Workshop presented by WealthTrust-Arizona & special guest Walt Czaicki, vice president and senior portfolio manager from AllianceBernstein.
Presentations highlights how a well-diversified mix of inflation-sensitive assets, which dynamically moves to exploit global growth and inflationary pressures, may benefit your portfolio.
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WealthTrust-Arizona - Inflation/Deflation: Harvesting the Inflation Opportunity
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2. Inflation Already a Problem in Much of the World As of January 2011, most recent 12 months available except China Source: Bloomberg, IMF, AB Estimates
3. Global Inflation Relevant for Real Asset Returns Recent Global Inflation Accelerations Average Move During Last Three Inflation Accelerations Accelerations Historical analysis and current estimates do not guarantee future results. As of November 30, 2010 Global Consumer Price Index (“CPI”) as represented by IMF Global Inflation Index, Real Assets as represented by equally weighted index of MSCI Commodity Producers Equity Index, FTSE EPRA/NAREIT Global Developed Market Total Return Index, DJ-UBS Total Return Commodity Index Source: Bloomberg, Factset and IMF
4. Global Inflation Presents a Global Opportunity Set Forecasts are subject to change. As of February 12, 2011, BRIC = Brazil, Russia, India, China Source: Bloomberg 2011 Year-Over-Year CPI Consensus Forecasts Developed Market Average 1.9% BRIC Average 6.7%
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6. Sensitivity: Varies by Asset Class Asset Class Inflation Betas 1965–2009 Historical analysis is not a guarantee of future results. Individuals cannot invest directly in an index. Total return beta to one-year inflation rate change in multivariate regression including lagged inflation rate. 10-year Treasury Inflation-Protected Securities (TIPS) are calculated from synthetic AllianceBernstein real yields estimated from actual inflation and nominal yield curve variables before 1999 and from Federal Reserve real yields thereafter. REITs (Real Estate) are sourced from the Ken French Data Library prior to 1972; they are represented by the NAREIT Equity REIT Index thereafter. Commodity Stocks are sourced from the Ken French Data Library and are weighted by market-capitalization. Commodity Futures and Precious Metals Futures prior to 1990 are on a US consumption–weighted basis and are sourced from AllianceBernstein series prior to 1970 and from the MJK Commodity Futures Database between 1970 and 1990; they are represented by the Dow Jones-UBS Commodity Futures Index (DJ-UBS) thereafter. All futures returns are fully collateralized by T-bills unless otherwise indicated. Real Assets represents the total return of a real asset portfolio (comprising one-third Commodity Stocks, one-third REITs, and one-third Commodity Futures fully collateralized by 10-year TIPS). Source: DJ-UBS, Federal Reserve, Global Financial Data, Ken French Data Library, London Times, MJK Associates, NAREIT, New York Times, Wall Street Journal and AllianceBernstein Protect from Inflation Rise Benefit from Inflation Rise Hurt by Inflation Rise 1.0 0.8 2.0 -1.4 -2.4 -3.1 6.5 8.6 20 Yr UST S&P 500 REITs 10 Yr TIPS Commodity Stocks Commodity Futures Precious Metals Futures
7. Reliability: Higher Sensitivity Related to Lower Reliability Percent of Rising Inflation Years with Positive Return 1965–2009 Historical analysis is not a guarantee of future results. Individuals cannot invest directly in an index. Total return beta to one-year inflation rate change in multivariate regression including lagged inflation rate. 10-year Treasury Inflation-Protected Securities (TIPS) are calculated from synthetic AllianceBernstein real yields estimated from actual inflation and nominal yield curve variables before 1999 and from Federal Reserve real yields thereafter. REITs (Real Estate) are sourced from the Ken French Data Library prior to 1972; they are represented by the NAREIT Equity REIT Index thereafter. Commodity Stocks are sourced from the Ken French Data Library and are weighted by market-capitalization. Commodity Futures and Precious Metals Futures prior to 1990 are on a US consumption–weighted basis and are sourced from AllianceBernstein series prior to 1970 and from the MJK Commodity Futures