U.S. Credit Research Process & Pioneer Funds U.S. Dollar Aggregate Bond

Transcription

1 U.S. Credit Research Process & Pioneer Funds U.S. Dollar Aggregate Bond Investment Conference, Boston, March 2010 Michael Temple I Director of Fixed Income Credit Research For Broker/Dealer Use Only and Not to be Distributed to the Public

2 Agenda Firm Overview US Fixed Income Overview US Fixed Income Research Process Pioneer Funds U.S. Dollar Aggregate Bond Appendix For Broker/Dealer Use Only and Not to be Distributed to the Public Page 2

3 Firm Overview Introduction to Pioneer Investments Wholly-owned asset management company of the UniCredit Group Founded in 1928 Over 2,000 employees worldwide US$252 billion AUM* *AUM data as of 31 December 2009 For Broker/Dealer Use Only and Not to be Distributed to the Public Page 3

4 Global Presence Local Insight Global presence Breadth of business Strong parentage Source: Pioneer Investments as at July 2008 For Broker/Dealer Use Only and Not to be Distributed to the Public March 2010 Page 4

5 Firm Overview Assets Under Management in USD (bn) Global Assets Under Management US$252 Money Market 10.1% Alternative 1.2% Equity 20.3% Balanced 19.0% Fixed Income 49.4% Source: Pioneer Investments as of 12 December 2009 For Broker/Dealer Use Only and Not to be Distributed to the Public Page 5

6 Agenda Firm Overview US Fixed Income Overview US Fixed Income Research Process Pioneer Funds U.S. Dollar Aggregate Bond Appendix For Broker/Dealer Use Only and Not to be Distributed to the Public Page 6

7 Pioneer Investments US Fixed Income Capabilities and AUM Credit Opportunities $0.27 *Other $3.14 Bank Loans $0.58 Opportunistic Core $1.64 Money Market/Short Term $2.03 Core Plus $5.65 Global High Yield $2.87 Long Duration Credit $0.30 High Yield $4.88 US$21.4 Billion in US Fixed Income Assets Under Management as of 31 December 2009 *Comprised of Municipals, US Government, Intermediate Maturity, Limited Maturity, Global Fixed Income, Short Term Income, Credit Recovery, Mortgage Credit Opportunity, and Investment Grade Source: Pioneer Investments as of 31 December 2009 For Broker/Dealer Use Only and Not to be Distributed to the Public Page 7

8 Team-Based Approach Multi-Disciplinary Global Team Dedicated to Alpha Generation EUROPEAN FIXED INCOME Raffaele Bertoni US FIXED INCOME Ken Taubes QUANTITATIVE FIXED INCOME Diego Franzin GLOBAL EMERGING & HIGH YIELD Hakan Aksoy Zeke Diwan Colm D'Rosario Gregorio Saichin Yerlan Syzdykov INVESTMENT GRADE Pierre Andre Klein Raffaele Bertoni GOVT. BONDS Derek Arnold Marco Cecchi Alberto Fontana Andreas Konig Adam Laux Tanguy Le Saout Cosimo Marasciulo Marco Meijer Semin Soher CREDIT RESEARCH GLOBAL ex US Andriy Boychuk Silvia Clarkson Brian Farrell Alison Harvey Majella Healy Gavin McKeown Virna Valenti Garrett Walsh As of 31December 2009 HIGH YIELD DEBT & LOANS Andrew Feltus Jonathan Sharkey Tracy Wright INVESTMENT GRADE Charles Melchreit Seth Roman Richard Schlanger TAX EXEMPT David Eurkus Tim Pynchon MORTGAGES / ABS Steve Bernhardt Ali Haghighat Nicholas Pauwels Larry Zeno CREDIT RESEARCH Michael Temple David Brecht Joanne Fisher Jessica Frattura Daniel Gilbert Keith Hogan Bradley Komenda Will Taylor Richard Stevens Andrey Demidov Grainne Dooley Akvile Janeliunaite Tugrul Kolad Chin Liu Vladimir Popov Robert Urie Mark Scrowston For Broker/Dealer Use Only and Not to be Distributed to the Public Page 8

