Macquarie-Globalis BRIC Adv Fund H

Transcription

1 Macquarie-Globalis BRIC Adv Fund H Analysts: Lee Comper; Ben Sheehan Products Facts Manager Macquarie Investment Fund type Wholesale Investment Trusts Boutique No Management Limited APIR code MAQ0473AU Specialisation Multimanager No Fund status Open Peer group International Equities - Emerging Inception date Nov. 1, 2006 Markets Min. investment (A$) MER (% pa) Standard & Poor s View Standard & Poor's rates this fund 4 stars, reflecting our high conviction that risk-adjusted fund returns will consistently exceed relevant investment objectives and returns of peer funds. The NEW subscript indicates the investment team or process has changed significantly or the fund has a relatively short history. Globalis Investments LLC (Globalis) is the manager of the fund, which is a joint venture between the Macquarie Group (Macquarie) and OneWorld Investments L.P. (OneWorld). The fund will invest in emerging-market equities, largely through index exchange-traded funds (ETFs) and to a lesser extent debt securities, with a focus on Brazil, Russia, India, and China (BRIC). The portfolio managers are knowledgable and skilled in emergingmarket investing. Although the managers have historically been emerging-market debt investors, their top-down macro-economic views translate well into the types of securities traded in this fund. The manager's investment process is seeking to take country-specific views based on a top-down research approach, predominantly expressed through country equity index ETF positions. Although these securities are liquid, in various circumstances the ETF available to implement an investment view may not allow for the full capture of all upside returns of the view, given its composition. Debt positions may provide an alternative in some scenarios, but sovereign debt is not available in all countries. Although the fund is relatively new with a limited track record, the underlying manager has been trading a similar long-only strategy since April The manager's ability to hedge the portfolio through short positions or move the portfolio into cash allows for downside protection. Product Features A 20% performance fee applies to the unhedged fund performance above the MSCI Emerging Market Index, subject to a high watermark and positive outperformance on the unhedged fund. This fund began trading on Nov. 2, Macquarie Investment Management Limited are the responsible entity for the fund. Fund Objectives Benchmark MSCI Emerging Mkt Free Net Div Reinv $A Target return (% p.a.) Investment Style The fund invests in emerging-markets countries, with a specific tilt towards BRIC. At least 50% of the non-cash holdings of the fund will be invested in BRIC securities, with the remainder invested in other emerging-market securities. The manager conducts top-down country analysis, which drives security selection. Although the fund is long biased, short positions may be used for downside protection. The fund also has the ability to invest in emerging-market debt securities, although these are limited to 20% of the fund's value and may go 100% into cash. Investment Team The investment manager of the unhedged fund is Globalis, which is an entity that was formed out of a joint venture between Macquarie and OneWorld. OneWorld was established in 1999 by its two principals, David Dali and Ignacio Sosa. OneWorld has US$278m in funds under management (FUM) as at June 2007, predominantly invested in its emerging-market sovereign debt mandates and a BRIC fund. Mr. Sosa began his emerging-market career in 1981 and has since held various positions within the industry, including at Bankers Trust and BancBoston. He has significant experience and knowledge of emergingmarket investing. Mr. Dali began his emerging-market career in 1989 and has since spent time with Chase Manhattan Bank, Bank of America, and BancBoston. Again, Mr. Dali portrays high levels of skill and knowledge of emerging markets. The pair has been working together for 11 years and its combined interpretation of emerging-market factors creates a solid ability to pick countries on a top-down basis. Both managers have experienced various emerging-market crises during their careers, providing increased knowledge of the risks associated with emerging-market investing. Although the managers have predominantly spent their careers investing in emerging market fixed-interest securities, their macro-economic skills translate well to investing in macro equity instruments. Jack Janaseiwicz is the final member of the investment team. He began his career with Zurich Scudder in He currently manages OneWorld's BRIC opportunity fund, which invests in BRIC equities. He will be responsible for investment strategy and assisting Mr. Dali and Mr. Sosa in the day-to-day management of the portfolio. Although the team is small, S&P feels the resources are adequate to implement the investment strategy. Furthermore, the manager intends to hire additional research resources as assets under management (AUM) grow. Investment Process The manager takes a top-down investment approach to analysing emerging-market countries. The process is designed to identify attractive emerging-market country investment opportunities. Sept. 14, 2007 Page 1/6

