Swisscanto (LU) Equity Fund Green Invest Emerging Markets: Benefit from the trend towards sustainable growth

Transcription

1 Swisscanto (LU) Equity Fund Green Invest Emerging Markets: Benefit from the trend towards sustainable growth Swisscanto Asset Management Ltd. Raphael Lüscher, Senior Portfolio Manager, CFA Geneva, June 2015

2 Fund focuses on sustainable growth Swisscanto (LU) Equity Fund Green Invest Emerging Markets Emerging markets sustainability fund We invest in competitive companies providing sustainable solutions in emerging markets. The focus is on key areas with attractive growth and profitable potential. Actively managed equity fund Investor profile Fundamental, bottom-up driven Long standing expertise in the field of sustainability Disciplined investment process and risk management long-term oriented investors exposure to companies benefiting from sustainability related trends in emerging markets: doing well by doing good 2

3 Swisscanto (LU) EF Green Invest Emerging Markets Sustainable investments in emerging markets offer long-term return opportunities Net performance since launch in USD, August The fund is not managed against MSCI Emerging Markets Relative monthly return, net (right scale) Swisscanto (LU) EF Green Invest Emerging Markets B, net Lipper peer group: Equity Emerging Markets Global 1 year 3 years Since launch 2. quartile 1. quartile 1. quartile 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% +10.1% Source: Swisscanto, Lipper as of

4 Benefit from the trend towards sustainable growth Trends and investment risks in emerging markets Key areas within the transformation process towards sustainable growth Adding value through strict sustainability analysis and disciplined investment process 4

5 Relevant trends in emerging markets Economic structure Growth dynamic Competitiveness Reforms Natural Resources Availability Demand & consumption Price fluctuations Implications for society, environment and economy Demographics Population growth Availability of labour Consumption behaviour Climate Weather patterns Politics and Regulation Public interest Research 5

6 Massive pollution increases and social challenges are rising "Airpocalypse" in Harbin Rising risk of social unrest Source: AP Photo/Kyodo News, Reuters, ibtimes. 6

7 China is reconsidering its economic model 1999 Today Tomorrow "China doesn t need bigger steel plants. People want better education, variety in tourism, high-quality medical service, better service for the aged and, overall, a better life." Guo Guangchang Chairman, Cofounder of Fosun International 7 Source: company

8 Benefit from the trend towards sustainable growth Trends and investment risks in emerging markets Key areas within the transformation process towards sustainable growth Adding value through strict sustainability analysis and disciplined investment process 8

9 We identify eight key areas acting as catalysts for more sustainable growth Education and Digital Innovation Social development Energy supply and -efficiency Resources and environmental services Water Health Sustainable mobility Financial inclusion The future belongs to companies, which contribute to the decoupling between economic growth and resource consumption to social peace through the promotion of equal opportunities Old economy Sustainable economy 9

10 Improvement factor Case study: Equal opportunities through education in Brazil Kroton Educacional Education as enabler access to better jobs and higher income opportunities Income improvement potential for skilled vs. non-skilled China Brazil Chile Mexico USA Kroton Educacional provides education Product analysis Kroton Educacional SA Sector median Best result Basic education system in Brazil is poor: lack of funding and quality teaching material, lack of skilled teachers, poor results Students from lower income families are disadvantaged in current school system Lack of skilled workers and low productivity in Brazil Kroton Educacional offers high quality education services and teaching material at affordable prices Product analysis reveals high additional benefit Sources: Kroton, Hoper, UNESCO, IBGE, Swisscanto, Inrate 10 Swisscanto Asset Management AG

11 Benefit from the trend towards sustainable growth Trends and investment risks in emerging markets Key areas within the transformation process towards sustainable growth Adding value through strict sustainability analysis and disciplined investment process 11

12 Our philosophy simultaneous consideration of sustainability and fundamentals Attractive fundamentals Low sustainability impact monitor avoid Investment focus discipli ne High sustainability impact Unattractive fundamentals 12

13 Swisscanto (LU) EF Green Invest Emerging Markets: Current portfolio structure Allocation by countries (fund, %) Allocation key areas (fund, %) China Korea, Republic of Hong Kong Brazil Financial inclusion Education & digital innovation Energy supply & efficiency Sustainable mobility Health Source: Swisscanto, as of