9 Pioneer Investments US Fixed Income Investment Philosophy We believe that a value approach to fixed income investing combined with careful assessment of risk can identify opportunities for above-average total return. Our fixed income strategies are based on extensive in-house fundamental and quantitative research. Pioneer Investments fixed income organisation is built on the premise that a tightly-knit group of highly-experienced fixed income portfolio managers and research analysts working collaboratively can produce competitive investment results. For Broker/Dealer Use Only and Not to be Distributed to the Public Page 9

10 Pioneer Investments US Fixed Income Investment Process Integrated Investment Process Buy Discipline Top-Down: Economic and market analysis Bottom-Up: Fundamental and absolute value Qualitative Research Generate investment ideas Review investment cases frequently Leverage Analysts expertise worldwide Portfolios Sell Discipline Change in fundamentals More attractive alternatives Quantitative Research Bond screening tools Risk control tools Performance and risk measurement For Broker/Dealer Use Only and Not to be Distributed to the Public Page 10

11 Agenda Firm Overview US Fixed Income Overview US Fixed Income Research Process Pioneer Funds U.S. Dollar Aggregate Bond Appendix For Broker/Dealer Use Only and Not to be Distributed to the Public Page 11

12 Pioneer Investments Credit Research Process Investment ideas are winnowed from a vast universe of investments and potential problems are identified Quantitative Screens Relative Value Comparisons A unique value approach allows for global benchmarking of all owned and potential investments Investment Decision Ignore/Buy/Sell Sector and risk allocations are determined through an analysis of interest rates, economic and credit cycles, currency and political trends Macro Considerations Fundamental Research Detailed industry and company assessments of past and future trends are distilled into investment thesis For Broker/Dealer Use Only and Not to be Distributed to the Public Page 12

13 Fundamental Corporate Research Relative Value Framework Our framework assesses risk per unit of spread and free cash flow expectations and can identify both long and short opportunities. SPL vs FCF % TD Long Opportunity Set SPL 150 Avoidance Set HY Average -20% -15% -10% -5% 0% 5% 10% 15% 20% FCF % Total Debt Source: Pioneer Investments as of 30 September 2008 For Broker/Dealer Use Only and Not to be Distributed to the Public Page 13

14 Mortgage Valuation Models Sector Allocation compares fair value of agency mortgages Includes: Treasury yields and curve shape Swap spreads Implied volatility Coupon Mortgage prices Sector Allocation compares fair value of agency mortgages Ten factors focusing on: Interest rate volatility Prepayment model risk OAS Agency spreads Spread duration Convexity Refi sensitivity Investment Decision For Broker/Dealer Use Only and Not to be Distributed to the Public Page 14

15 Relative Value Model GNMA 30-year Regression Analysis Actual - Fit /16/2005 5/5/2006 9/22/2006 2/9/2007 6/29/ /16/2007 4/4/2008 8/22/2008 1/9/2009 5/29/ /16/200 Rich/Cheap -1 SD +1 SD FNMA 30-year Regression Analysis FHLMC 30-year Regression Analysis Actual - Fit /16/2005 5/5/2006 9/22/2006 2/9/2007 6/29/ /16/2007 4/4/2008 8/22/2008 1/9/2009 5/29/ /16/200 Rich/Cheap -1 SD +1 SD Actual - Fit /16/2005 5/5/2006 9/22/2006 2/9/2007 6/29/ /16/2007 4/4/2008 8/22/2008 1/9/2009 5/29/ /16/200 Rich/Cheap -1 SD +1 SD Source: Pioneer Investments as of 16 October 2009 Actual Current Coupon Fitted Current Coupon Difference Standard Deviation Z-score GNMA FNMA FGLMC For Broker/Dealer Use Only and Not to be Distributed to the Public Page 15

