2. AllianceBernstein: Experience and Expertise
Our Investment Management Credentials Our DC Expertise
Managing c. €326bn on behalf of clients globally First provider of a flexible target-date service
platform in the US, UK and Ireland
Managing assets since 1967
c.€20bn in DC assets under management globally
Providing asset allocation solutions for more
than 40 years Largest provider of flexible TDF solutions globally
Intense focus on achieving positive outcomes In depth research into DC issues
for our clients
Our target date funds are being used by more
Research is key to our clients’ success than one million participants globally
A Trusted Partner for DC Innovation
As of 30th September 2012.
AllianceBernstein.com 1
3. Why Choose AllianceBernstein?
Creating better member outcomes
Age-appropriate investment design
Portfolio managed solution – not an administrative mechanism
Greater investment sophistication
Volatility management to “smooth the ride” for members
Significantly improved risk management
Accountable portfolio manager for asset allocation decisions
Strategies kept fresh through time
A simpler way for members to save
“One fund for life” Target Date Funds (TDFs)
Intuitive communications
Value for money
Low cost
High value
An Age-Appropriate Diversified Growth Fund
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4. Typical Lifestyling Approach Has Its Limitations
Typical Mechanistic Lifestyle
Fund switches on individual basis Member Fund
Accounts Switches
Really difficult to communicate to members
End point sensitive – designed to mature on Global Equity
a specific day
Real impediment to change DGF
Costly and time consuming
Bonds
A formula that has no market awareness
Introduces operational risk Cash
+1000s
Investment Problem of Retirement Saving Requires an Investment Solution
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5. A Target Date Fund is a Single Fund for Life
Member either elects or is automatically invested in the fund with their expected retirement year in its name
2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059
to to to to to to to to to to to to to to to to to to to to
2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061
Each fund is an age appropriate diversified investment fund that lasts a lifetime
15 Years before
Today At the Target Date
the Target Date
Example:
Retirement Fund
2029–2031
Equities Diversifiers Bonds/Cash
An Investment Solution to an Investment Problem
Source: AllianceBernstein
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6. AllianceBernstein Retirement Strategies
A range of investment funds suitable for individuals saving for retirement in or around the years
stated in each fund’s name
2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053 2056 2059
to to to to to to to to to to to to to to to to to to to to
2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061
Objective of each fund is to:
maximise the savers potential retirement income having consideration to the remaining time to retirement
over which any losses can be recovered; and
use their savings on retirement to provide for retirement income based on consideration of the whole
range of options available at that time1
Performance expectation through time: CPI + 4%
Benchmark: each fund has a specific benchmark made up of a composite of the indices from
the underlying asset classes
A Low Cost, High Quality Solution for Your Clients
1 Including the purchase of an annuity from an insurance company or the alternative of pursing pension provision directly from the invested funds
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7. AllianceBernstein Retirement Strategies Funds (Euro): Proposed Allocations
Young Savers Midlife Savers Pre-retirement Savers Current Strategy
Target
Years Money Market Instruments
100%
Inflation Linked Euro Government Debt
80%
Medium Duration Nominal Euro Govt
Debt
Long Duration Nominal Euro Govt
Allocation
60% Debt
Euro Corporate Bonds
40% Global Property
Emerging Market Equities
20%
Global Unhedged Equities
Global Hedged Equities
0%
40 yrs 30 yrs 20 yrs 10 yrs 0 +10 yrs
2050 2041 2032 2023 2011 2002
to to to to to to
2052 2043 2034 2025 2013 2004
Key features For
Packaged low cost range of funds (3 year vintages) Trust based schemes and contract based market
Passive only (external managers) Those who want an improved DC governance framework
Volatility Managed with Dynamic Asset Allocation Those who may want a seamless transition to a customised
Can be white-labelled solution in future
Available via the PensionSource Platform from Q1 2013
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8. AllianceBernstein Target Date Funds Offer a Robust Strategy
Creating better member outcomes with
improved risk management
Robust age-appropriate de-risking “glidepath” which
moves from growth assets to stabilising assets
