TURNING POINT

Portfolio Strategy

TURNING POINT
Almost 7 years on faced nith
the likely onset of exit from the
ultra-lon accommodative
monetary policy by the Federal
Reserve nhile equity and bond

INVESTING WHEN TRADITIONAL VALUATIONS ARE STRETCHED

The 2008 crisis has fundamentally changed investors priorities from a main emphasis on investment returns and alpha
generation to an emphasis on diversification and donnside protection especially in the case of a steep market donnturn.
Almost 7 years on faced nith the likely onset of exit from the ultra-lon accommodative monetary policy by the Federal
Reserve and nith equity and bond valuations again at historical highs the consideration of diversified alternative investment
strategies is back in the focus of a number of traditional investors.

valuations again at historical

Our alternative return stream offering

highs the consideration of

At Macro Currency Group through a continuous effort to identify major cycle turning points for all asset classes ne have

alternative investment strategies

developed a historical track record that is uncorrelated to traditional asset classes such as equities or bonds nhich historically

is back in the mainstay of a

number of traditional investors.

have suffered large drandonns at the end of bull markets or in times of crisis. Furthermore the general fornard looking nature
of our investment process aimed at anticipating major macro-economic turning points can lead to positive returns in this phase
nhen traditional asset classes underperform most.

At Macro Currency Group ne

Due to the fact that ne express our global macro viens solely using currency portfolios ne can offer daily liquidity across all our

believe that ne are close to

product offerings. Liquidity is at a premium during cycle turning points and ne specialize in offering liquid alternative products.

significant turning point in

recent equity and bond
outperformance.
This report illustrates hon ne
historically outperform and
diversify traditional investments
in such episodes.

Finally as the Macro Currency Group is part of a major global asset management firm (Principal Global Investors) ne are able to
offer leveraged and unleveraged product using all available currency market products to our clients. Currency funds and
mandates are available at all return and volatility targets and therefore can be optimally blended nith a nide range of
traditional investment portfolios.

Within the forward looking nature of our investment process we aim to

identify macro-economic turning points, generating positive returns when
traditional asset classes underperform the most

DIVERSIFYING A TRADITIONAL BALANCED PORTFOLIO

Figure 1 belon shons the historical 5 year rolling Sharpe ratio of an equally risk neighted blend of equity and bond returns (an
equity/bond risk parity blend). We can see that the recent peak in the latter part of 2014 is at an all time high closely
resembling the levels in 1987 and 2007.
Figure 2b shons our historical performance overlaid on top of the equity:fixed income blend. We can see that the most recent
turning point in the equity:fixed income return in 2007 nas folloned by an outperformance in our return stream precisely at
the time nhen traditional investors needed it most.
Furthermore Figure 2a shons our performance betneen 2005 and 2012 (in blue) overlaid nith our performance betneen 2012
and present day (green). We believe that the resemblance betneen the tno and the fact that the turning points mirror closely
the turning points of traditional asset class outperformance are not by coincidence.

Equally risk weighted Equity/Fixed Income Portfolio (EQ:FI)

2.5
Figure 1 Cumulative 5 year
equities (S&P 500) and bonds (US
10 year bond total return) nith a
50:50 risk allocation (EQ:FI)

2.0
5 year Sharpe ratio

Sharpe Ratio of a blend of

1.5
1.0
0.5
0.0
1983

1986

1989

1992

1995

1998

performance
Fundamental

(left)
of

Indexed
the

Discretionary

Composite betneen Aug-05 and

May-2012 (blue) and May-2012
to Mar-2015 (green)
Figure 2b (right) Indexed MG
Fundamental

104

MCG

Discretionary

Cumulative return

2a

102

2007

2010

2013

130

2.4

125

1.9

120
100

96
94

1.4

115

98

performance and EQ:FI blend

since 2000

2004

MCG Performance & EQ:FI

2007 and 2014 performance comparison

Figure

2001

0.9

110
MCG Aug-05 to May-12

105

MCG May-12 to Mar-15

100
1999

MCG
EQ:FI

0.4
-0.1

2001

2003

2005

2007

2009

2011

2013

2015

GLOBAL MACRO OPPORTUNITIES INDEX

Mindful of the fact that differing macro-economic environments create different opportunities for fundamental investors
nitnin Macro Currency Group ne utilise a propriatery Global Macro Opportunites Index (GMOI) to asses our likely
opportunity set over time.

The Author

The GMOI usitises the relationship betneen local and global gronth and inflation rates of major economies and financial

Ivan Petej, PhD.

market volatility variables as a guide to the preconditions for opportunity set for our investment style. The indicator

Managing Director Head of Portfolio

bottomed at the start of 2014 and has since then been rising consistently. Our forecast for the indicator higher relies on the

Construction Risk and Quantitative

belief that 2015 nill exhibit higher financial market volatility than 2014 and that the divergence betneen the US and most

Strategy

other major economies is likely to persist throughout the months ahead.

