Allianz global investors

Understand. Act.

Risk: A new

understanding

January 2013

Not for distribution to retail clients

© Copyright Allianz Global Investors AG 2012 - 2

12-11055\P-RiskMaster\TH\071212

January 2013

Contents

risklab in numbers

Risk: A new understanding

Allianz RiskMaster Funds

01

02

03

risklab in numbers | Risk: A new understanding | Allianz RiskMaster Funds | Appendix



January 2013

1

risklab in numbers


© Copyright Allianz Global Investors AG 2012 -

risklab in numbers

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January 2013

World leading provider of strategic investment and risk solutions

15 years

experience

31 team

members

28 bn EUR

under supervision

11 Ph.Ds


Source: risklab, January 2013.



January 2013

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Four key elements to manage risk and return in today's markets

1 Asset class coverage

Broad coverage of all asset classes including absolute return strategies, commodities, real estate and derivatives

2 Advanced modelling

Advanced modelling beyond normal distributions to account for unpredictable events

3 Robust optimisation

Account for the uncertainties in parameters with robust methodology

4 Dynamic asset allocation

Manage risk by using forward looking tools to optimise risk return characteristics of portfolios



Asset class coverage

Investors should cover a broad universe of traditional and alternative asset classes, both liquid and illiquid to

capture return opportunities

Investing in a broad asset allocation with several asset classes in order to profit from the only “free lunch”:

diversification

Top performing asset classes change over time therefore an allocation to a diversified basket of asset classes

reduces timing risks

For example the Allianz RiskMaster funds cover a broad asset class universe including

- Gilts

- Corporate Bonds

- Emerging Market Bonds

- Global Equities

- Emerging Market Equities

- Absolute Return Strategies

- Commodities

- Property

- Cash

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January 2013

Broad asset class coverage to make use of diversification to reduce risk



Asset Class Coverage Diversification – The only free lunch in capital markets

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January 2013

Global Equities

Emerging Markets

Commodities

Real Estate

Hedge Funds

Emerging Markets Bonds

UK Bonds

Corporate Bonds

Glo

bal E

quiti

es

Em

erg

ing M

ark

ets

Com

moditi

es

Real E

sta

te

Hedge F

unds

Em

erg

ing M

ark

ets

Bonds

UK

Bonds

Corp

ora

te B

onds

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

Correlations show us diversification is vital in reducing risk

Source: risklab. Data: Bloomberg. Historical linear correlations of benchmark indices over the period January 2001 to February 2012.




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January 2013












Advanced Modelling Sep/Oct 08: The normal distribution underestimates the actual risks

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January 2013

It is key to understand the risks of black swan events

Stocks (S&P 500)

Inflation-Linked Bonds (Barcap World Inflation Linked Bonds)

0

20

40

60

80

100

120

140

160

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

20

40

60

80

100

120

140

160

180

200

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

* under the assumption of normally distributed returns. Source: risklab, based on Bloomberg data 1999-2008.

Sep

-Oct 0

8

Return (2 months) -24.21%

Deviation -5.01 σ

Occurs every* 598K years

Sep

-Oct 0

8


Deviation -6.97 σ

Occurs every* 106B years

European High-Yield Bonds (ML European Currency HY Constrained)

Commodities (Dow Jones UBS Commodity)

0

20

40

60

80

100

120

140

160

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

50

100

150

200

250

300

350

400

450

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Sep

-Oct 0

8


Deviation -6.06 σ

Occurs every* 247M years

Sep

-Oct 0

8


Deviation -5.05 σ

Occurs every* 742K years



Advanced Modelling

The known unknowns…

In volatile markets a realistic modelling of returns is vital in building portfolios which are better able to withstand

negative market events

At risklab we have designed a proprietary economic scenario generator to help to understand potential economic

scenarios and the consequences for asset class returns

A realistic modelling of individual asset classes as well as modelling asset classes in relation to other risk

factors/asset classes is crucial to provide the best possible understanding

Forward looking modelling allows you to identify the potential clustering of risks in your portfolio

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You must understand individual risks, how they relate to each other and how they relate to your

portfolio




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Robust optimisation

There is uncertainty attached to expected return and risk measures because the parameter estimates (samples) are never exact

Traditional portfolio optimisation is dependent on the input data. Even marginal changes in the input parameters can consequently

lead to completely different portfolio allocations

A robust optimisation incorporates the estimation risk of the used parameters (bottom left).