Blend of asset classes and fund managers
Volatility management to smooth the ride for
members
Daily portfolio manager oversight
Adapts to any future change
Value for Money
Low cost
Passive managers with active asset allocation
Consistent investment approach with some of the
largest DC schemes globally
An Evolution Over Traditional Strategies
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9. Your AllianceBernstein Team – Client Relations
Tim Banks APMI
Director, Head of Sales and Client Relations
AllianceBernstein Defined Contribution Investments
50 Berkeley Street
London W1J 8HA
Office: +44 (0) 207 959 4783
Mobile: +44 (0) 7900 324918
Email: tim.banks@alliancebernstein.com
Katie Weber
Director—Client Relations
AllianceBernstein Defined Contribution Investments
50 Berkeley Street
London W1J 8HA
Office: +44 (0)20 7959 4948
Mobile: +44 (0)79 17263 525
Email: katie.weber@alliancebernstein.com
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11. Flexible TDFs vs. Lifestyling: Simplicity for Members
By using Target Date Funds as the delivery mechanism:
Communication is simpler to understand
Operational changes are easier to implement
Members see one fund for life
Flexible
TDFs Lifestyle
Manager changes require no member communication /
consent
Glidepath changes require no member communication /
consent
No legacy asset issues
Low operational risk during changes
Changes seamless for member
An Evolution Over Mechanistic Lifestyling
Source: AllianceBernstein
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12. Flexible Target Date Funds vs. Lifestyling: In practice…
Quarterly TDF Member Statement Quarterly Lifestyle Member Statement
The Objective is in the Fund Name
Source: AllianceBernstein. Example – for illustration purposes only.
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13. Volatility Management: Aims to Smooth the Journey
Our Objective is to Rein in Extreme Outcomes Our Approach Tends to Reduce Peak Volatility
Whilst maintaining long-term returns Simulated Historical Portfolio Volatility 2008-2010 Fund
30%
Dynamic Asset
Allocation Risk Capacity
Realised Portfolio Volatility (pa)
25%
Dynamic Management
Fixed Asset 20% Fixed Management
Conventional
Allocation
Asset Allocation
Frequency
15%
Fewer Fewer
Large Large
Losses Gains
10%
5%
0%
Lower Returns Higher
82 85 88 91 94 97 00 03 06 09
Year
Avoiding the default failing to meet its objectives and bad Our dynamic approach is applied across approx. €20bn
member behaviour of buying high and selling low or of client portfolios globally
ceasing contributions altogether
Source: Alliance Bernstein through to 31 December 2010 – Historical Information provided for illustrative only.
Analysis is simulated based on the current strategic asset allocation strategy of the AllianceBernstein Retirement Strategy Funds combined with a simulation of our dynamic asset allocation
toolset, this was not a live client strategy for the majority of this period. Please read “Note on Simulation Results” in back of presentation for important additional information. Volatility is measured
in relative terms to a benchmark which is blended over the period from being 100% cash when the fund is 25 years from retirement to 25% cash and 75% bonds matching the annuity purchased
when the fund reaches its target date.
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14. Notes on Simulation Results
The asset-allocation framework discussed in this presentation is a new strategy for which actual data were not available. The portfolios and their performance are hypothetical and do not
represent the investment performance or the actual accounts of any investors. The securities in these hypothetical portfolios were selected with the full benefit of hindsight, after their
performance over the period shown was known. The results achieved in our simulations do not guarantee future investment results.
The model performance information in this presentation is based on the back-tested performance of hypothetical investments over the time periods indicated. “Back-testing” is a process of
objectively simulating historical investment returns by applying a set of rules for buying and selling securities, and other assets, backward in time, testing those rules, and hypothetically
investing in the securities and other assets that are chosen. Back-testing is designed to allow investors to understand and evaluate certain strategies by seeing how they would have
performed hypothetically during certain time periods. It is possible that the markets will perform better or worse than shown in the projections; that the actual results of an investor who invests
in the manner these projections suggest will be better or worse than the projections; and that an investor may lose money by investing in the manner the projections suggest.
