BSF Global Event Driven Fund

Transcription

1 BSF Global Event Driven Fund Julius Baer Group Ltd. January 2018

2 Hard Investment Strategy Overview CATALYST SPECTRUM Equity Announced Mergers Strategic Alternatives Spin-offs Restructuring Synergistic Acquisitions Management Change Collaborative Activism Soft Credit Lead with fundamental and strategic rationale PORTFOLIO BENEFITS All-Weather Strategy Events occur across market cycles a Idiosyncratic Alpha Outcome of event drives returns Uncorrelated Diversifier Disciplined hedging promotes low beta profile 1

3 Event Driven Landscape is Highly Robust CEOs compelled to buy growth Sustained merger boom Strong underlying fundamentals are driving elevated corporate activity M&A boom that began in 2015 continues at a robust pace Among the levers a CEO has to pull, inorganic growth is the primary tool in today s market 2016 was the second strongest year for M&A globally since the financial crisis Expand valuation multiple Cut cost Grow organically Grow inorganically (M&A) Boardroom Supply M&A backlog at investment banks appears strong for next 6-12 months Dynamics Pro-business Trump agenda Government Demand Technical market factors Focus on deregulation Increased CEO confidence and optimism expected to fuel activity Substantial de-risking and shuttering of large Event Driven funds due to poor risk management ~$38 billion in outflows from Event Driven segment in Proprietary trading desks no longer able to engage in merger investing Convergence of market dynamics and macro backdrop creates robust investment landscape 1 Source: Hedge Fund Research, as of January

4 Portfolio Manager Background Mark McKenna has extensive Event Driven investment experience Current Salomon Smith Barney Caxton Associates, LP Harvard Management Company, Inc. Vice President, Mergers & Acquisitions Advised corporate boards and their CEOs Over $100 billion deal experience Portfolio Manager, Event Driven Strategy Managed ~$2 billion Co-Founder and Managing Director, Event Driven Fund Managed ~$1 billion Experience & proven ability to generate alpha across bull, bear, and volatile markets Global Head of Event Driven and Portfolio Manager, BlackRock Alternative Investors Event Driven strategy leveraging BlackRock s Collaborative Alpha Academic Background and Military Service New York Maritime College United States Navy NYU Stern School of Business BE, Electrical Engineering Third Assistant Engineers License, US Coast Guard Lieutenant in the United States Navy s Nuclear Submarine Force Decorated with three United States Navy and Marine Corps Achievement Medals MBA with Distinction, Stern Scholar Awarded the Glucksman, Amerada- Hess and Director s Fellowships 3

5 Partnering with BlackRock Leveraging the BlackRock platform significantly increases the profit opportunity and minimizes loss scenarios Information Advantage Capital Markets Advantage Risk Management Advantage Event Driven team leverages the collective intelligence of over 120 specialized BlackRock investment teams First-rate access to company management elevates the conversation Local offices in 70 cities and 30 countries 20 person dedicated capital markets team that drives IPO & secondary allocations First call for most issuers with an early opportunity to influence transaction structuring Scale and scope of securities lending, PB and ishares platforms provides unrivaled insight on market Models utilize ~1,500 global risk factors, along with volatilities and correlations Daily custom risk package includes stress scenarios at factor level Proprietary risk model technology developed specifically for Event Driven strategy All company statistics as of December 31, BlackRock Global Event Driven Fund s investment activities may be limited in order to comply with Section 13(d) of the Exchange Act, and related rules. This segregation would have the effect, among others, of restricting or eliminating the ability of BlackRock Global Event Driven Fund to exchange ideas and information related to particular securities with other personnel of BlackRock. As a result, the potential benefits of collaboration within a large financial institution may be curtailed. 4

