Investment Management Conference Call

Transcription

1 Investment Management Conference Call Enhancing Our Investment Platform September 15, 2011 Marc D. Stern Chief Investment Officer Peter J. Langas Director of Investment Strategies Lois R. Roman Head of Global Equities

2 Past performance is no guarantee of future results This material is provided for your general information It does not take into account the particular Past performance is no guarantee of future results. This material is provided for your general information. It does not take into account the particular investment objectives, financial situation, or needs of individual clients. This material has been prepared based on information that Bessemer Trust believes to be reliable, but Bessemer Trust makes no representation or warranty with respect to the accuracy or completeness of such information. This presentation does not include a complete description of any fund or portfolio mentioned herein. Investors should carefully consider the investment objectives, risks, charges, and expenses of each fund or portfolio before investing. Views expressed herein are current opinions only as of the date indicated, and are subject to change without notice. Forecasts may not be realized due to a variety of factors, including changes in economic growth, corporate profitability, geopolitical conditions, and inflation. The mention of a particular security is not intended to represent a stock-specific or other investment recommendation, and our view of these holdings may change at any time based on stock price movements, new research conclusions, or changes in risk preference. Index information is included herein to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indices in either composition or volatility.

3 Our Mandates Ensure all clients can benefit from the firm s best thinking Deliver superior long-term performance at a controlled level of volatility Our central goal is to participate in stronger market periods and limit losses in weaker ones 3

4 Evolution of Investment Platform Add Global Small Cap Add Strategic Cash 2007 Add Global Opportunities Add Real Estate Fund Enhance Global Small & Mid Cap 2009 Broaden collaboration between teams Strengthen global analytical tools Add Strategic Currency Modify research team structure 2010 Add Real Return Create global sector research teams Asset Classes 7 16 Analysts/Portfolio Managers External Managers (sub-advisers) 0 6 Figures from December 31, 2004 through August 31,

5 Favorable Long-Term Results January 2005 July 2011 Cumulative Returns Annualized Volatility 42.8% 39.0% 29.6% 22.0% 9.9% 11.0% 11.3% 15.9% Bessemer Balanced Growth Global Balanced Growth Index U.S. Stock/Bond Mix 70/30 S&P 500 Index As of July 31, Past performance is no guarantee of future results. Volatility is measured by annualized standard deviation of monthly returns. This figure is most meaningful over multi-year periods. The Bessemer Balanced Growth Portfolio represents a model portfolio comprised of U.S. Large Cap, Non-U.S. Large Cap, Global Opportunities, Global Small & Mid Cap, Real Return, Fixed Income, Strategic Currency and three Bessemer hedge funds of funds. Investments cannot be made directly in this model portfolio. Relative weightings vary over time. Index information is included herein to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indices in either composition or volatility. Please see the end of this presentation for a complete description of Bessemer s portfolios and benchmarks. 5

6 Bessemer Large Cap Frequency of Outperformance vs. Benchmark Since January Year Periods 3-Year Periods U.S. Large Cap 35% 73% Non-U.S. Large Cap 53% 55% Hypothetical Combination 51% 80% Recent results: U.S. Large Cap outperformed in 2009, but trailed index in last 18 months Non-U.S. Large Cap trailed index in 2009, but outperformed in last 18 months Reflects rolling periods calculated monthly commencing January 1, 2005 through July 31, Past performance is no guarantee of future results. U.S. Large Cap returns are compared with the S&P 500 Index. Non-U.S. Large Cap returns are compared with the Non-U.S Large Cap Index. Hypothetical Combination reflects a combination averaging U.S. Large Cap and Non-U.S. Large Cap portfolios with monthly rebalancing. Information presented is derived from Bessemer s U.S. Large Cap Common Trust Fund and Non-U.S. Large Cap Common Trust Fund. Returns are shown before the deduction of fees. Index information is included herein to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indices in either composition or volatility. Please see the end of this presentation for a complete description of Bessemer s portfolios and benchmarks. 6

