Navigating Unchartered Waters Managed Account Solutions

1
Navigating Unchartered WatersManaged Account
Solutions

• Dover Financial Research
• October 16, 2007

2
Agenda

• Brief overview of current events
• Implications to Managed Account Solutions
  industry
• Industry outlook

3
Market Events Have Thrust the Financial Services
Industry into Unchartered Waters

• Dow drops from historical highs of 14,164 (Oct.
  9, 2007) to 8,452 (October 10, 2008)
• Distribution has been reordered
• All asset classes have been impacted
• Equities, fixed income, housing, international
  investments
• Systemic issue which has rocked the financial
  system on a global scale

4
MAS Outperforms SP 500Growth Rate of MAS
Assets Compared SP 5001Q 07 to 10/13/08
MAS growth adjusted for net sales. Excludes Rep
as Advisor Assets
Sources Money Management Institute, Dover
Financial Research, LLC
5
Growth of SMA and Mutual Fund Advisory Assets
Compared to SP 5001Q 07 to 10/13/08
Sources Money Management Institute, Dover
Financial Research, LLC
6

• Q?

7
Projected MAS Assets Based on Market Movement
Excludes Rep as Advisor Assets
Sources Money Management Institute, Dover
Financial Research, LLC
8
Core Themes Hold True

• Asset allocation and diversification have
  benefited investors
• Holistic, research-driven, professionally managed
  investment solutions have helped investors reduce
  risk
• There is value in advice-based solutions
• Active management in certain segments adds value
• Managed solutions will continue to be a theme
  going forward

9

• Q?

10
Managers Indicate Retail Fee-Based Solutions as
Greatest Area of Growth
Q In which addressable markets are you
experiencing the greatest growth?
3Q 2008
Sources Money Management Institute, Dover
Financial Research, LLC
11
Estimated Future Growth in Fee-Based Businesses
by Investment Managers of Investment Managers
3Q 2008
Sources Money Management Institute, Dover
Financial Research, LLC
12
Sponsor Firms Indicate Robust Growth in Fee-Based
Solutions
Q Over the next five years what is your target
percentage of total firm AUM sourced from
fee-based managed solutions?
3Q 2008
Sources Money Management Institute, Dover
Financial Research, LLC
13
Obstacles to Growth Investment Manager Responses
14

• Q?

15
Technology and UMAs Key Areas of Capital
Investment By Sponsor Firms
Q Where are you making capital investments in
your managed solutions business?
3Q 2008
Sources Money Management Institute, Dover
Financial Research, LLC
16
Investment Managers Also Emphasize UMAs and
Mutual Fund Advisory Programs
3Q 2008
Sources Money Management Institute, Dover
Financial Research, LLC
17

• Q?

18
While Some Things Have Stayed the Same Others
Have Changed

• Investors will be more risk adverse
• Financial advisors are under siege
• Greater focus on more conservative investments
  and income generation products
• Taxes will increase
• The distribution landscape has forever changed

19

• Q?

20
Conclusions

• The financial services industry has undergone a
  significant transformation
• MAS appears to outperform equity indexes through
  broad diversification and better risk management
• Industry participants indicate that managed
  solutions are an area of focus and growth
• Despite market upheaval and change, advice-based
  solutions will continue to be important going
  forward