Database between 1970 and 1990; they are represented by the Dow Jones-UBS Commodity Futures Index (DJ-UBS) thereafter. All futures returns are fully collateralized by T-bills unless otherwise indicated. Real Assets represents the total return of a real asset portfolio (comprising one-third Commodity Stocks, one-third REITs, and one-third Commodity Futures fully collateralized by 10-year TIPS). Source: DJ-UBS, Federal Reserve, Global Financial Data, Ken French Data Library, London Times, MJK Associates, NAREIT, New York Times, Wall Street Journal and AllianceBernstein Coin Toss Perfectly Reliable 50% 49% 84% 76% 76% 54% 10 Yr TIPS REITs Commodity Stocks Commodity Futures Precious Metals Futures
8. Cost: Higher Sensitivity Related to Lower Risk-Adjusted Return Inflation Betas vs. Volatility-Adjusted Returns 1965–2009 Industrial Metal Stocks Lower Risk-Adjusted Return Greater Inflation Sensitivity Historical analysis is not a guarantee of future results. Individuals cannot invest directly in an index. Commodity futures (including grain and precious metal futures) prior to 1990 are on a US consumption–weighted basis and are sourced from the AllianceBernstein series (synthetic AllianceBernstein real yields estimated from actual inflation and nominal yield curve variables) prior to 1970 and from the MJK Commodity Futures Database between 1970 and 1990; they are represented by Dow Jones-UBS Commodity Futures Index (DJ-UBS) thereafter. Commodity-related stocks and futures are sourced from the Ken French Data Library; gold bullion data provided by London Bullion Market Association (LBMA), and REITs by the NAREIT Index. Source: BLS, GFD, Ken French, LBMA, London Times, NAREIT, The New York Times, The Wall Street Journal and AllianceBernstein S&P 500 REITs Ag Stocks Energy Stocks Livestock Futures Industrial Metal Futures Gold Stocks Grain Futures Precious Metal Futures Softs Futures Gold Bullion 0 0.2 0.4 0.6 0.8 -3 -1 1 3 5 7 9 Inflation Beta Return/Volatility
9. Blends: Improved Tradeoff Between Sensitivity and Cost Inflation Betas vs. Volatility-Adjusted Returns 1965–2009 Return/Volatility Maximizing Blends Commodity Futures: 33% Real Estate Stocks: 33% Commodity Stocks: 33% Historical analysis is not a guarantee of future results. *Allocation is representative of the zone in which a static, well-diversified blend of these assets would roughly fall; it does not point to a particular spot on the curve as having exactly such an allocation historically. The blending of real assets does not eliminate the risk of loss in a portfolio. Figures do not sum to 100% due to rounding. 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-related stocks and futures are sourced from the Ken French Data Library. Gold bullion is represented by London FX, and REITs by the NAREIT Index. Source: BLS, GFD, Ken French, London FX, London Times, NAREIT, The New York Times, The Wall Street Journal and AllianceBernstein Blend of Real Assets* Greater Inflation Sensitivity Lower Risk-Adjusted Return 0.0 0.2 0.4 0.6 0.8 1.0 -3 -1 1 3 5 7 9 Inflation Beta Return/Volatility
10. Relative 10-Year Performance Real Asset Blend vs. S&P 500 Blends: Improved Reliability of Inflation Sensitivity Past performance does not guarantee future results. Real Assets = 1/3 rd Commodity Stocks, 1/3 rd Real Estate Stocks, 1/3 rd Commodity Futures collateralized with 5-year AB Synthetic TIPS Series. Individuals cannot invest directly in an index. Source: FRB and GFD Commodity Futures Real Estate Stocks Inflation Blend of Real Assets Commodity Stocks vs. S&P 500 -15 -10 -5 0 5 10 15 10 20 30 40 50 60 70 80 90 00 10 % Annualized
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13. Best Performer Worst Performer Striving to Profit From Inflation: Being Dynamic is Critical Past performance does not guarantee future results. Individuals cannot invest directly in an index. These returns are for illustrative purposes only and do not reflect the performance of any fund. Diversification does not eliminate the risk of loss. An investor cannot invest directly in an index or average and they do not include sales charges or operating expenses associated with an investment in a mutual fund, which would reduce total returns. Note: Performance reflects annualized total returns during ensuing two years following National