2 Investment views are typically expressed through country-specific equity indices. Where an index is not available, the manager will seek to replicate an index through a basket of securities. The ability of the manager to efficiently implement its investment views is limited by the liquid equity indices available. An example would be where a particular ETF does not broadly represent a country's equity market. The manager's ability to express views through debt securities will, however, offer a suitable alternative on occasion to investing in equities, where the manager feels that credit yields are offering better return potential than equities. Screens are applied to a range of emerging-market countries, based on a review of research provided by international investment banks, independent research firms, and consultants. The process is ultimately seeking to screen out countries based on liquidity concerns and expected investment return. The process typically results in approximately 15 countries' being highlighted for potential investment. The manager will then conduct its own internal research on each highlighted country. A major and attractive feature of this process is that the manager will typically visit each country at least once a year and the BRIC countries more often. During these country trips, the manager will visit policy makers, opposition politicians, economists, academics, and local market analysts. This allows the manager to form independent informed economic and political views on each country. S&P feels that this aspect of the investment process is a key differentiation from other emergingmarket managers, which in some instances will not visit countries when generating investment ideas. The manager will heavily rely on thirdparty-generated economic statistics and research for the various countries it invests in. After this analysis, the manager will generate global investment themes that provide the basis for determining the level of exposure it is willing to take in the emerging economies. G7 countries are analysed at this stage to provide a basis for global growth, liquidity, and risk appetite. Regional themes on a long-term basis are generated, which provide the basis for a review of specific emerging-market countries. During this process, the manager will review a country's fundamentals, including balance of payments, monetary policy, and other economic data. Furthermore, geopolitical issues, value investing versus another country, and an assessment of capital flows will all be taken into consideration when forming opinions. This analysis will also result in the manager's deciding whether debt may provide a more attractive option to equities in a particular country, analysing the total risk/return potential of the debt position versus equity investments. Regional themes will also be reviewed daily in an attempt to identify potential short-term trading opportunities. A review of trade flows, foreign capital investment, and market sentiment will be taken at this stage. A result of this analysis will be a decision whether to move part of the portfolio to cash or hedge a particular currency position. The analysis results in various allocation decisions within the portfolio, based on country views, a preference for equity or debt, and the need to hedge risk or hold cash to effect downside protection. Ultimate country weights will represent the relative risk/reward attributes of each country. Debt position weightings again represent the risk/reward relationship of each debt position. Debt and equity positions are subject to maximum limits. Short positions are used to protect the value of the portfolio. Short positions will be taken to offset long positions when liquidity is not available to reduce or close a portfolio position that is deemed to be under threat in accordance with the manager's economic views. These positions are short term in nature and are intended only to provide immediate protection against market movements, until the manager can reduce or close a relative long position. Short positions in G7 country securities may also be taken to protect portfolio value, but this will only occur if the G7 security has a high correlation with the portfolio security. Furthermore, credit default swaps can be shorted, which offers both a means to protect individual credit positions and in some instances currency positions. Currency Management The USD value of the units in the unhedged fund is substantially hedged to AUD. Performance The fund invests in the Macquarie-Globalis BRIC Advantage fund (Unhedged) ( unhedged fund) and substantially hedges the US dollar value of those units back to AUD. The fund began trading on Nov. 2, 2006, so there is limited track record to comment on. The underlying manager of the unhedged fund does have a track record investing in a similar mandate to this fund since April Active returns will be generated through the manager's country weights, which are ultimately a reflection of conviction in the investment views. Additionally, the manager aims for return through its decision to invest in equities relative to debt, or vice versa. Importantly, the manager's ability to hedge the portfolio and move the investments into cash will allow the unhedged fund the ability to outperform during periods of negative return for the broader markets, a positive for investors. Performance Measures Average portfolio turnover (%) Typical number of stocks in portfolio 19 security positions Source: Macquarie Investment Management Limited. Risk Management Risk management processes and controls are varied, but the unhedged fund manager's intention to provide downside protection is an integral part of the risk management process, in which it will use short positions and switch fund investments to cash. There are various risk controls associated with portfolio construction, ultimately seeking to provide diversification and limit exposure to any one security or country. Stop losses are used for individual securities and for the portfolio as a whole, when the value of each respectively drops by 10% or more. The manager also monitors value at risk (VAR), with VAR limits set at 10% of portfolio net asset value for a daily 95% confidence level. Gross equity exposure is capped at 200% and gross debt exposure at 20%. The fund cannot be net short, but can have 100% exposure to cash. Individual security and issuer positions are limited to 7.5%. Regional diversification varies, with maximum 50% to Latin America, maximum 60% to Asia including India, and maximum 50% to eastern Europe. Brazil, Russia, India and China maximum 25% exposure. Management Group Profile The investment manager of the unhedged fund is Globalis Investments LLC, which is an entity that was formed out of a joint venture between the Macquarie Group (Macquarie) and OneWorld Investments L.P. (One World). OneWorld was established in 1999 by its two principals, Mr. Dali and Mr. Sosa. OneWorld has US$278 million in FUM as at June 2007, predominantly invested in its emerging-market sovereign debt mandates. OneWorld remains in an asset-gathering phase of its business cycle after seven years in operation. Globalis is registered as an investment adviser with the Securities and Exchange Commission in the U.S. Macquarie Investment Management Ltd is the responsible entity for the fund. It is a part of Macquarie, which provides diversified financial Page 2/6 Sept. 14, 2007