7 Rationale Behind Next Stage of Evolution Key factors that drive our assessment: Thinking globally Limiting volatility Maximizing resources Seek consistent delivery of superior performance 7

8 Thinking Globally Increased global interconnections have reshaped the investment landscape. 26% World Trade (As Percent of GDP) 36% 38% 46% 52% Companies Are Global 15% Europe 10% Asia/Other 35% 70% 55% 15% US U.S. Intel Taiwan Semiconductor Automobile Manufacturing Foreign U.S. Cadillac SRX BMW X5 Chevrolet Aveo Honda Accord Chevrolet Camaro Hyundai Elantra Dodge Grand Caravan Mercedes-Benz M Class Ford Edge Nissan Maxima Ford Fusion Subaru Legacy Lincoln MKX Toyota Camry World trade reflects three-year averages, including estimated data for calendar Data for Intel and Taiwan Semiconductor is as of December 31, 2010 and reflects geographical breakdown of company s revenues. Source: Company reports, World Bank 8

9 Limiting Volatility Innovative analytics that consider a range of factors can help determine stock weights to limit return volatility, which can protect capital in down markets. Size Sector Country Effect of oil prices Effect of interest rates Earnings consistency Valuation Growth rate Balance sheet strength 9

10 Maximizing Resources Tapping into skilled professionals with diverse areas of expertise regardless of where they work can enhance return potential and increase consistency. Advantages of using internal and external managers Allows for high degree of flexibility Enables focus on core areas of expertise Builds knowledge from direct market exposure Ensures full accountability Global Small & Mid Cap Fund Mondrian Champlain 18% Dimensional 27% 7% Bessemer 48% Annualized 3 Years Ended July 31, 2011 Return Volatility Global Small & Mid Cap Fund 11.4% 17.4% Global Small & Mid Cap Index 7.0% 26.9% BlackRock 12% Shenkman Capital 17% Global Opportunities Fund Franklin Templeton 11% Bessemer 60% Annualized 3 Years Ended July 31, 2011 Return Volatility Global Opportunities Fund 3.4% 15.0% S&P Global LargeMidCap Index 2.1% 23.9% Data for Old Westbury Global l Small & Mid Cap Fund and Old Westbury Global l Opportunities Fund as of July 31, Source: Standard & Poor s, Bessemer Investment Management LLC, a member of the Bessemer Trust group of companies 10

11 Redefining Our Large Cap Portfolios Instead of being defined by geography U.S. Large Cap Non-U.S. Large Cap our portfolios will now be global and structured around distinct volatility objectives Large Cap Core Large Cap Strategies 11

12 New Global Large Cap Structure Bessemer Global Large Cap Large Cap Core Large Cap Strategies Superior returns and Superior returns and controlled volatility complementary strategies Objectives over full market cycles: Deliver strong absolute returns Outperform benchmark Control volatility 12

13 Recommended Allocation to Both Portfolios Bessemer Balanced Growth Previous Target Recommended Target Fixed Income/Cash 20.0% 20.0% Fixed Income Strategic Cash Global Equities 40.5% 40.5% U.S. Large Cap 16.0 Non-U.S. Large Cap 10.0 Large Cap Core 18.0 Large Cap Strategies 8.0 Global Small & Mid Cap Inflation Assets 8.5% 8.5% Real Return Opportunistic Assets 31.0% 31.0% Global Opportunities Hedge Funds Strategic Currency Total 100% 100% 13

14 Large Cap Core Objective Outperform the S&P Global LargeCap Index with lower volatility Strategy Invest in companies across the globe Utilize fundamental research and disciplined analytics to select stocks and weight holdings based on risk Management Internal team headed by Marc Stern, with associate portfolio managers Alex Christie and Alex Lloyd Separately managed Designed to complement Large Cap Strategies 14