14 Swisscanto (LU) EF Green Invest Emerging Markets: Our top convictions Company Country % Sector Key theme MTN GROUP South Africa 2.23 Telecommunication Services Education & digital innovation ZHUZHOU CSR TIMES ELECTRIC China 2.20 Industrials Sustainable mobility VALID SOLUCOES Brazil 2.17 Industrials Education & digital innovation AGRICULTURAL BANK OF CHINA China 2.15 Financials Financial inclusion HUANENG RENEWABLES China 2.14 Utilities Energy supply & efficiency BEIJING ENTERPRISES WATER Hong Kong 2.12 Utilities Water NEW ORIENTAL EDUCATION United States 2.11 Consumer Discretionary Education & digital innovation CHINA MOBILE China 2.09 Telecommunication Services Education & digital innovation ICICI BANK LTD-SPON India 2.08 Financials Financial inclusion SK TELECOM Korea, Republic Of 2.07 Telecommunication Services Education & digital innovation 14 Source: Swisscanto, as of

15 One of our best ideas in financial inclusion Description Banco Compartamos (Gentera) is the leading micro finance services provider in Mexico and across Latin America Core elements of investment thesis: High structural growth in Mexico driven by underdeveloped banking system and low credit penetration Solid business model with high barriers to entry Continuous high return on equity with low levels of nonperforming loans Strong management team with solid track record Core elements of sustainability thesis : Gentera provides access to micro loans and working capital loans for low income population (average loan of 400 USD) Company generates social, economic and human value through financial inclusion, innovation and education 70% of population in Mexico does not have access to traditional banking products and services 98% of customers are women Key financial metrics: ROE (2014): 30.3% ROA (2014): 11.2% More than 2m active customers Market Cap: USD ~2.8bn Sources: Swisscanto, Inrate, Bloomberg, company 15 Swisscanto Asset Management AG

16 One of our best ideas in health care Description Aspen Pharmacare is a South African-based supplier of branded and generic pharmaceuticals in more than 150 countries across the world and of consumer and nutritional products in selected territories. Core elements of sustainability thesis: Aspen sells high quality, effective and affordable pharmaceuticals across emerging markets Expansion of product offering (healthy food, infant formula, etc.) 6% of sales reinvested in research and development Above-average sustainability profile within health care peer group Core elements of investment thesis: Strong market position and broad diversification across emerging markets Stable management team with a strong track record Economies of scale in production of pharmaceuticals (cost efficiencies) Strong sales and earnings growth Above-average profitability and return on invested capital Key financial metrics: EBIT margin (2015e): 24.4% ROE (2014): 19.4% Operating Cash Flow (2014) : USD 493m Market Cap: USD ~14.2bn Sources: Swisscanto, Inrate, Bloomberg, company 16 Swisscanto Asset Management AG

17 One of our best ideas in energy efficiency Description Delta Electronics is a Taiwanese IT company. The company sells switching power supplies and other electronic components for various applications and industries. Core elements of sustainability thesis: Global leader in power management and thermal solutions for IT sector Products improve energy efficiency and lead to lower costs across several industries Innovation leader with 6% of sales being reinvested in R&D Core elements of investment thesis: Strong market position and credible management Proactive investments into new growth trends (e.g. automation) Margin improvement expected to drive earnings growth Maintaining of strong level of profitability (ROE, ROIC) and solid balance sheet Attractive valuation Key financial metrics: EBIT margin (2015e): 11.7% ROE (2014e): 21.1% Operating Cash Flow (2014): USD 918.3m Market Cap: USD ~13.8bn Sources: Swisscanto, Inrate, Bloomberg, company 17 Swisscanto Asset Management AG

18 Swisscanto (LU) EF Green Invest Emerging Markets: Comparable risk to MSCI Emerging Markets 18 Characteristics Swisscanto (LU) EF Green Invest Emerging Markets MSCI Emerging Markets Total Risk (ex ante) 15.9% 16.8% Tracking Error (ex ante) 4.3% Beta (ex ante) 0.92 Price to Earnings (P/E 2015e) Price to Book (P/B 2015e) Dividend Yield Number of stocks Active share* 85.7% Market capitalisation (in USD) > 10 bn (Large Caps) 52% 70% 3-10 bn (Mid Caps) 29% 25% < 3 bn (Small Caps) 19% 5% * % of portfolio that differs from the benchmark Comparable level of risk Active, sustainable and concentrated portfolio All Caps (current bias towards Small & Mid Caps) Sources: Barra, Bloomberg, MSCI, as of

19 Benefit from the trend towards sustainable growth

20 Appendix 20

21 Follow us Funds in focus: 21

22 Key data Swisscanto (LU) Equity Fund Green Invest Emerging Markets Benchmark MSCI Emerging Markets Net Return Share classes B: Retail (capitalisation) R: Retail (with agreement) J: Institutional (capitalisation) P: institutional (with agreement) Currency USD USD USD USD Flat rate management fee 2.00% 1.00% 1.53% 1.13% Total Expense Ratio 2.26% 1.13% 1.72% 1.33% Security number ISIN LU LU LU LU Date of launch ongoing Admitted for trading CH, AT, DE, LI, LU CH, AT, DE, LI, LU CH, AT, DE, LI, LU CH, AT, DE, LI, LU 22

