1. Money Talks: Money Making Secrets Your Bank Will Never Tell You!
14TH Eastern Africa Resource Mobilization Workshop
Safari Beach Hotel Mombasa
30TH November 2007.
Paul Wachira Mwai

2. Contents Social Responsible Investing. Defining Your Objective.
Managing Your Risk.
Investment Options.
Social Responsible Investing.
Q & A 2 2

3. Defining the Investment Objective
Short Term v/s Long Term
Capital Preservation v/s Inflation Protection
Growth v/s Income
Maximising return on Investment
Creating Certainty of Income flows
Managing your foreign Currency Exposure 3 3

4. Liability Based Asset Allocation
A fully integrated investment strategy based on a
thorough analysis of your objectives and liability structure
It is letting the liabilities take the lead in determining how
the assets should be invested
Avoid taking unnecessary risk
Proper immunisation should lead to the same sensitivity
of assets and liabilities to external risk factors. 4 4

5. Asset Allocation Asset Class Allocation Average Return Long term
Standard Deviation
(Risk Rating)
Purpose
Cash & Call Deposits
2.5% 6% 5%
Provide liquidity
Bank Deposits
42.50% 7%
9.57%
1).Provide income to meet ongoing obligations,
2) reduce risk profile
3)provide liquidity
Corporate Notes & CP 8%
Government Paper
14%
Domestic Equities
40%
29%
57%
1)Provide long-term growth
2) Inflation protection
Offshore
15%
20%
1)Provide long-term growth
2) Inflation protection and 3)Diversifition from local economy
Total
100% 5 5

6. Managing Foreign Currency Risk
Define your objective and matching your Asset & Liability.
Conflict between report requirement & the Objective
Hedging / Diversify across currencies. 6 6

7. What it takes to beat Inflation7

8. Long Term vs. Short Term Assets8 8

9. Strength of diversity, power of focus
Investment Options
Bank Deposits
Government Treasury Bills
Government Treasury Bonds
Property
Investing Offshore
Unit Trust
Strength of diversity, power of focus

10. Domestic Interest Bearing Assets
Provides mainly income though interests
Lowest risk asset class, but …
… Returns are lower on a long term basis than those of other asset classes to the extent that …
…. Does not provide protection against inflation
Their combination with other assets classes provides stability to returns
Long term average returns of 13% per annum (latest 15 year TBond)
Standard Deviation of 9.79% (low risk) 10

11. Investing in Long Dated Bond
Returns vary form 9% on 1 year bond to about 13 % on 15 years
Immunize your portfolio & march your asset and your liability 11

12. Stock Exchange Investment
Returns derived mainly from capital gains
Returns are better on a long term basis than those of interest bearing assets, but ….
… Higher risk measured by volatility of returns
Low correlation with Offshore / T-bills
Higher long term return and correlation suggests a hedge against inflation
Diversification (combination with other asset classes) can reduce portfolio risk and provide increased returns
Long term average return of around 29% per annum
Standard Deviation of 57% (high risk) 12

13. Property Investment Provides both income and capital gains
Returns are better, on a long term basis, than those of interest bearing assets (though credible long term data is difficult to find for East Africa) ..
.. But higher risk (like offshore and local equities) though volatility may be different to these other asset classes
The combination with other asset classes again reduces portfolio risk, provides stability and enhanced returns
Provides a better hedge against inflation than interest bearing assets
Current Rental Yield 6%-14% depending on type; Residential, Retail, or Commercial 13

14. Performances are in US$
Offshore Investment
Expanding Investment options to Emerging Market Funds for greater diversification
Allocation more to equity rather than bonds funds
Returns remain strong
.. But need to manage dual risks of markets and currencies
Performances are in US$
YTD
1 Year
3 Years
5 Years
BRIC
59.77%
80.70%
54.75%
50.09%
MSCI Emerging Market
42.95%
56.88%
38.57%
35.09%
Global Equity Fund
13.24%
18.68%
58.72%
128.96%
UK SMALL CAP
6.30%
23.10%
120.00%
277.80% 14

15. Pool of Savings
Investor A F D C E B
You receive Units in return for your investment.
Each unit purchased on the same day in a specific fund gets the same value and is an undivided share of the pool of savings.

16. Balanced Fund 16

17. Balanced Fund - Returns17

18. Equity Fund 18

19. Old Mutual Equity Fund - Returns19

20. Money Market Fund 20

23. What it Takes to Beat Inflation23 23

24. Long Term vs. Short Term Assets24 24

25. Social Responsible Investing
The belief that environmental, social and corporate governance
issues DO affect the performance of investment portfolios
As Investors, we have a duty to act in the best interest of
our beneficiaries
By ensuring that our investments INDEED help create a better world
Putting your money to work to build a better tomorrow while earning
competitive returns today….to sustain current and future generations 25 25

26. Social Responsible Investing
How do we practice it ?
Invest in profitable companies with respectable employee relations, strong records of community involvement, sound environmental impact practices, respect for human rights and safe products
Proactive approach to advocating for good governance and shareholder rights 26 26

27. Asante Sana Paul Wachira Mwai Old Mutual Asset Manager
Old Mutual Building Upper Hill
Mara Road Nairobi