This leads to more balanced allocation structures along the resulting efficient frontier (bottom right) and increased diversification

benefits.

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Use forward looking measures to remove historical bias from inefficient sampling

Incorporation of the estimation risk (Illustration) Robust Optimisation (Illustration)

Risk

Return

Retu

rn

Ris

k

Portfolio: Sample Mean

Portfolio: Sample Volatility


January 2013




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Dynamic Asset Allocation Dynamic investment and risk management

Static asset allocations offer diversification but fail to capture the upside and actively manage risk

Today's volatile markets make asset allocation harder than ever

A rules-based dynamic approach is best placed to avoid behavioural bias and manage risk

Forward looking scenario analysis should be applied to provide most reliable risk-return profile

Regular active asset allocations reduce the clustering of risks in your portfolio, we recommend monthly

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Use diversification and then dynamic asset allocation to manage potential risks and gain upside



Dynamic Asset Allocation Dynamic allocation between asset classes is key

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Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012

15.07 4.49 16.22 16.81 4.77 4.16 8.25 12.11 10.63 4.02

12.14 1.51 13.96 13.12 3.01 3.36 6.29 10.09 9.81 3.76

10.68 1.50 13.41 12.12 1.66 2.89 4.65 8.45 9.19 2.63

9.64 0.90 12.45 9.27 1.37 2.78 -0.30 7.62 8.87 1.91

8.86 -2.89 12.29 8.28 0.73 2.47 -3.87 6.99 7.99 0.64

6.02 -3.36 6.27 6.99 0.65 1.73 -6.11 5.36 7.95 -1.51

5.67 -6.61 6.18 6.84 0.46 1.72 -8.96 5.01 4.39 -1.86

4.77 -6.97 5.76 4.72 0.20 0.16 -12.22 4.42 3.92 -2.07

3.90 -8.70 3.60 3.27 -0.23 -0.23 -13.12 3.32 3.15 -2.67

2.38 -10.09 3.48 1.13 -0.79 -0.29 -14.77 1.24 -1.44 -2.98

1.71 -12.53 3.12 -1.06 -0.96 -1.17 -17.56 0.46 -1.74 -5.47

1.14 -12.92 1.74 -2.08 -1.15 -2.47 -20.48 -0.43 -2.09 -6.90

0.95 -14.02 0.74 -2.64 -7.65 -6.74 -23.97 -2.99 -2.16 -7.09

Key

UK Corporate Bonds

UK Index Linked Bonds

International Bonds

Commodities

UK Property

Hedge Funds

UK Gilts

EM Equities

Europe ex UK Equities

North American Equities

Japanese Equities

Pacific ex Japan Equities

UK Equities

Volatility makes predicting falls and rises in markets hard

Source: Bloomberg, as at 30/08/12.




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January 2013

Source: AllianzGI UK. 1. These voluntary bandings may be breached – this range covers approximately 80% of the 12 month volatility.

Allianz RiskMaster Defensive

Expected volatility range: 7% - 11%1

Share classes / fees: C: 0.75%

Aim: The Allianz RiskMaster Defensive Fund aims to achieve long term

capital growth by maintaining a bias towards investments which are

considered lower to medium risk but may hold some investments which are

considered higher risk.

Allianz RiskMaster Conservative



Aim: The Allianz RiskMaster Conservative Fund aims to achieve long term

capital growth by maintaining a balance between investments which are

considered lower to medium risk and those which are considered higher risk.