Bureau of Economic Research (NBER) recession end month. Recession ending 7/1980 omitted due to less than two years of recovery before next recession. Early 1970s: 11/30/1970–11/30/1972, Mid-1970’s: 3/31/1975–3/31/1977, Early 1980s: 11/30/1982–11/30/1984, Early 1990s: 3/31/1991–3/31/1993, Early 2000s: 11/30/2001–11/30/2003. S&P 500 reflects S&P 500 Index total return. Commodity Stocks are sourced from the Ken French Data Library. Real Estate Stocks (REITS) are sourced from the Ken French Data Library prior to 1972; they are represented by the NAREIT Equity REIT Index thereafter. Commodity Futures prior to 1991 are represented by the S&P GSCI Commodity Index; they are represented by the Dow Jones-UBS Commodity Index thereafter. Source: Dow Jones-UBS, Ken French Data Library, NAREIT, NBER, Standard & Poor’s and AllianceBernstein Average Annual Return in Two Years Following Recessions Early 1970s Recovery Mid-1970s Recovery Early 1980s Recovery Early 1990s Recovery Early 2000s Recovery Commodity Futures 26.9% Real Estate Stocks (REITs) 25.6% Real Estate Stocks (REITs) 26.1% Real Estate Stocks (REITs) 24.1% Commodity Futures 19.4% Real Estate Stocks (REITs) 21.4% Commodity Stocks 21.8% Commodity Stocks 20.3% S&P 500 13.1% Real Estate Stocks (REITs) 18.7% S&P 500 19.2% S&P 500 13.2% S&P 500 13.7% Commodity Stocks 8.8% Commodity Stocks 4.6% Commodity Stocks 14.0% Commodity Futures -4.2% Commodity Futures 8.9% Commodity Futures 1.8% S&P 500 -2.0%
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15. Top-Down Opportunity: Commodity Futures vs. Stocks Country Commodity Region Commodities Impacted Potential Bottlenecks Farmland Environmental Issues, Skilled Labor Wheat, Corn, Soy, Cotton Midwest US Alberta Canada Oil Data is subject to change. As of December 31, 2010 Source: AllianceBernstein Iron Ore, Coal, Lead, Nickel, Zinc, Natural Gas Skilled Labor Western Australia
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18. Gross Net 7.68% 1.05% AB Real Asset Strategy Fund Class A: Performance Summary *Inception date: March 8, 2010 The performance information shown represents past performance and does not guarantee future results. The investment return and principal value of an investment in the Funds will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.alliancebernstein.com/investors/us. Fund returns are annualized for periods longer than one year. Returns for other share classes will vary due to different charges and expenses. Performance assumes reinvestment of distributions and does not account for taxes. Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. This Fund is relatively new and the performance reflected may not be illustrative of long-term performance. A fund’s performance, especially for very short time periods, should not be the sole factor in making your investment decision. **As of March 1, 2011 Reflects the Adviser’s contractual waiver of a portion of its advisory fee and/or reimbursement of a portion of the Fund’s operating expenses. This waiver extends through the Fund’s current fiscal year and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. Source: MSCI and AllianceBernstein Expense Ratios** 3.08% 22.32% 20.03% 25.40% Period Ended March 31, 2011 YTD Since Inception* Real Asset Strategy (without sales charge) 5.70% One Year 24.43% Real Asset Strategy (with max 4.25% sales charge) 1.24% 19.49% MSCI All Country Commodity Producers Index 8.04% 22.03% Relative Performance -2.34% 2.40%
21. Experienced Management and Research Portfolio management subject to change. As of December 31, 2010 Management Team with an Average 19 Years of Industry Experience and 12 Years with AllianceBernstein Supported by more than 249 research analysts with an average of 13 years of industry experience Jon Ruff Inflation Strategies Vince Childers Inflation Strategies Drew Demakis Commodity Futures Josh Lisser Commodity Stocks Teresa Marziano Real Estate Stocks Greg Wilensky & Dan Loughney Index-Linked Bonds Expertise Portfolio Manager
22. Portfolio Allocation: Traditional or Core-Satellite Portfolio Allocation Approaches 10% Real Assets in Equity Allocation 5%–10% Real Assets in Alternatives Allocation Stocks Bonds Diversified Stocks Real Assets Other Diversified Stocks Real Assets Bonds Stocks Bonds Bonds Alternatives, e.g., real estate, credit, hedge funds