Assumptions for Long-term returns: SA - Real
Equity returns
7.0%
Equity Risk premium
4.0%
Property returns
6.0%
Property premium
3.0%
Bond returns
3.0%
0.5%
Inflation Risk premium
ILB returns
2.5%
Term premium
Cash returns
0%
Source : SIM
0.5%
2.0%
1%
2%
3%
4%
5%
6%
7%
What could you expect given these RETURN assumptions
CPI+5% (Domestic)
Allocation
Long term real
return
Weighted
average
Equity
35
7
2.45
Property
5
6
0.3
Bonds
15
3
0.45
ILB’s
15
2.5
0.38
Cash
30
2
0.6
Domestic
Alpha
Total
Source : SIM
1
100%
5.17%
What returns can you expect?
Long Term
Real
Returns
To Asset
Classes
Conservative
[CPI + 2%]
Expected
Real Return
To Fund =
Asset Class
Exposure X
Real Return
To Asset
Class
Cautious
[CPI + 3%]
Moderate
Moderate
Aggressive
Aggressive
SA Equity
7%
10
10 x 7%
25
37.5
45
57.5
Intl Equity
6%
5
5 x 6%
5
7.5
10
12.5
30
45
55
70
5
7.5
5
10
7.5
15
TOTAL EQUITY
USD Cash
1%
Intl Bonds
2%
SA Bonds
3%
30
30 x 3%
30
22.5
12.5
7.5
SA Cash
2%
50
50 x 2%
35
15
17.5
10
SA Listed Property
6%
5
5
5
4.5
5
5.7
EXPECTED
REAL RETURN
5
3.0
5 x 1%
2.95
3.7
10 years to 31 May 2012
Source : SIM – ALSI, ALBI, STeFi, J255T (prop), MSCI World, JPM Gbl Bond, 3m USD LIBID
What could you expect given these RETURN assumptions
CPI+5% (Domestic)
Allocation
Long term real
return
Weighted
average
Equity
35
7
2.45
Property
5
6
0.3
Bonds
15
3
0.45
ILB’s
15
2.5
0.38
Cash
30
2
0.6
Domestic
Alpha
Total
Source : SIM
1
100%
5.17%
Portfolio construction
Asset Class Index
EQUITY
BONDS
CASH
PROPERTY
Allocation
FTSE/JSE Top40 Index
8.4%
FTSE/JSE Dividend Plus Index
12.6%
A Top Quartile General Equity Fund
14.0%
SIM Bond Plus Fund
30.0%
SIM Active Income Fund
10.0%
STeFI
20.0%
SA Listed Prop Index
5.0%
Annual Management Fee
Asset Class Index
EQUITY
Mean of the ASISA Domestic
General Equity Category
35.0%
BONDS
SIM Bond Plus Fund
30.0%
SIM Active Income Fund
10.0%
STeFI
20.0%
SA Listed Prop Index
5.0%
CASH
PROPERTY
Annual Management Fee
0.75%
Annualised
Performance
Annualised
Standard Deviation
1 Year
13.10%
4.96
2 Years
14.09%
3 Years
Allocation
0.98%
Annualised
Performance
Annualised
Standard Deviation
1 Year
9.91%
4.86
5.87
2 Years
10.66%
5.57
15.46%
5.58
3 Years
13.35%
5.30
4 Years
12.46%
7.58
4 Years
9.64%
6.81
5 Years
9.62%
7.42
5 Years
8.04%
6.74
Thank you
SIM’s current positioning
Asset allocation
Overweight
Underweight
Neutral
Inflation Linked Bonds
Domestic
Equity
Nominal Bonds
Cash
Property
Global
1 March 2011
Equity
Cash
Property
Bonds