23 Swisscanto sustainable investments above CHF 2 bn AuM Yield Swisscanto PF Green Invest Balanced CHF/EUR Swisscanto EF Green Invest CHF Swisscanto PF Green Invest Equity EUR Swisscanto EF Green Invest Emerging Markets USD Swisscanto EF Climate Invest EUR Swisscanto EF Water Invest EUR Swisscanto PF Green Invest Yield CHF/EUR Swisscanto PF Green Invest Income CHF/EUR 23 Stocks Bonds or/and cash Theme funds PF = Portfolio Fund EF = Equity Fund Risk

24 Swisscanto (LU) Equity Fund Green Inv. Emerging Markets B Performance (gross) in USD as per Indexed Performance over 5 years (gross of Fees) Swisscanto (LU) Equity Fund Green Invest Emerging Yearly Performance (gross of Fees, in %) YTD Swisscanto (LU) Equity Fund Green Invest Emerging Markets B Past performance is no indication of future performance and does not guarantee success in the future Performance (gross of Fees) Portfolio Benchmark 1 year annualised years annualised years annualised Since inception annualised years years Since inception Tracking Error Information Ratio (3 years) (3 years) 2015 YTD years annualised years annualised Since inception annualised Inception Swinging Single Pricing Yes Source: Lipper

25 Swisscanto (LU) Equity Fund Green Inv. Emerging Markets B Performance (net) in USD as per Indexed Performance over 5 years (net of Fees) Swisscanto (LU) Equity Fund Green Invest Emerging Yearly Performance (net of Fees, in %) Inception Swinging Single Pricing Yes YTD Total Expense Ratio 2.25% Swisscanto (LU) Equity Fund Green Invest Emerging Markets B Past performance is no indication of future performance and does not guarantee success in the future. The performance data do not take account of commission and costs charged for the issuing and redemption of units Performance (net of Fees) Portfolio Benchmark 1 year annualised years annualised years annualised Since inception annualised years years Since inception Tracking Error Information Ratio (3 years) (3 years) 2015 YTD years annualised years annualised Since inception annualised Source: Lipper

26 Our sustainability approach is based on long-standing expertise Sustainable investment universe emerging markets Swisscanto - Sustainability approach Analysis of impact Risk reduction Strict implementation: Selection of companies with a positive impact on the environment, society and with a strong corporate governance Avoid sectors/activities that contradict sustainable development 1. Sustainability data from Inrate 2. Selection by our internal sustainability research 3. Swisscanto Sustainability Advisory Committee (external experts) 4. Universe binding for PMs Total investment universe emerging markets 26

27 Our investment process is transparent and disciplined Idea generation Identification of trends and themes Identification of companies exposed to key areas Quantitative and qualitative screening Internal equity platform Internal economists Conferences, site visits and 1-to-1 Research Independent investment thesis Focus on barriers to entry and 'economic moat' Fundamental analysis and valuation Attractiveness score (internal database) Sustainable investment universe EM ( stocks¹) Portfolio construction and risk management Co-management Implementation of "best ideas" from research Performance reviews Focus on profitable, competitive and sustainable companies Structure of portfolio Sell discipline and Timing Diversification (countries and sectors) Contribution to risk Liquidity analysis Portfolio (50-70 holdings) 1) As of November

28 Raphael Lüscher, CFA Senior Portfolio Manager Raphael Lüscher (1976) is a Director, Senior Portfolio Manager and as a co-manager responsible for the Swisscanto (LU) Equity Fund Green Invest Emerging Markets, Swisscanto (CH) Equity Fund Tiger and Swisscanto (CH) Equity Fund Emerging Markets. Before joining Swisscanto, Raphael worked eleven years at UBS Global Asset Management, most recently as a senior portfolio manager for sustainable equity funds, sector funds and institutional mandates on locations in Zurich and Singapore. Prior to that, he was as a portfolio manager and analyst for European equity funds. He began his professional career at UBS as well, where he completed a talent programme in the Global Asset Management. Raphael Lüscher received a master's degree in Economics from the University of St. Gallen (lic.oec.hsg). In 2009, he obtained his diploma as a Chartered Financial Analyst (CFA). Joined Swisscanto: 2014 Professional experience: 13 years 28

