Joint Event Visions & Strategies for Asset Managers Monday 23rd September 2013

1. Joint EventVisions & Strategies for Asset ManagersMonday 23rd September 2013 and

2. Falling yields generated a golden age for bonds To extrapolate the last 30 years’ bond returns would be fantasy

3. 300 years of UK bond yields. What is “normal”? The high bond returns since 1980 were not “normal”

4. A deeper purpose for finance Visions and Strategies for Asset Managers Roger UrwinCFA Society Switzerland September 2013

5. Big picture Investing to a long-term financial framework in which short-term and extra-financial factors play a part • Making connections • Looking closer in and further out • Dealing with complexity • Abstraction and adaptation • Communication • Convexity • Roadmaps and dashboards • Culture and governance

6. Current investment trends Shorter term Pressure from low returns : a Red Queen Race – everyone running as fast as possible to stay still Investing in the new world order The great investment revamp Medium-term Systemic issues - regulation, crises, trust, legitimacy Sustainability issues Long-term vs short-term investing Investing in a resource-constrained world First bounce = Nearer term, fast, needs execution Through the Looking Glass by Lewis Carroll Second bounce = Longer term, unpredictable, needs adaptability 6

7. The deeper purpose of investment • The investment chain links savings to investments to economic growth through institutional intermediation across time horizons, geographies and sub-groups • A better and more legitimate investment chain requires: • Investment markets as instruments of effective capital formation • Investment institutions as instruments of effective wealth build-up and draw-down • A better chain can involve one or more of • Increased returns, reduced risks, reduced costs/ negative externalities, increased trust , lesser agency issues • Sustainable capitalism and better governance need to evolve, financial capitalism needs to make way for better fiduciary capitalism • The results are a number of public goods: more economic growth and employment, more economic well-being, less degradation of natural capital and support for the sustainability of the financial system itself 7

8. CFA Future of Finance Project • Financial services is a broken spoke in the economic wheel - bandaging it has cost $billions • The current discussion about fixing finance is tired • The problem summary is of the investment industry struggling with its purpose • The CFA journey involves authoritatively describing the financial ecosystem • The CFA wants to find some solutions covering the issues of industry effectiveness and adaptability: structure, alignment, ethics, competency and trust • This is a blueprint for a new and sustainable financial ecosystem 8

9. Contact details and limitations Roger Urwin Roger.urwin@towerswatson.com References Towers Watson | We need a bigger boat (2012) The wrong type of snow (2012) Urwin | Sustainable investing practice (2009)Allocations to sustainable investing (2010) Universal owners (2011) Clark and Urwin | Best-practice Investment Management (2007) Limitations of relianceThis work reflects the opinions of the author rather than representing the formal view of Towers Watson, MSCI or the CFA • This report for information only. Specific professional advice should be taken before any action is taken based upon this report. • This report is based on data available to Towers Watson at the date of the report and takes no account of subsequent developments after that date. It may not be modified or provided to any other party without Towers Watson’s prior written permission. It may also not be disclosed to any other party without Towers Watson’s prior written permission except as may be required by law. In the absence of our express written permission to the contrary, Towers Watson accepts no responsibility for any consequences arising from any third party relying on this report or the opinions we have expressed. This report is not intended by Towers Watson to form a basis of any decision by a third party to do or omit to do anything. • The analysis in this report is based on a range of assumptions which influence the output and our recommendations. The assumptions have been derived by Towers Watson through a blend of economic theory, historical analysis and the views of investment managers. They inevitably contain an element of subjective judgement. Our opinions and return forecasts are not intended to imply, nor should be interpreted as conveying, any form of guarantee or assurance by Towers Watson to any third party, of the future performance of the asset classes in question, either favourable or unfavourable. Past performance should not be taken as representing any particular guide to future performance. 9