EFTA01377063.pdf

CIO Insights —August 2016 Multi Asset 6 MULTI ASSET Recalibrating strategy Return Figure 1. 14% Lower returns for a higher level of risk 12% 1990-2005 10% - 2010-2016 8% Expected return (10y1 6% 4% 2% Past performance is not indicative of 0% future returns. -1% 1% 3% 5% 7% 9% 11% 13% 15% Volatility Multi-asset investors face an frontier" chart (Figure 1) showing environment where growth the highest rate of return for a given In short, we have remains stubbornly low and there level of risk, or vice versa. A simple an investment cycle are increasing concerns about hypothetical example makes the the long-term implications of very point even more strongly. In 2004 where some asset- accommodative monetary policy. you could achieve a 4% return with class price movements But, for the foreseeable future, we a portfolio made up with 85% fixed should live in a situation where core income and only 15% of equities. are out of synch with sovereign-bond yields are at record Now you would have to allocate economic growth. lows, corporate-credit yields are -50% into equities to have a hope of moving down and equities are at approaching this level of return - and record highs. In short, we have an your expected volatility would have investment cycle where some asset- doubled. class price movements are out of synch with economic growth. Lower effective returns are also accompanied by high levels of volatility. This is most simply illustrated by the classic "efficient- Sources: Morgan Stanley Research, Bloomberg Finance L P Data as of November 2015. Past performance is not indicative of future returns. Readers should refer to the explanatory notes at the end of this document. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0073599 CONFIDENTIAL SONY GM_00219783 EFTA01377063