16 Structured Security Credit Research Process Non-Agency RMBS/ABS Analysis Overview Knowing the issuer and servicer Regular meetings and on-site diligence Origination channels Underwriting philosophy and process Capitalisation and organisation of the company Staffing size and expertise Growth and outlook Residual retention Understanding Collateral and Enhancement Proprietary collateral and enhancement risk database Tailored loan stratifications Focus on loan level geographic exposures Understand layered risks Stress Runs and Cash Flow Analysis Generating customised default vectors Standard default scenarios Assessing available funds cap risk Loss coverage multiple test For Broker/Dealer Use Only and Not to be Distributed to the Public Page 16

17 Country and Currency Decision Process Fundamental Analysis: Countries are like Companies Income Statement GDP, Inflation Balance Sheet Management/Strategy Debt/GDP, Current Account Who s in charge, political parties, monetary and fiscal policies Valuation Credit spreads Local currency yields Currency valuation Create portfolio based on investment goals and objectives For Broker/Dealer Use Only and Not to be Distributed to the Public Page 17

18 Agenda Firm Overview US Fixed Income Overview US Fixed Income Research Process Pioneer Funds U.S. Dollar Aggregate Bond Appendix For Broker/Dealer Use Only and Not to be Distributed to the Public Page 18

19 Pioneer Funds U.S. Dollar Aggregate Bond Team Kenneth J. Taubes Head of Portfolio Management, U.S. Portfolio Management (PM) Kenneth Taubes, MBA Andrew Feltus, CFA Charles Melchreit, CFA Average 20 Years of Experience Credit Research Team Structured Finance Team Non-US Fixed Income Team Quantitative Fixed Income Team For Broker/Dealer Use Only and Not to be Distributed to the Public Page 19

20 Pioneer Funds U.S. Dollar Aggregate Bond Strategy Overview We believe that a fixed income portfolio that includes a wide range of investment grade and non-investment grade fixed income sectors can achieve returns competitive with a typical high quality core fixed income approach without excessive additional volatility. US Treasuries/ Agencies US Municipals US Mortgage- Backed Securities US Investment Grade Corporates Diversification from a wide range of fixed income sectors and low correlations of investment grade and noninvestment grade debt markets Active asset allocation methodology Individual security selection Non-Agency MBS and ABS US High Yield Corporates USD International Investment Grade For Broker/Dealer Use Only and Not to be Distributed to the Public Page 20

21 Pioneer Funds U.S. Dollar Aggregate Bond Sector Allocation and Characteristics as of 31 December 2009 Pass Thru's/Other 39% Maturity Distribution % Characteristics 0 to 1 Year 17.3 Average Credit Quality A Industrial 17% 1 to 3 Years 26.4 Effective Duration 4.16 Years Finance 13% Portfolio 3 to 4 Years 13.0 Average Life 7.26 Years Treasury/Agency 9% 4 to 6 Years 16.1 Utility 8% 6 to 8 Years Years 9.7 Quality Distribution % A & Above 61.2 Cash Equivalent 7% BBB 25.4 Banks 7% Below BBB 13.4 Yankees 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% The portfolio is actively managed, and current holdings and characteristics may be different. Portfolio sector allocations will vary over other periods and do not reflect a commitment to an investment policy or sector. Average Credit Quality is an asset weighted average of the higher rating of the fixed income securities, cash, and cash equivalents in the Sub-Fund as provided by Moody s or S&P. The rating also includes securities that have not been rated by either of the rating agencies, which has the effect of reducing the overall average. Source: Wilshire Axiom as at 31 December For Broker/Dealer Use Only and Not to be Distributed to the Public Page 21

22 Agenda Firm Overview US Fixed Income Overview US Fixed Income Research Process Pioneer Funds U.S. Dollar Aggregate Bond Appendix For Broker/Dealer Use Only and Not to be Distributed to the Public Page 22

