Download power consistency - Voya Investment Management

Tap into the
power of
consistency
How Investing for Retirement with a Focus on
Consistency May Help Reduce Your Stress
DRAFT/R1
Your Guide to Investing for Retirement with Consistency
For financial professional use only. Not for inspection by, distribution or quotation to, the general public.
For financial professional use only. Not for inspection by, distribution or quotation to, the general public.
I N V E S T M E N T M A N AG E M E N T
TM
Why Consistency Matters
If you’re like many retirement investors, you’d like higher
investment returns.
But the potential of big losses causes more than a little stress. So, is there a way to seek higher returns while keeping
stress to a minimum?
Now there is a new way to evaluate funds and identify those that have delivered consistent excess returns with less risk
of big losses. At Voya, we call it the Consistency Lens™. What’s the main benefit for you? Less stress. Market swings can
cause you to worry about having enough money to retire comfortably. Investing in funds that have historically produced
a smoother ride may help to reduce that stress.1
Applying a Consistency Lens™ to
Retirement Investing
What are “excess returns”?
A fund produces excess returns when
its returns are higher than those of
a relevant benchmark. If Fund A is
benchmarked to the S&P 500 Index,2
and the fund produces a 6% return
while the Index produces a 5% return,
Fund A has provided investors with an
excess return of 1%.3
Voya’s Consistency Lens™ is a unique application of six
performance-based factors that measure funds for historical
consistency.
Funds that ranked higher on these factors tended to produce consistent excess returns in both up and down markets—
meaning fund performance was less of a roller coaster ride compared to funds that ranked lower on those factors.
Keep in mind that not all funds will rank highly across all six factors. It’s not about perfection. It’s about overall consistency
compared to the thousands of actively-managed mutual funds available to investors. The orange box highlights what each
of the six factors measure and why it’s important to you as a retirement investor.
P ast returns are not a guarantee of future outcomes. The information presented here is not intended as investment advice. Consult with your financial advisor before investing in any fund.
A gauge of the U.S. stock market, which includes 500 leading companies in major industries of the U.S. economy. The index is unmanaged and not available for direct investment.
3
For illustrative purposes only. This is not meant to predict the returns for any fund or index and does not take into account fund fees. Investors cannot directly invest in an index.
1
2
2
1
2
Information Ratio
Does the fund manager have a track record of excess returns with controlled
risk? We want to discover if a fund’s record of success is the result of skill or mere
luck. We rank the degree of skill in terms of the relationship between the excess
return the manager produced and the risk accepted to produce it.
Sortino Ratio
Does a manager mitigate the possibility of large losses?
Sortino Ratio measures how returns relate to downside risk in both up markets
and down markets.
3
R-Squared
Does the manager handle fund assets as they claim on a consistent
basis? We look for how similar or different the manager’s performance and
security selection is compared to the benchmark. The best managers can
outperform the benchmark without deviating wildly from it.
4
Upside Capture
What is the manager’s strategy for picking securities that have
appreciated faster than market averages? Favorable Upside Capture tells
us a manager has a discipline for finding undervalued securities.
5
6
Consistency at Each Life Stage
Finding consistency in your retirement
investing shouldn’t be a “one-size-fits-all”
solution. We tested combinations of the six
factors and found that certain subsets help
identify funds that are more suitable for
certain “life stage” categories. This makes it
easy for you and your advisor to fine-tune the
results to better fit your risk and return needs.
Retirees
■■ Generally the most conservative group, retirees look for funds that have closely
tracked benchmarks but with lower risk. Sortino Ratio, Downside Capture, and
R-Squared help to identify funds with low potential for losses.
Downside Capture
Pre-Retirees
This tells us about a manager’s historical ability to avoid losses in difficult
market conditions.
■■ This group takes a more balanced, middle-of-the-road approach. Pre-retirees
look for funds that have produced consistent, above-benchmark returns with
average risk. Information Ratio, Upside Capture, and R-Squared help to
identify funds that have shown these characteristics.
How has a manager performed during down markets?
Overall Ratio
What is the ratio of Upside Capture to Downside Capture?
Accumulators
It’s very difficult to get a high ranking in both Upside Capture and Downside Capture.
What’s important is seeing a favorable Overall Ratio between the two. This helps
to narrow and clarify evidence of manager skill.
■■ The youngest life stage group expects the highest potential returns and is willing
to accept typical or above average risk. Information Ratio and Upside Capture
help to identify funds that have provided above average returns in up markets
compared to the funds in the other life stage groups, but with higher risk of loss.
3
Voya’s consistency analysis is not meant to be your only means for evaluating funds.
Consistency is just one of many strategies you should consider as you work with
your advisor to build and manage a long-term retirement plan.
Glossary of Terms
Information Ratio: The ratio of fund returns in excess of a market index to the variability of those excess returns; in effect, the value added by active management in relation to the risk taken to achieve those returns.
Sortino Ratio: The ratio of the excess of the total return over the risk free rate divided by the standard deviation of negative returns.
R-Squared (R2): The degree (expressed as a percentage from zero to one hundred) to which a fund’s returns resemble those of its benchmark index.
Up and Down Capture Ratios: The ratios are equal to the percentage that a fund’s monthly returns bears to the benchmark’s returns when the monthly benchmark returns are either positive or negative, respectively, over a defined
measurement period.
Overall Capture Ratio: The ratio of a fund’s Up Capture Ratio to its Down Capture Ratio; ideally, as much in excess of 1.0 as possible.
Investment Risks
Domestic Equity: Exposure to financial and market risks that accompany investments in equities. Markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market or economic developments.
Small-cap stocks may be more volatile and less liquid than stocks of larger, more established companies.
Fixed Income: Exposure to financial, market, prepayment, credit and interest rate risks. The value of an investment in a fund is not guaranteed and will fluctuate. Higher yielding bonds are subject to greater volatility and credit risks.
A fund may invest in securities guaranteed by the U.S. government as to timely payment of interest and principal, but a fund’s shares are Not Insured or Guaranteed. Bonds have fixed principal and return if held to maturity, but may
fluctuate in the interim. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates.
International: In addition to the general risks of investing in equities and fixed income securities, investing in foreign securities poses special risks, including currency fluctuation, economic and political risks not found in investments
that are solely domestic. Risks of Foreign Investing are generally intensified for investments in emerging markets.
REITs: Real Estate Investment Trusts may be sensitive to factors such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and
credit-worthiness of the issuer. REITs may also be affected by tax and regulatory requirements.
Non-Diversified Funds/Sector Funds: Due to the concentrated nature of non-diversified and sector funds, they may experience greater volatility than funds with a broader investment selection/strategy.
Past performance does not guarantee future results.
An investor should consider the investment objectives, risks, charges and expenses of the Fund(s) carefully before investing. For a free copy
of the Fund’s prospectus, or summary prospectus, which contains this and other information, visit us at www.voyainvestments.com or call
(800) 992-0180. Please read all materials carefully before investing.
©2016 Voya Investments Distributor, LLC • 230 Park Ave, New York, NY 10169 • All rights reserved.
Not FDIC Insured | May Lose Value | No Bank Guarantee
BSRE-CONSIST 071816 • IM0422-23968-0417 • 174042