Structured Investment Solutions

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Structured Investment Solutions

• Angelien Kemna

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Structured Investment Solutions

• Outline
• ING IM
• Fixed asset allocation
• Dynamic asset allocation
• Protected Mix Fund
• ING Volatility Fund
• Solutions for whom?

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ING Group Asset Management
Hubbell (Insurance Europe)
Rinnooij Kan (Insurance Asia Pacific)
Hubbell (Insurance Americas)
ING AM platform
ING IM Global Board Regional CEOs
Baring Asset Management
ING IM Europe Angelien Kemna
ING IM Asia Pacific Chris Ryan
ING IM Americas Bob Crispin
ING Real Estate
ING IM Global Board co-ordinates global ING IM
activities.
Parcom
ING Trust
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Top 30 global investment managers
source IPE figures as per June, 2003 ING
figures include ING IM, Baring Asset Management,
ING Real Estate, ING Trust, Baring Private Equity
Partners, ING Parcom
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ING IM - Global Engine, Local Delivery
Europe U 110,8 bn AUM 175 Investment
Professionals
Americas U132,3 bn AUM 310 Investment
Professionals
Asia-Pacific U 43,1 bn AUM 156 Investment
professionals

• Global presence
• 29 Countries
• AUM U
  286,2 bn
• Total Investment professionals 642
• Total Employees 2263

Data as of 31 December 2003
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Our asset base
AuM increased with 6,3 to EUR 110,8 billion
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Our asset base
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Building blocks for asset allocation

• A large part of the activities of ING IM is the
  management of (sub-categories of) different asset
  classes.
• Examples
• High-dividend equity
• Emerging market debt
• European small cap equity
• Asset-backed securities
• ...

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Fixed asset allocation

• Most widely used method of asset allocation.
• Fixed weights, periodically rebalanced.
• Based upon mean-variance optimisation, risk
  aversion, investment targets.
• Used in both retail (model portfolios) and
  institutional portfolios.
• Added value
• Outperformance of building blocks
• Outperformance of Tactical Asset Allocation

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Dynamic asset allocation

• Based on risk considerations protection against
  severe shortfall.
• Natural connection to asset management in
  correspondence with liabilities.
• No fixed weights allocation to different assets
  depends on market developments.
• Building blocks are the same as before.
• Structured Products.

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Structured Products

• Fixed maturity
• Zero equity gt CPPI
• Zero (exotic) option gt CoCoNote
• gt ING LIRIC
• Infinite maturity
• Money market portfolio of (call) options
• gt Continuous Click Fund
• Bonds equity portfolio of (put) options
• gt Protected Mix Fund
• gt Horizon Matching Fund
• Fixed income options FX options
• gt Volatility Fund

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Protected Mix Fund

• Building blocks bonds, equity, and put options.
• Floor is a fixed percentage (70, 80 or 90) of
  highest value reached, effective immediately.
• For reference 100 would correspond to a savings
  account.
• Uses options to manage gap risk, and to make
  dynamic rebalancing more effective and efficient.

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Protected Mix Fund
Traditional Balanced Fund
Protected Mix Fund 70
Dynamic Rebalancing
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Protection Level (70)
59
E
20
39
E
E
E
Option
Option
Option
70
40
40
60
B
B
B
B
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Protected Mix Fund
NAV
Protection Level
What goes up can never go down again!
Example Protected Mix fund 80 (Korea)
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ING Volatility Fund

• Volatility as an asset class aims to earn total
  return from active bets in fixed income and
  currency option markets -that is, from the
  non-lineair risks gamma and vega
• To be a separate asset class exposure to the
  underlying markets (delta), like duration, curve,
  swapspreads, FX etc. should be limited
• Average delta is neutral, but may be considerable
  at any one point in time

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ING Volatility Fund

• Three basic volatility bets
• trading implied volatility versus actual
  volatility.
• trading ranges is volatility part of a trend?
• trading current implied volatility versus future
  implied volatility (vega).
• Next to that relative value volatility bets
• (FX and IR) short dated versus long dated
  volatility.
• (IR) volatility on short versus long rates.
• skew trades high/low strikes versus ATM forward.
• cross-country difference in volatility between
  currencies.
• cross-product volatility (IR) for example
  treasury versus swap volatility.

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ING IM Structured Products

• Solutions for whom?
• Retail clients who
• want protection,
• have specific investment targets.
• Institutional clients that
• have to comply with specific regulations,
• aim to reduce risk through diversification,
• have investment objectives related to their
  liabilities.
• ING group
• to protect solvency ratios.