29 Dr. Gerhard Wagner, CFA Head of Sustainable Investments Gerhard Wagner (1968) is a Director, Senior Portfolio Manager and as a co-manager responsible for sustainable Swisscanto collective investments (investment funds, investment groups) and institutional mandates, which are managed according to the Green Invest- and Responsible Invest approach. Summarized these are the Equity Green Invest, -Water Invest, -Climate Invest, Green Invest Emerging Markets and Responsible Invest strategies. Gerhard is an acknowledged expert in the management of sustainable investments and was last in charge of the SRI team at UBS. From 1994 to 2001, he worked as a scientist at the ETH/EAWAG in the field of climate physics. Gerhard Wagner holds a master's degree in Physics from the University of Konstanz. Afterwards, he earned a doctorate in Natural Sciences (Dr. rer. nat.) at the ETH Zurich. In 2006, he obtained his diploma as a Chartered Financial Analyst (CFA). Joined Swisscanto: 2008 Professional experience: 20 years 29

30 Roman Boner, CFA Portfolio Manager Roman Boner (1980) is a Manager, Portfolio Manager and as a co-manager responsible for sustainable Swisscanto collective investments (investment funds, investment groups) and institutional mandates, which are managed according to the Green Invest- and Responsible Invest approach. Summarized these are the Equity Green Invest, -Water Invest, -Climate Invest, BVG 3 Oeko and Responsible Invest strategies. Before joining Swisscanto, Roman worked ten years at UBS Global Asset Management, the last five years as a portfolio manager and an analyst for sustainable equity funds and institutional mandates. Prior to that, he led the Investment Service Global & US Equities team and was a portfolio manager for global equity funds. He began his professional career at UBS as well, where he completed two talent programmes in the Private & Corporate Clients division. Roman Boner received a Bachelor in Business Administration from the University of Applied Sciences in Zurich (HWZ). In 2013, he obtained his diploma as a Chartered Financial Analyst (CFA). Joined Swisscanto: 2013 Professional experience: 15 years 30

31 Marion Swoboda Head of Sustainability Research Marion Swoboda (1965) is a Director and as a Head of Sustainability Research responsible for the sustainability approach and its implementation. Before joining Swisscanto, Marion worked for ten years at SAM Sustainable Asset Management as a senior sustainability/equity analyst mainly focused on the financial sector. Previously, she worked seven years as a senior economist and as senior fund analyst at Credit Suisse Group. Marion Swoboda has gained extensive knowledge in a broad range of sustainability and together with the ETH Institute for Sustainability and Technology she published the study "Climate Change and Banks: Opportunities and Risks". Marion Swoboda graduated in Macroeconomics (lic. oec. publ.) at the University of Zurich. Joined Swisscanto: 2011 Professional experience: 21 years 31

32 Disclaimer These documents are intended for the exclusive use of supervised financial intermediaries of Swisscanto. It is prohibited to copy these documents or to use them for any other purpose. Under no circumstances may these documents be used as promotional materials for sale or made available either directly or indirectly to a third party without the written permission of Swisscanto Funds Management Ltd. An intermediary is solely responsible, in particular to the investor and to Swisscanto, for the use of information contained in these documents. Past performance is no indication of future performance and does not guarantee success in the future. The performance data do not take account of commission and costs charged for the issuing and redemption of units. Mentioning particular securities does not constitute any recommendation to buy or sell them. The information contained in this document has been compiled with the greatest care by Swisscanto. This information and opinions expressed here have been obtained from reliable sources. Despite taking professional care, Swisscanto cannot guarantee the correctness, completeness or topicality of the information. Swisscanto does not accept any liability for investments made on the basis of the information contained in this document. The information contained in the document does not constitute an offer unless this is explicitly indicated. The documents published (fund contract, contractual conditions, prospectuses and/or key investor informations, and reports) can be obtained free of charge at The sources for obtaining the documents published in paper form, at least in German and free of charge, according to the country are: Switzerland: Representative Swisscanto Asset Management Ltd, Nordring 4, P.O. Box 730, 3000 Berne 25, all branches of Cantonal Banks in Switzerland and the Bank Coop AG. Paying Agent in Switzerland: Basler Kantonalbank, Spiegelgasse 2, 4002 Basel. Germany: Paying and information agency DekaBank, Mainzer Landstrasse 16, Frankfurt a.m. Austria: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft, Hypo-Passage 1, 6900 Bregenz. Liechtenstein: Valartis Bank (Liechtenstein) AG, Schaaner Str. 27, 9487 Gamprin-Bendern. Luxembourg: RBC Dexis Investor Services Bank S.A., 14, Porte de France, 4360 Esch-sur-Alzette. 32