23 Pioneer Funds U.S. Dollar Aggregate Bond Strategy Overview as of 31 December 2009 Investment Category Benchmark Investment Universe Investment Approach Core Investment Grade Fixed Income BarCap US Aggregated Bond Index US Treasuries, Agency MBS, US investment grade corporate debt, and limited high yield bond exposure Top down: actively allocate amongst a variety of primarily US investment grade fixed income sectors; strategically overweighting those we believe have superior relative value characteristics; considers limited investment to US high yield Bottom up: rigorous research-driven approach to issue selection, that leverages Pioneer Investments extensive global fixed income capabilities, including experienced Credit Research and MBS Research team Management Team Leader Ken Taubes Lead Manager since 1998 Industry Experience since 1982 Inception Date 27 February 2006 Assets Under Management US$155.4 Million as of 31 December 2009 The Portfolio is actively managed and current holdings and characteristics may be different. The BarCap US Aggregated Bond Index is a measure of the US bond market. Indices are unmanaged and their returns assume reinvestment of dividends and, unlike mutual fund returns, do not reflect any fees or expenses associated with a mutual fund. It is not possible to invest directly in an index. For Broker/Dealer Use Only and Not to be Distributed to the Public Page 23

24 Pioneer Funds U.S. Dollar Aggregate Bond Strategy Overview (continued) Average Credit Quality Typical Duration Range Typical Holding Period Typical Issuers Range Historical Turnover Range A to AA Between 4 years and 6 years 2 to 3 years issuers 45% to 60% annually The Portfolio is actively managed and current holdings and characteristics may be different. Average Credit Quality is an asset weighted average of the higher rating of the fixed income securities, cash, and cash equivalents in the Sub-Fund as provided by Moody s or S&P. The rating also includes securities that have not been rated by either of the rating agencies, which has the effect of reducing the overall average. Source: Wilshire Axiom as at 31 December For Broker/Dealer Use Only and Not to be Distributed to the Public Page 24

25 Pioneer Funds U.S. Dollar Aggregate Bond Performance (annualised) as of 31 December 2009 Percent Pioneer Funds - U.S. Dollar Aggregate Bond Class A USD Non-Distributing BarCap US Aggregated Bond Index Q Year 3 Year Since Inception (3/17/06) Source: Pioneer Investments as at 31 December Performance figures are in USD and have been converted from the Sub-Fund s base currency, the euro. Pioneer Bond Fund, a US registered investment company (inception date of Class A Shares 31 October 1978), returns are used for performance purposes until inception date on 17 March 2006 of the Unit Class A USD of Pioneer Funds U.S. Dollar Aggregate Bond, a Sub-Fund of Pioneer Funds, a fonds commun de placement (the "Fund") with several separate Sub-Funds established under the laws of the Grand Duchy of Luxembourg. The data of Pioneer Funds U.S. Dollar Aggregate Bond is not indicative of the performance of Pioneer Bond Fund, and viceversa. Pioneer Funds U.S. Dollar Aggregate Bond and Pioneer Bond Fund have the same portfolio manager and similar investment objectives and policies. However, the funds are domiciled in different jurisdictions and are subject to different regulatory regimes, which affect the manner in which they are managed. Investment results will vary. There can be no assurances that they will achieve similar results due to different inception dates, fund sizes, portfolio holdings and other factors. Pioneer Funds U.S. Dollar Aggregate Bond (the "Sub-Fund") may not be offered for sale In the United States of America, or in any of its territories or possessions subject to its jurisdiction or to/for the benefit of a United States Person, whereas Pioneer Bond Fund only has limited availability outside the United States. For Broker/Dealer Use Only and Not to be Distributed to the Public Page 25