6 Anheuser-Busch (ABI) / SABMiller (SAB): Leading Collaborative Activism Overview: Announced Merger Catalyst: Brexit Opportunity: Collaborative Activism September 2015: Deal Announced Valuation Post-Brexit BlackRock was SAB s largest non-insider shareholder % value gap BlackRock had 2x as large ownership as all other public activists combined Event Driven Team led a behind-the-scenes, private campaign Cash Stock Coalesced view internally and presented 3 requirements to SAB s Board Chairman advocating for fairness in consideration and process 2 forms of consideration offered: 1) Cash 2) Stock Stock consideration structured as unlisted, nontransferrable security for 5 years Initially, both forms of consideration valued at parity GBP devaluation creates 13.2% value disparity Illiquid nature of stock precludes most shareholders from electing Stock consideration structured for and to be funneled to two large inside shareholders who sit on SAB s board Activists began to build public opposition SAB and ABI accepted all three of our recommendations to remedy the inherent unfairness in the situation Event Driven Team s Recommendations: 1) Hire independent financial advisor Outcome SAB / ABI Actions: Centerview retained 2) 2 share class vote 2 class vote 3) Normalize value disparity Bump in cash value, closing value gap 50%+ Source: BlackRock, as of 31 December

7 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Portfolio Benefits 1 ALL-WEATHER STRATEGY 2 UNCORRELATED DIVERSIFIER 3 Consistent, absolute returns across market cycles Corporate events occur across bull, bear, and volatile markets Currently in the midst of a sustained merger boom Outcome of event drives returns Disciplined hedging program to isolate the event No directional market exposure: beta to broad equity and credit markets is ~0.1 BLACKROCK ADVANTAGE Benefits of sitting within the world s largest asset manager Structural information advantage associated with BlackRock s top ownership position in virtually every company Systems advantage, including proprietary merger arbitrage risk model 12.0% Uncorrelated returns Absolute return strategy focused on idiosyncratic risk 8.0% 4.0% Aug 15 S&P: -6.0% GED: -0.4% Dec Feb 16 S&P: -6.6% GED: +3.0% Sep Oct 16 S&P: -1.8% GED: +0.3% Mar Apr 17 S&P: +1.1% GED: +2.3% Protecting capital in down markets Average return during S&P down days 1 0.0% -0.5% -0.51% S&P % BSF GED 0.0% -1.0% -4.0% -8.0% Summary Risk Statistics Annualized volatility 3.2% Realized beta to S&P S&P 500 Sharpe 1.2 Past performance is not a reliable indicator of future results. Past performance is not a guide to current or future performance and should not be the sole factor of consideration when selecting a product. 1 Inception (August 5, 2015) through September 30, Performance shown is gross of fees and expenses. Past performance is not a reliable indicator of current or future results. Summary risk statistics are from inception (August 5, 2015) through December 31,

8 Performance Summary Net Monthly Returns (USD, net) JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ANNUAL ITD % 1.07% 0.85% 1.48% 0.49% 0.56% 0.44% -0.01% 0.18% 0.35% -1.47% 0.48% 5.16% 8.88% % 1.51% 0.40% -2.12% 0.79% -0.10% -0.43% 0.21% 0.81% -0.54% 0.86% 0.96% 2.82% 3.54% % -1.70% 2.30% -0.41% 0.92% 0.70% 0.70% Represents the performance for an investor in BSF Global Event Driven Fund since the Fund s inception on August 5, Performance is unaudited, and net of all fees and expenses for the Class D share class. Past performance is not a guide to current or future performance. The figures shown relate to past performance. Past Performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Fund risks: Overseas investment will be affected by movements in currency exchange rates. Smaller company investments are often associated with greater investment risk than those of larger company shares. The Fund will attempt to reduce (or 'hedge') the risk of currency movements between the base currency and the currency in which some or all of the underlying investments are transacted. Depending on the exchange rates, this may have a positive or negative impact on the performance of the Fund. The hedging strategy employed will not completely eliminate the exposure of the Fund to movements between the base currency and these other currencies. Performance is calculated on a NAV basis, with gross income reinvested, net of fees in USD currency terms. Past performance is not a guide to current or future performance and should * Estimated not be the performance. sole factor of The consideration estimate may when be selecting based on, a among product. other things, estimated prices, is preliminary and subject to significant revision, and therefore should not be relied upon. 7

9 Key Takeaways: Why BSF Global Event Driven Proven expertise + BlackRock platform = powerful combination that does not exist in the marketplace today Why Event Driven Absolute return strategy targeting consistent 6-8% net returns across market cycles Uncorrelated to equity and bond markets Lower volatility than traditional equity strategies Why Now Highly robust M&A and strategic corporate event market driven by tepid organic growth, peak margins, and high corporate cash balances 2015 and 2016 were record years for M&A. Activity continues to be strong in 2017 Why BlackRock Experienced Portfolio Manager with proven expertise in Event Driven investing Keen focus on risk management. Proprietary event driven risk model and disciplined hedging program Breadth of BlackRock investment platform results in a differentiated perspective Target returns are not guaranteed and subject to change. 8