15 Large Cap Core: Bessemer s Approach Global stock screening Fundamental research Portfolio construction Identify companies demonstrating desirable characteristics: Attractive valuations High earnings quality Disciplined capital deployment Low balance sheet risk Positive technical indicators Select stocks using firsthand research: Evaluate competitive position, management capabilities, and earnings power Analyze factors driving potential mispricing Identify catalysts for realization of fundamental value Determine security weights: Emphasize holdings with most attractive risk/return profile 60 stocks 0.75% 2.50% weights Sell positions if potential value is achieved, fundamentals deteriorate, or catalysts do not materialize Build portfolio designed to outperform over time with limited volatility in difficult market periods 15

16 Large Cap Core: Volatility Reduction Consider a hypothetical equal-weighted portfolio of 60 stocks. How can we lower its volatility? Security Sector Dividend Yield Earnings Consistency Stock Volatility Portfolio Weighting Exelon Utilities 4.9% % Higher Symantec Technology Lower CVS Consumer Higher Nordstrom Consumer Lower Securities and figures above reflect a hypothetical example to illustrate some of the factors driving weightings within portfolios. Stock volatility reflects the portion of each individual stock s volatility not explained by market forces. Earnings consistency reflects stability of a company s earnings over the last five years: higher numbers indicate higher consistency, and lower numbers indicate lower consistency. Source: Northfield Information Services 16

17 Large Cap Strategies Objective Outperform the S&P Global LargeCap Index with similar volatility Strategy Invest in companies across the globe Combine complementary investment strategies Employ active currency management Management Internal team headed by Lois Roman, with associate portfolio managers Hank Hagey and Jeff Rutledge Two complementary external managers Mutual fund Designed to complement Large Cap Core 17

18 Large Cap Strategies: Bessemer s Approach Fundamental Research Differentiated Thesis Portfolio construction Select stocks using primary research: In-depth evaluation of global industry fundamentals Assessment of company management Detailed modeling of normalized earnings power Assessment of fair valuation Sell stocks if: Fully valued Thesis is broken Vet investment ideas with portfolio team: Insights from each team member Theses typically predicated on improving fundamentals Identification of key milestones Determine security weights: Emphasize companies earning below our assessment of normalized earnings Build best-ideas portfolios designed to outperform over time 30 stocks 1% to 5% weights Use quantitative analyses of risk factors and performance attribution 18

19 Accessing Complementary Investment Strategies Manager Criteria i Record of long-term success Clear investment discipline Concentrated best-ideas portfolio Sensible investment professionals Stable, independently owned firm Openness to collaboration Managers in Large Cap Strategies* Bessemer Trust Oldfield Partners High normalized earnings Deep value and reasonable valuations Sands Capital Management Aggressive earnings growth *Represents a hypothetical allocation. 19

20 Large Cap Strategies: Deep Value Manager Overview Based in London, U.K. Richard Oldfield founded the firm in 2004 Privately owned primarily by employees $3.8 billion under management for family offices, endowment funds, and charitable organizations Investment Goals Emphasize large, global companies trading at significantly discounted valuations Build concentrated portfolio of about 20 stocks Focus on long-term investment potential Performance Annualized Since Inception 5-Year 10-Year (January 1997) Oldfield Global Equity Composite 3.6% 9.1% 10.3% S&P Global LargeCap Index 3.0% 4.9% 6.0% As of July 31, Source: Oldfield Partners LLP, Standard & Poor s 20

21 Large Cap Strategies: Aggressive Earnings Growth Manager Overview Based in Arlington, VA Frank M. Sands, Sr. founded the firm in 1992; Frank M. Sands, Jr. is CEO and CIO Privately owned by Sands family and employees $18 billion under management for institutions and individuals Investment Goals Focus exclusively on leading businesses with above-average earnings growth Build concentrated portfolio of about 40 stocks using proprietary fundamental research Accept short-term market volatility in exchange for long-term wealth creation Performance Annualized 5-Year 10-Year Sands Select Growth 9.8% 6.6% S&P 500 Index 2.4% 2.6% Since Inception (December 31, 2008) Sands Global Growth 44.6% S&P Global LargeCap Index 18.4% As of July 31, Source: Sands Capital Management, Standard & Poor s 21