Allianz RiskMaster Moderate



Aim: The Allianz RiskMaster Moderate Fund aims to achieve long term

capital growth by maintaining a bias towards investments which are

considered higher risk but may invest, to lesser degree, in investments

considered lower to medium risk.

Allianz RiskMaster Growth



Aim: The Allianz RiskMaster Growth Fund aims to achieve long term capital

growth by investing in investments which are considered higher risk but may,

on an ancillary basis, invest in investment considered lower to medium risk.

RiskMaster the first time the expertise of risklab is available to retail investors



What makes the Allianz RiskMaster Funds really different?

1. The Allianz RiskMaster Funds are advised by risklab - A world leader in the provision of strategic

investment and risk solutions.

2. We use our own proprietary forward looking asset allocation models - important in today's

modern macro-economic environment.

3. Asset allocation is well diversified across a selected group of 14 major asset classes including

commodities, absolute return vehicles and property.

4. Portfolio asset allocation changes are usually made on a monthly basis which we believe

gives us the best potential of capturing upside gains and avoiding losses in more volatile markets.

5. The asset allocation involves a rules based approach avoiding key man risk and behavioural

bias in portfolios.

6. Backed by our unique "Fee Promise" - If any of the RiskMaster Funds has its launch risk

category changed Allianz Global Investors will not charge its management fee for the next three

months (see www.allianzriskmaster.co.uk for further details).

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January 2013

Allianz RiskMaster Funds – powered by proven leaders in Multi Asset Investing




January 2013

A

Appendix



risklab Services on offer

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January 2013

Wide ranging expertise and offering

Risk Management Pension Investing Alternative Beta Strategic Asset Allocation/

Asset Liability Management

Total Portfolios

Structured Products

Portfolios

Absolute Return Portfolios

Illiquid Portfolios

SRI1 Portfolios

Dynamic asset allocation

strategies

Tail Risk Hedging

Hedging Strategies

(e.g. Inflation, Longevity)

Guarantee Structures

Liability Driven Investing

DC Investment Plan Design

and LifeCycle Investing

Dynamic surplus returns

management

Volatility asset class

Commodity asset class

1Socially Responsible Investing.



risklab Size and clients

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January 2013

1Source: risklab as at 31.12.2011 2Source: risklab as at 30.11.2012.

Asset Development

Assets under supervision

On-Going Advice

Strong business growth and diverse client base

2011: >160bn EUR1

Corporate Clients (Pension) 39%

Pension Funds, 21%

Banks, 11%

Consultants, 7%

Insurances, 6%

Investment Companies, 6%

Foundations, 6%

Family Offices, 4%

0

2.7

5.77.1 7.7 8.5

23.5

28.3

0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009 2010 2011

EU

R b

n

Assets Consulted Over 100 clients2

Client Structure

Percentage distribution clients




January 2013

Disclaimer

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount

invested.

The volatility of fund unit prices may be increased or even strongly increased. Past performance is not a reliable indicator of future results. If the currency in which

the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange

rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency.

This is for information only and not to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities. The

products or securities described herein may not be available for sale in all jurisdictions or to certain categories of investors. This is for distribution only as permitted

by applicable law and in particular not available to residents and/or nationals of the USA. The investment opportunities described herein do not take into account the

specific investment objectives, financial situation, knowledge, experience or specific needs of any particular person and are not guaranteed.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of

publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or

completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful

misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail.

Contact the issuer electronically or via mail at the address indicated below for a free copy of the sales prospectuses, the incorporation documents, the latest annual

and semi-annual financial reports and the key investor information document in English. Please read these documents - which are solely binding - carefully before

investing. This is a marketing communication. Issued by Allianz Global Investors www.allianzglobalinvestors.co.uk, a private limited company ,incorporated in the

UK, with its registered office at 155 Bishopsgate , EC2M 3AD, London authorized by the Financial Services Authority (ww.fsa.gov.uk). The duplication, publication, or

transmission of the contents, irrespective of the form, is not permitted.


Understand. Act.

Thank you

Allianz global investors

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