Prudential Plc · LSE:PRU
Prudential — Investor Day (November 2016)
31 slides from Prudential's investor day presentation, November 2016
Slide 1: Anne Richards, M&G
Anne Richards M&G
Slide 2: Agenda
Agenda M&G’s key capabilities Rising to cyclical challenges Adapting to structural change The future
Slide 3: M&G's key investment capabilities
M&G’s key investment capabilities M&G Group assets under management by asset class (%), 30 September 2016 One of Europe’s leading bond managers with one 2.5% Fixed Income 6.4% of the largest credit analyst teams in UK / Europe 19.1% 8.0% Corporate bonds High yield Leveraged finance Government bond
Slide 4: M&G's investment expertise: supporting the needs of a diverse range of clients
M&G’s investment expertise: supporting the needs of a diverse range of clients M&G Group assets under management by client type and asset class (%), 30 September 2016 2.7% 0.6% 5.3% 9.7% 12.3% 17.7% 21.3% 5.0% 30.8% 0.8% 2.9% 1.5% 7.3% 2.9% 40.7% 12.8% 11.3% 8.5% 43.5% 49.4% 3.8% 9.0% Internal AUM:
Slide 5: Agenda
Agenda M&G’s key capabilities Rising to cyclical challenges Adapting to structural change The future
Slide 6: The OEIC range is the major part of retail assets
The OEIC range is the major part of retail assets M&G Group assets under management by client type and asset class (%), 30 September 2016 2.7% 0.6% 5.3% 9.7% 12.3% 17.7% 21.3% 5.0% 30.8% 0.8% 1.5% 2.9% 7.3% 2.9% 40.7% 12.8% 11.3% 8.5% 43.5% 49.4% 3.8% 9.0% Internal AUM: £130bn Retail AUM: £62bn Inst
Slide 7: A year ago only 36% of our open ended retail funds had above median performance
A year ago only 36% of our open ended retail funds had above median performance over one year… M&G retail investment performance weighted by number of funds (%), 30 September 2015 Top quartile 12% 11% 16% 30% 24% 32% 25% Upper quartile 28% 22% 50% 26% 32% Lower quartile 26% 42% 31% 27% Bottom quarti
Slide 8: …that has improved to 53% at the end of September 2016
…that has improved to 53% at the end of September 2016 Retail investment performance weighted by number of funds (%), 30 September 2015 and 30 September 2016 Top quartile 12% 11% 13% 16% 16% 31% 30% 39% 24% 21% 32% 20% 25% Upper quartile 22% 28% 22% 50% 31% 24% 26% 38% 32% Lower quartile 20% 26% 18%
Slide 9: Pace of outflows from retail funds is slowing as investment performance improves
Pace of outflows from retail funds is slowing as investment performance improves 2016 M&G Group retail net sales (£m), January 2015 – September 2015 1,000 573 500 346 Brexit effect 0 (260) (245) (500) (361) (399) (429) (605) (1,000) (885) (938) (1,076) (1,136) (1,168) (1,149) (1,205) (1,209) (1,216)
Slide 10: M&G Optimal Income Fund has led the recovery in performance
M&G Optimal Income Fund has led the recovery in performance M&G Optimal Income Fund investment performance, 31 December 2015 and 30 September 2016 Fund manager 1 year 3 years 5 years tenure* Sector Return % Return % Return % Return % Quartile Quartile Quartile Quartile p.a. p.a. p.a. p.a. M&G Optima
Slide 11: Market environment has been testing for M&G's equities style for some time
Market environment has been testing for M&G’s equities style for some time Global value vs. quality stocks vs. 10 year US bond yields (%), 2002 – October 2016 6 105 US 10y yields (LHS) MSCI World Index - value vs quality (RHS) 6 100 5 95 5 90 4 85 4 80 3 75 3 70 2 65 2 60 1 55 2002 2003 2004 2005 20
Slide 12: M&G's institutional client base
M&G’s institutional client base Strong performance across a range of metrics A number of funds outperform against benchmark(%), M&G institutional pipeline (%), 30 September 2016 five years to September 2016 Real estate 32% Infrastructure 46% ~£4bn investment 100% 100% pipeline across a diverse Real
Slide 13: Agenda
Agenda M&G’s key capabilities Rising to cyclical challenges Adapting to structural change The future
Slide 14: Changing demand leads to strong growth prospects for alternatives, solutions and passives
Changing demand leads to strong growth prospects for alternatives, solutions and passives Global AUM split by product (%), 2003 – 2015 Estimated share of cumulative net flows $34T $43T $71T $71T 2016 – 2020 Alternatives 7% 11% 11% 12% 100% Active specialties 20% 21% 23% 22% 23% Solutions 6% 7% 8% 12
Slide 15: Global asset management industry faces margin pressure with an increased focus on costs
Global asset management industry faces margin pressure with an increased focus on costs Net revenues and costs / AUM (bps) and operating margins / net revenues (%), 2007 – 2015 Bps % 45.0 Net revenues (bps) Costs (bps) Operating margins (%) 45 40 40.0 40 38 37 37 36 36 35 35 35.0 35 33.6 31 30.0 29.
