ECOM100 - STRATEGIC ASSET ALLOCATION Who We Are Mirko Cardinale Head of Multi-Asset Allocation USS Investment Management Andrzej Pioch Fund Manager Asset Allocation Legal and General Investment Management I am Head of Multi-Asset Allocation (MAA) at USSIM where I am building a dynamic asset allocation process for the largest pension fund in the UK. Prior to my role at USSIM, I was Head of Asset Allocation-EMEA at Russell Investments where I was responsible for designing model portfolios and reviewing the asset allocation of EMEA funds. Before Russell I was Head of Strategic Asset Allocation and Multi-Asset Fund Manager at Aviva Investors, where I worked with Andrzej to develop a dynamic strategic asset allocation process. Prior to Aviva I was a senior investment consultant at Watson Wyatt (now Towers Watson), where I advised large institutions around Europe Mirko holds a PhD in Finance from Imperial College, London with a thesis on the interrelationships between pension funding and capital markets, an MSc in Economics from Pompeu Fabra University in Barcelona and a BSc in Economics from Bocconi University in Milan. I am a fund manager in the Multi-Asset Funds team with responsibilities covering the portfolio management and ongoing development of both institutional and retail multi-asset funds. Prior to joining LGIM in July 2014, I was a fund manager at Aviva Investors where, over the course of 5 years, I was responsible for developing long-term return and risk assumptions across major asset classes, providing advice on dynamic strategic asset allocation of multi-asset portfolios and managing a range of retail income funds and peer-aware multi-asset funds. I completed the MSc programme in Finance at Bocconi University in Milan. I am also a CFA Charterholder and I hold a bachelor degree in Economics and Social Science from Utrecht University. ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

What We Will Cover Definition of Asset Allocation and Asset Class Asset Allocation in Practice: static vs. dynamic, SAA vs. TAA (incl. TAA models) Asset Allocation Models Markowitz’s Mean-Variance and Alternative Approaches Asset Allocation vs. Security Selection: beta vs. alpha (incl. smart beta) Performance Attribution Efficient Market Hypothesis and Importance of Return Forecasting Asset Allocation Inputs: Expected Returns, Volatility and Correlation Dynamic volatility management and tail risk hedging Asset Allocation Process in Action: Defining Objectives and Constraints Asset Allocation for Individuals Asset Allocation for Institutions Incorporating liabilities/spending targets/liquidity risk/capital requirements ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

Who Worries about Asset Allocation INDIVIDUALS CORPORATIONS INSURANCE COMPANIES BANKS PENSION FUNDS ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

Investment Consultants Who Can Help Them Investment Consultants Asset Managers Trust Advisors Hedge Funds Private Bankers ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

Asset Management Company Typical Structure CEO UK Investments Fundamental Equity Desk Quant Equity Desk Fixed Income Desk Asset Allocation Desk Liquidity Desk Property Desk Multi-Manager Desk Economists Strategic Asset Allocation Tactical Asset Allocation Multi-Asset Fund Managers Implementation UK US Eurozone Japan Asia-Pacific / EM ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

What We Do Strategic Asset Allocation in Practice ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

What We Do Strategic Asset Allocation in Practice * subject to client-defined parameters to provide a customised solution: ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16

What We Do Strategic Asset Allocation in Practice ECOM100 Strategic Asset Allocation, Course Introduction, www.qmul.ac.uk, QMUL©2015-16