22 Complementary Styles Companies Top 5 Holdings Oldfield Partners Bessemer Large Cap Sands Capital Microsoft Vivendi ConocoPhillips Nippon T&T Siemens Apple Ecolab NTT DoCoMo Shin-Etsu Chemical General Electric Naspers Amazon.com National Oilwell Varco QUALCOMM Salesforce.com P/E 9.1x 15.2x 24.8x Dividend Yield 3.7% 2.6% 0.7% Growth Rate 7.2% 10.1% 22.2% As of July 31,

23 Our Fundamental Tenets Remain the Same Exposure to leading Intense focus on companies across a wide independent d global l range of geographies research Emphasis on highconviction holdings Steadfast commitment to superior long-term returns 23

24 Keeping You Informed 24

25 Additional Questions Will the two portfolios invest in both developed d and emerging markets? Will there be substantial overlap? What drives our confidence in volatility reduction within Large Cap Core? Why are we using both separately managed accounts and mutual funds? What are the fee and tax implications? When will we implement the change? 25

26 Past performance is no guarantee of future results is the first full reporting period since Bessemer Trust s Chief Investment Officer assumed responsibilities for investments. The Bessemer Balanced Growth Portfolio represents a model portfolio comprised of U.S. Large Cap, Non-U.S. Large Cap, Global l Opportunities, Global l Small & Mid Cap, Real Rt Return, Fixed Income, Strategic Currency and three Bessemer hedge funds of funds. Investments cannot be made directly in this model portfolio. Relative weightings vary over time. Returns for Old Westbury Global Opportunities Fund, Old Westbury Global Small & Mid Cap Fund, Old Westbury Real Return Fund, and Bessemer hedge funds of funds are after all fees and expenses. All other returns reflect performance of Bessemer Common Trust Funds and are before fees and expenses. The results also include the reinvestment of all dividends and capital gains. Global Small & Mid Cap Fund returns began April 5, Real Return Fund returns began April 28, Global Opportunities Fund returns began November 28, Bessemer hedge funds of funds returns for this model portfolio began July 1, Alternative investments, including Bessemer hedge funds of funds, are not suitable for all clients and are available only to qualified investors. The Global Balanced Growth Index represents a mix of the Barclays Capital U.S. Government/Credit Index (25%), S&P 500 Index (15%), S&P Global Large ex-u.s. Index (10%), S&P Global MidSmallCap Index (14%), S&P Global l LargeMidCap Index (14%), Real Assets (7% consisting of Dow Jones-UBS Commodity Index [5%] and Barclays Capital U.S. TIPS Index [2%]), Hedge Funds (10% consisting of S&P Global Broad Market Index (Hedged) [7%] and Barclays Capital U.S. Government Index [3%]), and 3 Month Treasury Bills (5%) after 12/31/2010 and a mix of the S&P 500 Index (25%), S&P Mid Cap 400 Index (10%), MSCI EAFE Index (14%), MSCI World Small Cap Index (5%), MSCI Emerging Markets Index (3%), HedgeFund.net Fund of Funds Aggregate Index (10%), Dow Jones-UBS Commodity Index (2.5%), Barclays Capital U.S. Government/Credit Index (25%), Barclays Capital U.S. TIPS Index (2.5%), and 3 Month Treasury Bills (3%) before 1/1/2011. The U.S. Stock/Bond Index (70/30) is a composite of 70% S&P 500 Index and 30% Barclays Capital U.S. Government/Credit Index. The Non-U.S. Large Cap Index represents the S&P Global Large Cap ex-u.s. Index after 12/31/2010 and the MSCI EAFE Index before 1/1/2011. The Global Small & Mid Cap Index represents the S&P Global MidSmallCap Index after 12/31/2010 and the MSCI World Small Cap Index before 1/1/2011. Index information is included herein to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indices in either composition or volatility. Index returns are not an exact representation of any particular investment, as you cannot invest directly in an index. Sources: Barclays Capital, Dow Jones, Federal Reserve, HedgeFund.net, Morgan Stanley Capital International, Standard & Poor s, UBS 26

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