The projections assume the reinvestment of dividends and include transaction costs of 0.6% for purchases and sales of equities and bonds and 1.0% for real estate investment trusts (REITs).
For equity and bond derivatives, we assume total one-way transaction costs and cost of financing of 0.5%. We assume no deduction for advisory fees, and that assets are allocated in the
manner the projections suggest for nearly 40 years and are rebalanced monthly.
Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. While back-testing results reflect the
rigorous application of the investment strategy selected, back-tested results have certain limitations and should not be considered indicative of future results. In particular, they do not reflect
actual trading in an account, so there is no guarantee that an actual account would have achieved the results shown. Back-tested results also assume that asset allocations would not have
changed over time and in response to market conditions, which might have occurred if an actual account had been managed during the time period shown. AllianceBernstein L.P. may have a
different investment perspective and maintain different asset allocation or other recommendations from those shown here.
Dynamic Asset Allocation is AllianceBernstein’s proprietary tool which aims to:
Manage short term volatility;
Reduce portfolio risk dynamically;
Focus on one-year time horizon, updated daily;
Generate early warning of changes in return and risk environment through the use of high-frequency data;
Select the short-term asset-allocation tilts that best balance current conditions with longer-term goals of target date funds.
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15. Disclosures and Important Information
A Word About Risk
Market Risk: The market values of the investments may rise and fall from day to day, so investments may lose value.
Interest Rate Risk: Bonds may lose value if interest rates rise or fall—long-duration bonds tend to rise and fall more than short-duration bonds.
Credit Risk: A bond’s credit rating reflects the issuer’s ability to make timely payments of interest or capital—the lower the rating, the higher the risk of default. If the issuer’s financial strength
deteriorates, the issuer’s rating may be lowered and the bond’s value may decline.
Allocation Risk: Allocating to different types of assets may have a large impact on returns if one of these asset classes significantly underperforms the others.
Foreign Risk: Investing in overseas assets may be more volatile because of political, regulatory, market and economic uncertainties associated with them. These risks are magnified in assets of
emerging or developing markets.
Currency Risk: currency fluctuations may have a large impact on returns and the value of an investment may be negatively affected when translated into the currency in which the initial investment
was made.
Capitalization Size Risk (Small/Mid): Holdings in smaller companies are often more volatile than holdings in larger ones.
AllianceBernstein has partnered with AXA Wealth* to provide blended fund product solutions which have an underlying asset allocation strategy designed by AllianceBernstein. AXA Wealth will be
responsible for establishing each blended fund and AllianceBernstein is responsible for designing and managing the asset allocation strategy. The underlying funds by reference to which the value
of each blended fund solution will be determined, include collective investment schemes and re-insurance arrangements and are selected by AXA Wealth and AllianceBernstein. Such underlying
funds may include funds managed by AllianceBernstein and its affiliates.
AXA Wealth will make the blended funds available to investors via an insurance contract under which the benefits payable are linked to the performance of the underlying funds.
*AXA Wealth is a brand used by the AXA Group. Winterthur Life UK Limited is part of the AXA Group.
MSCI: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be
further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Potential investors should note: the interests in the underlying fund held within each balanced fund solution are owned by Winterthur Life Limited through sub-funds of its life-fund and investors will
not have any legal or beneficial ownership in such underlying funds. The returns described above or for any blended fund product are, therefore, dependant on Winterthur Life UK Limited being
able to meet its obligations under the life insurance contract. In the event of Winterthur Life UK Limited being unable to meet its obligations, compensation, subject to limits, may be available from
the Financial Services Compensation Scheme.
AllianceBernstein.com