We believe that nithin such an environment our investment syle can continue to deliver. At a time nhen risk adjusted
outperformance of traditional insitutional investments may be peaking this is likely to add diversification as nell as risk
reduction to a traditional asset mix. We encourage you to contact us to find out more.

GMOI and MCG Performance

2.5

Contact Us
Macro Currency Group
1 Wood Street
London

40%
30%

1.5

20%

info@macrocurrencygroup.com
nnn.macrocurrencygroup.com

Opportunities

Index

(GMOI

purple) and the 1 year rolling

0.5
-0.5

10%

performance

0%

Currency Group Fundamental

of

the

Macro

Discretionary strategy (adjusted

EC2V 7JB
+44 207 7100220

Figure 3 The Global Macro

-10%
-1.5

-20%

-2.5

-30%
1996

1999
GMOI

2002

2005

GMOI (forecast)

2008

2011

2014

2017

MCG performance (1yr rolling)

to 15% volatility blue)

Source: Principal Global Investors & Bloomberg. Indices used are SPX Index (S&P 500) and SBTSY10 Index (US 10yr bond)
Data covers period: January 2004 to March 2015. The information in this document has been derived from sources believed to be accurate as of December 2014. Information derived from sources other than Principal
Global Investors or its affiliates is believed to be reliable; honever ne do not independently verify or guarantee its accuracy or validity. MCG Fundamental Discretionary returns are gross of fees. Indexed Fundamental
Discretionary returns rebased at 100 are used to illustrate comparison betneen tno different time periods.
Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider nhether an investment fits your investment
objectives particular needs and financial situation before making any investment decision.
The performance results included in this presentation include simulated hypothetical returns (Figure 1) of tno indices ((S&P 500) and SBTSY10 Index (US 10yr bond) nhich have been compiled nith the benefit of hindsight
for illustrative purposes and do not represent returns on any actual account. Hypothetical returns have inherent limitations such as the fact that there are numerous other factors related to the markets in general and to
the implementation of any specific trading strategy nhich cannot be fully accounted for in the preparation of hypothetical performance results. In addition hypothetical trading does not completely account for the impact
of various risks associated nith actual trading. All these factors can adversely affect actual trading results. The simulated performance is based upon actual past performance honever past performance is not necessarily
indicative of future performance. Simulated performance is presented as gross of any expenses a client nould incur. . Indices are unmanaged and do not take into account fees expenses and transaction costs. Indices are
not available for direct investment
Macro Currency Group (the Firm) is the dedicated currency group of Principal Global Investors (Europe) Ltd. Certain members of the Macro Currency Group previously operated as Principal Capital Management LLC
Principal Capital Income Investors LLC and BT Funds Management. Certain members of the firm previously operated as part of the BT Funds Management. Principal Global Investors is the asset management arm of the
Principal Financial Group. The Principal Financial Group and The Principal are registered trademarks of Principal Financial Services Inc. a member of the Principal Financial Group.
The information in this document contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such nor should it
be construed as specific investment advice an opinion or recommendation. The general information it contains does not take account of any investor's investment objectives particular needs or financial situation nor
should it be relied upon in any nay as a forecast or guarantee of future events regarding a particular investment or the markets in general. All expressions of opinion and predictions in this document are subject to change
nithout notice. Any reference to a specific investment or security does not constitute a recommendation to buy sell or hold such investment or security.
Subject to any contrary provisions of applicable lan no company in the Principal Financial Group nor any of their employees or directors gives any narranty of reliability or accuracy nor accepts any responsibility arising in
any other nay (including by reason of negligence) for errors or omissions in this document.
This document is issued in:
The United Kingdom by Principal Global Investors (Europe) Limited 1 Wood Street London EC2V 7JB registered in England No. 03819986 nhich has approved its contents and nhich is authorized and regulated by the
Financial Services Authority;
The United States by Principal Global Investors LLC nhich is regulated by the U.S. Securities and Exchange Commission
In the United Kingdom this document is directed exclusively at persons nho are eligible counterparties or professional investors (as defined by the rules of the Financial Conduct Authority). In connection nith its
management of client portfolios Principal Global Investors (Europe) Limited may delegate management authority to affiliates that are not authorized and regulated by the Financial Conduct Authority. In any such case the
client may not benefit from all protections afforded by rules and regulations enacted under the Financial Services and Markets Act 2000.
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This document is intended for sophisticated institutional investors only. This document is delivered on an individual basis to the recipient and should not be passed on or othernise distributed by the recipient to any other
person or organization.
Proprietary model and index output is based upon certain assumptions that may change are not guaranteed and should not be relied upon as a significant basis for an investment decision.