 10% is the conviction resulting from a total score of +2
Source: AEGON Asset Management. The above example is provided for illustration purposes only.
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Appendices
20
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Step 1: Idea generation
21
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Step 1: Idea generation
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Important information
FP ID No: 2011/11348
This communication is directed at professional investment advisors. It should not be distributed to, or relied on, by private customers. The
information in this presentation is based on our understanding of the current and historical position of the markets. The views expressed should not
be interpreted as recommendations or advice. Past performance is not a guide to future performance. The value of investments and the income
from them may fall as well as rise and is not guaranteed. We refer to the full prospectus and the simplified prospectus which is available from
AEGON Asset Management UK plc, www.aegonam.co.uk.
Any investment objective, performance benchmark and yield information will be treated as a target only and should not be considered as an
assurance or guarantee of the performance of the fund or any part of it.
The Global Opportunities Fund invests primarily in financial derivatives. The fund also follows a share or bond index and the value of the assets
may greatly fluctuate as a result of the investment policy. The Global Opportunities Fund is a sub fund of AEGON Investment Company (Ireland) plc
which is registered in the Netherlands by the Netherlands Authority for the Financial Markets (AFM).
AEGON Investment Company (Ireland) plc is an umbrella type open ended investment company with variable capital registered in the Republic of
Ireland (no: 442106) registered office at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. AEGON Investment Company
(Ireland) plc is regulated by the Financial Regulator. AEGON Asset Management includes AEGON Asset Management UK plc (no: 113505) andAEGON Investment Management UK ltd (no: 212159). AEGON Asset Management is the Investment Manager and Marketing Agent for AEGON
Investment Company (Ireland) plc. AEGON Asset Management UK plc is authorised and regulated by the Financial Services Authority, (FSA
reference no: 144267).
AEGON Investment Management UK ltd is an appointed representative of Scottish Equitable plc, an AEGON company, whose registered office is 1
Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (FSA reference no: 165548).
AEGON Investment Management UK ltd is a subsidiary company of AEGON Asset Management UK plc and provides investment management
services to AEGON which provides pooled funds, life and pension contracts.
AEGON Investment Company Ireland is a UCITS collective investment scheme registered in Luxembourg by the Commission de Surveillance du
Secteur Financier. The Prospectus, Supplement and Simplified Prospectus of AEGON Investment Company (Ireland) are available f rom CACEISBank Luxembourg 5, alle Scheffer, L-2520 Luxembourg
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