Slide 16: More complex distribution landscape
More complex distribution landscape End customers HNW investor Mass market low-cost self Mass market advised Mass affluent advised Mass market self-directed wealth investor investor investor / DC pension investor services investors Online self service Robo-advice Robo holistic finance investment mod
Slide 17: Wave of regulatory development
Wave of regulatory development Asset management Shadow banking - ETFs Corporate governance market study PRIIPs Dodd-Frank FTT UCITS V CCP R&R CSDR Shareholder rights MiFID 2 / MiFIR Shadow banking – FAMR IORP II liquidity / leverage UCITS VI Sanctions Data protection Senior Managers ICSD Regime GATC
Slide 18: Developing new capabilities led by investor needs
Developing new capabilities led by investor needs Long lease real Absolute return Commercial real estate Private debt Distressed debt solutions estate debt Infrastructure Infrastructure Direct lending Private equity equity debt Source: M&G management information
Slide 19: M&G Inflation Opportunities Funds: overview
M&G Inflation Opportunities Funds: overview Alternative investments case study Strategy launched in October 2012 Current AUM of £1,950m Consists of two co-mingled funds and three single investor funds Targets: – UK RPI +2.5% p.a. on a five year rolling average – Duration of 15 – 20 years I
Slide 20: M&G Inflation Opportunities Funds: portfolio overview
M&G Inflation Opportunities Funds: portfolio overview Alternative investments case study M&G Inflation Opportunities Fund portfolio breakdown (%), 31 October 2016 Cash 0.5% Private corporates Solar Public 3.3% Social power corporates housing 3.8% 2.6% 5.9% Private Index-linked Drax power station ren
Slide 21: M&G Inflation Opportunities Funds: performance update
M&G Inflation Opportunities Funds: performance update Alternative investments case study M&G Inflation Opportunities Fund performance (%), 31 October 2016 18% M&G Inflation Opportunities Fund Estimated RPI +2.5% 16.4% 15.9% 16% 14% 12.8% 12.4% 12% 11.7% 10.9% 10% 8% 6% 4.8% 4.6% 4.0% 4.3% 3.8% 4.0%
Slide 22: M&G Inflation Opportunities Funds: NAV growth
0.0 0.5 1.0 1.5 2.0 2.5 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Note: Data as at 30 September 2016 Jun-13 Source: M&G management information Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 Alternative investments case study May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 +95
Slide 23: Simplification and scalability are key to meeting industry-wide margin pressure
Simplification and scalability are key to meeting industry-wide margin pressure Data and digital Fund structures Aladdin system implementation Development, integration and Website rebuild project to improve the implementation of a new business functionality and user experience of operating mod
Slide 24: Adapting distribution to meet increasingly complex customer channels
Adapting distribution to meet increasingly complex customer channels More emphasis on sub-advisory opportunities Joint-product development opportunities Digital distribution Strategic partnerships Brexit
Slide 25: The regulatory tide shows no sign of turning
The regulatory tide shows no sign of turning Engage constructively with regulators and policymakers Shadow banking - ETFs Corporate governance Asset management market study PRIIPs Dodd-Frank FTT Regulatory UCITS V trend is towards increased complexity and greater CCP R&R administrative burden CS
Slide 26: Agenda
Agenda M&G’s key capabilities Rising to cyclical challenges Adapting to structural change The future
Slide 27: Asset management is a growth industry
Asset management is a growth industry Global AUM (USD trillion), 2004 – 2020 110.0 100.0 90.0 +42% 80.0 70.0 101.7 60.0 50.0 71.4 63.9 59.4 40.0 37.3 30.0 2004 2007 2012 2015 2020 estimate Source: PwC analysis 2014; BCG Global Asset Management Market Sizing Database 2016
Slide 28: For M&G to succeed requires…
For M&G to succeed requires… Right capabilities to meet customer demand Investment performance that offers value for money and meets customer expectations Distribution aligned to an evolving customer base Careful management of costs Investment in simplification and scalability
Slide 29: M&G has a competitive cost / income ratio by industry standards
M&G has a competitive cost / income ratio by industry standards M&G Group cost / income ratio vs. industry peers (%), 2015 Peer group Average: 62% 73% 67% 62% 63% 64% 61% 57% 57% 52% Amundi M&G BlackRock Man Group Franklin Schroders Henderson Aviva Investors JPMorgan Asset Templeton Management Sourc
Slide 30: Investing for growth will see the M&G cost / income ratio rise…
Investing for growth will see the M&G cost / income ratio rise… M&G Group cost / income ratio (%), 2008 – 2015 65% 63% 61% 61% 59% 59% 58% 57% 2008 2009 2010 2011 2012 2013 2014 2015 …but it will remain below the peer group average over the medium-term Source: M&G management information
Slide 31: The future
The future M&G has a tradition of developing creative investment ideas which meet client needs, and a proven ability to convert these ideas into assets under management