10 Appendix

11 Portfolio Characteristics Characteristic Market exposure BSF Global Event Driven Fund Typical long market value of 100% to 150% Typical gross exposure of 125% to 250% Typical beta-adjusted net exposure of 0-30% Position-level hedging with limited use of indices Focus on security selection rather than market risk Concentration Asset class: Typically 80%+ equity, 20% credit Approximately ideas: Each idea expressed through multiple securities Position limits: Sized up to a max 3.0% risk to NAV Diversified across industries and sectors Geographic regions Developed Markets U.S.: Typically 60-80% International: Typically 20-40% ICB0118E

12 Fund Terms Fund Terms D Share Class Minimum Investment $100,000 1 Management Fee 1.0% Performance Fee 2 20% Regulatory Structure & Domicile Subscription / Redemption Frequency Notice Period Custodian/Administrator Legal Advisors Auditors Transfer Agent Currency Share Classes UCITS, Luxembourg Weekly and month end (Daily indicative NAV available on Bloomberg) 2 business days State Street Bank Luxembourg S.A. Linklaters LLP Deloitte & Touche J.P. Morgan USD, EUR, GBP, CHF 1 Minimum investment amount can be waived at the Manager s discretion 2 Subject to a high water mark. Please refer to the Prospectus for further details Source: BlackRock, as of 31 December ICB0118E

13 Important Information This material is for distribution to Julius Baer Group Ltd. only. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: Registered in England No For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. For investors in Switzerland: This material is for Qualified Investors only.the BlackRock Strategic Funds (BSF) Funds are domiciled in Luxembourg. BlackRock Asset Management Schweiz AG, Bahnhofstrasse 39, CH-8001 Zurich, is the Swiss Representative and State Street International GmbH, Munich, Zurich Branch, Beethovenstrasse 19, CH-8002 Zürich, the Swiss Paying Agent. The Prospectus, Key Investor Information Document, the Articles of Incorporation, the latest and any previous annual and semi-annual reports are available free of charge from the Swiss Representative. Investors should read the fund specific risks in the Key Investor Information Document and the Prospectus. BlackRock Strategic Funds (BSF) is an open-ended investment company established in Luxembourg which is available for sale in certain jurisdictions only. BSF is not available for sale in the U.S. or to U.S. persons. Product information concerning BSF should not be published in the U.S. It is recognised under Section 264 of the Financial Services and Markets Act BlackRock Investment Management (UK) Limited is the UK distributor of BSF. Most of the protections provided by the UK regulatory system, and the compensation under the Financial Services Compensation Scheme, will not be available. A limited range of BSF sub-funds have a reporting fund status A sterling share class that seeks to comply with UK Reporting Fund Status requirements. Subscriptions in BSF are valid only if made on the basis of the current Prospectus, the most recent financial reports and the Key Investor Information Document, which are available on our website. Prospectuses, Key Investor Information Documents and application forms may not be available to investors in certain jurisdictions where the Fund in question has not been authorised. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Fund Specific Risks The value of this fund does not typically move in line with general market trends and is not expected to reap the full benefits of a rising stock market. Investment strategies employed by the manager may affect the risk profile of the fund, as both positive and negative share movements affect the overall value of the fund. The strategies utilised by the Fund involve the use of derivatives to facilitate certain investment management techniques including the establishment of both 'long' and 'synthetic short' positions and creation of market leverage for the purposes of increasing the economic exposure of a Fund beyond the value of its net assets. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds. Investors in this fund should understand that the Fund is not guaranteed to produce a positive return and as an absolute return product, performance may not move in line with general stock market trends as both positive and negative share movements affect the overall value of the fund. The Manager employs a risk management process to oversee and manage derivative exposure within the Fund. The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss. The fund may be subject to credit risk, where the issuer of a financial asset held within the Fund may not pay income or repay capital to the Fund when due. The fund investments may be subject to liquidity constraints, which means that shares may trade less frequently and in small volumes, for instance smaller companies. As a result, changes in the value of investments may be more unpredictable. In certain cases, it may not be possible to sell the security at the last market price quoted or at a value considered to be fairest. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time. Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. ICB0118E