Earning a decent real return …through liquid investments

January 2015

Scott Jamieson – Head of Multi-Asset Investing

‘Specialist’ investment ‘straight line’ out-performance

Source: DataStream as at 15 December 2014

2

3895

7

3911

8

3927

9

3944

0

3960

1

3976

2

3992

3

4008

4

4024

5

4040

6

4056

7

4072

8

4088

9

4105

0

4121

1

4137

2

4153

3

4169

4

4185

550

100

150

200

250

Specialist Investments FTSE All-share

To

tal r

etu

rn

Debts are rising and income is slowing

Source: DataStream as at 4 January 2015

3

2010 2011 2012 2013 20140

20

40

60

80

100

120

Debt to GDP (%)

US JapanEuro area UK 1975 1980 1985 1990 1995 2000 2005 2010

-4

0

4

8

12

16

US nominal GDP growth (% p.a.)

The pursuit of income has been a winning equity theme

Source: DataStream as at 28 November 2014

4

2000

2000

2001

2002

2002

2003

2004

2004

2005

2006

2006

2007

2008

2008

2009

2010

2010

2011

2012

2012

2013

2014

2014

0

100

200

300

400

500

Compound performance of yield themed equities

S&P 500 Robust Dividend

Performance of robust UK equity income

Source: DataStream, and Kames Capital as at 2 January 2015

5

Dec 13 Mar 14 May 14 Jul 14 Sep 14 Nov 1490

95

100

105

110

115

UK income portfolio All Share

Risk allocations

As at 4 January 2015

6

1.2%

1.4%

1.4%

1.3%

1.2%

0.9%

1.1%

1.2%

Risk allocation to 'growth' (total 9.7%)

Pro US$

US Equities

Japanese Recovery

Global Eq Income

UK Equity Income

EZ Normalisation

Other

Specialist Income

1.2%

1.3%

1.1%1.0%

0.9%

0.8%

0.7%

Risk allocation to create 'balance’ (total 7.0%)

Pro US$

US Treasuries

IL Corporate Bonds

EM Bonds

Non-UK IL

IL Gilts

Australia 10y

• Be clear about your objectives?

– In this case, 4-5% real growth with low volatility

• Establish your construction principles

– Simples!

• Pursue your conviction views

– Yield focus, play the policy imperative, source strong intrinsic value

• Generate balance

– To allow you to sleep at night!

Summary

7

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This document is not intended for retail distribution and is directed only at investment professionals. It should not be distributed to, or relied upon by, private investors.

All data in this presentation is sourced to Kames Capital unless otherwise stated.

The views expressed in this document represent our understanding of the current and historical positions of the market. They should not be interpreted as a recommendation or advice.

This document is accurate at the time of writing but can be subject to change without notification. Kames Capital is an Aegon Asset Management company and includes Kames Capital plc (Company Number SC113505) and Kames Capital Management Limited (Company Number SC212159). Both are registered in Scotland and have their registered office at Kames House, 3 Lochside Crescent, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the Financial Conduct Authority (FCA reference no: 144267). Kames Capital plc provides segregated and retail funds and is the Authorised Corporate Director of Kames Capital ICVC, an Open Ended Investment Company. Kames Capital Management Limited is an appointed representative of Scottish Equitable plc (Company Number SC144517), an Aegon company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (PRA/FCA reference no: 165548).

Important information

FPID: 2015/19422

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