3 and investment banking services. Macquarie Investment Management Limited is a full service fund manager, with more than 25 years' experience across major asset classes. Market Share Globalis commenced managing the fund from November 2nd, Analyst(s): Lee Comper; Ben Sheehan. Release authorised by: Mark Hoven. Sept. 14, 2007 Page 3/6

4 S&P Fund Rating Reference Information International Equities - Emerging Markets (at Sept. 14, 2007) Reference Material Sector Reports Reader's Roadmap Glossary Guide to S&P Qualitative Fund Ratings Fund Rating Team Biographies Page 4/6 Sept. 14, 2007

5 Fund Rating Peer Groups by Sector Australian Equities International Equities International Fixed Interest Alternative Assets Large Cap Diversified Diversified Equities Diversified Fixed Interest Commodities Large Cap Income Emerging Markets Diversified Fixed Interest Income Multi-Sector Large Cap Indexed Emerging Markets Asia ex Japan Fixed Interest Private Equity Listed Large Cap Industrials Emerging Markets China Fixed Interest High Yield Private Equity Unlisted Long Short Emerging Markets India Fixed Interest Income Infrastructure Listed Small Cap Large Cap Diversified Mortgages Infrastructure Unlisted Specialist Large Cap Income Mortgages High Yield Alternative Strategies Australian Fixed Interest Large Cap Indexed Mortgages High Yield Hybrid Single Strategy Funds Multimanager Cash Large Cap Industrials Mortgages Conventional Single Strategy Funds Single Manager Cash Enhanced Long Short Mortgages Hybrid Multi-Strategy Funds Multimanager Fixed Interest Long Short Specialist International Property Multi-Strategy Funds Single Manager Fixed Interest Income Long Short Regional Direct Commercial Multi-sector Mortgages Regional Japan Direct Development Capital Guaranteed Mortgages High Yield Regional UK/Europe Direct Diversified Direct 20 Mortgages Conventional Regional US Direct Industrial 40 Mortgages High Yield Hybrid Regional Asia Direct Residential 60 Mortgages Hybrid Small Cap Direct Retail 80 Australian Property Specialist Healthcare Direct Rural 100 Direct Commercial Specialist Information Technology Direct Specialised Equity Direct Development Specialist Resources Diversified Property Other Direct Diversified Direct Listed Direct Industrial Direct Residential Direct Retail Direct Rural Direct Specialised Diversified Fixed Interest Listed Fund Rating Philosophy A star rating is a forward looking qualitative assessment of a manager s ability to consistently generate superior risk-adjusted fund returns, net of fees, relative to relevant investment objectives and peers. Fund Rating Process In assigning a star rating Standard & Poor's evaluates: the size, skill and stability of the manager's investment team; the clarity, implementation and risk management of its investment process; the fund's objectives, fee structure and portfolio characteristics; and business management. Fund Rating Definitions Standard & Poor s has very high conviction that the manager will consistently generate risk-adjusted fund returns in excess of relevant investment objectives and relative to peers. Standard & Poor s has high conviction that the manager will consistently generate risk-adjusted fund returns in excess of relevant investment objectives and relative to peers. Standard & Poor s has conviction that the manager can generate risk-adjusted fund returns in line with relevant investment objectives and relative to peers. Standard & Poor s has conviction that the manager will not generate risk-adjusted fund returns in line with relevant investment objectives and relative to peers. Standard & Poor s has high conviction that the manager will not generate risk-adjusted fund returns in line with relevant investment objectives and relative to peers. Issues potentially affecting the management of the fund have emerged, and the fund rating is temporarily suspended, pending clarification. A manager with significant issues that have the potential to adversely impact performance. Existing investors should consider obtaining advice regarding switching or redemption. Fund Rating Subscript Where the investment process, fund manager or analytical team has changed significantly, or where the fund has a relatively short history, but a relevant and demonstrable track record can be shown on similar funds. Sept. 14, 2007 Page 5/6

6 To the extent that any ratings, opinions or other information of Standard & Poor's Information Services (Australia) Pty Ltd (ABN: , Australian Financial Services Licence Number: ) ("Standard & Poor's") constitutes general advice, this advice has been prepared by Standard & Poor's without taking into account any particular person's financial or investment objectives, financial situation or needs. Before acting on any advice, any person using the advice should consider its appropriateness having regard to their own or their clients' objectives, financial situation and needs. You should obtain a Product Disclosure Statement relating to the product and consider the statement before making any decision or recommendation about whether to acquire the product. Past performance is not a reliable indicator of future performance. Please refer to Standard & Poor's Financial Services Guide for more information at Each analytic product or service of Standard & Poor's is based on information received by the analytic group responsible for such product or service. "S&P" and "Standard & Poor's" are trademarks of The McGraw-Hill Companies, Inc. Copyright 2007 Standard & Poor's Information Services (Australia) Pty Limited. Certain funds data contained herein may be proprietary to Morningstar, Inc. Sept. 14, 2007 Page 6/6