26 Pioneer Funds U.S. Dollar Aggregate Bond Calendar Year Returns Percent Pioneer Funds - U.S. Dollar Aggregate Bond Class A USD Non-Distributing BarCap US Aggregated Bond Index Source: Pioneer Investments as at 31 December Performance figures are in USD and have been converted from the Sub-Fund s base currency, the euro. Pioneer Bond Fund, a US registered investment company (inception date of Class A Shares 31 October 1978), returns are used for performance purposes until inception date on 17 March 2006 of the Unit Class A USD of Pioneer Funds U.S. Dollar Aggregate Bond, a Sub-Fund of Pioneer Funds, a fonds commun de placement (the "Fund") with several separate Sub-Funds established under the laws of the Grand Duchy of Luxembourg. The data of Pioneer Funds U.S. Dollar Aggregate Bond is not indicative of the performance of Pioneer Bond Fund, and viceversa. Pioneer Funds U.S. Dollar Aggregate Bond and Pioneer Bond Fund have the same portfolio manager and similar investment objectives and policies. However, the funds are domiciled in different jurisdictions and are subject to different regulatory regimes, which affect the manner in which they are managed. Investment results will vary. There can be no assurances that they will achieve similar results due to different inception dates, fund sizes, portfolio holdings and other factors. Pioneer Funds U.S. Dollar Aggregate Bond (the "Sub-Fund") may not be offered for sale In the United States of America, or in any of its territories or possessions subject to its jurisdiction or to/for the benefit of a United States Person, whereas Pioneer Bond Fund only has limited availability outside the United States. For Broker/Dealer Use Only and Not to be Distributed to the Public Page 26

27 Pioneer Funds U.S. Dollar Aggregate Bond Summary A broadly-diversified fixed-income strategy that may include US Treasury obligations, Agency MBS, investment grade corporate debt, and up to 20% in high yield Flexibility to respond to changing bond market conditions Intensive credit research and issue selection process Focus on strong valuations to generate strongest risk/return over time For Broker/Dealer Use Only and Not to be Distributed to the Public Page 27

28 Pioneer Funds U.S. Dollar Aggregate Bond Portfolio Management Team: Lead Portfolio Manager Kenneth J. Taubes Head of Portfolio Management U.S. & Executive Vice President Ken Taubes is the Head of Portfolio Management, U.S. and a Portfolio Manager of Pioneer Investments US Core and US Core Plus strategies. Prior to joining Pioneer Investments in 1998, Ken spent seven years with Putnam Investments in Boston, most recently as Senior Vice President and Senior Portfolio Manager for over $15 billion in fixed income assets for more than 30 institutional accounts and 15 open-end mutual funds. Ken also served as Senior Vice President and Corporate Treasurer of Home Owners Savings Bank in Boston, New England s largest thrift holding company and one of the United States largest mortgage banks, where he worked from 1986 to He began his career in 1980 with Bank of New England as a Treasury Officer in the bank s international treasury division. Ken is a member of the Bond Analysts Society of Boston. He received a BS (Bachelor of Science) in accounting from Syracuse University s Utica College and an MBA from Suffolk University in Boston. For Broker/Dealer Use Only and Not to be Distributed to the Public Page 28

29 Pioneer Funds U.S. Dollar Aggregate Bond Important Information Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31 December Pioneer Funds U.S. Dollar Aggregate Bond is a sub-fund (the Sub-Fund ) of Pioneer Funds (the Fund ), a fonds commun de placement with several separate sub-funds established under the laws of the Grand Duchy of Luxembourg. Pioneer Bond Fund is a US registered investment company which is not made available for offering or subscription outside the United States of America. Past performance does not guarantee and is not indicative of future results. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. More recent returns may be different than those shown. Please contact your local sales representative for more current performance results. This material is not a prospectus and does not constitute an offer to buy or a solicitation to sell any units of the Fund or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. For additional information on the Fund, a free prospectus should be requested from Pioneer Global Investments Limited ( PGIL ), 1 George s Quay Plaza, George s Quay, Dublin 2, Ireland. Call Fax This information is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities or services in the United States or in any of its territories or possessions subject to its jurisdiction to or for the benefit of any United States person (being residents and citizens of the United States or partnerships or corporations organized under United States laws). The Fund has not been registered in the United States under the Investment Company Act of 1940 and units of the Fund are not registered in the United States under the Securities Act of This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. The content of this document is approved by PGIL. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), 123 Buckingham Palace Road, London SW1W 9SL, authorised by the Financial Regulator in Ireland and regulated by the Financial Services Authority for the conduct of UK business. The Fund is an unregulated collective investment scheme under the UK Financial Services and Markets Act 2000 and therefore does not carry the protection provided by the UK regulatory system. Pioneer Funds Distributor, Inc., 60 State Street, Boston, MA ( PFD ), a U.S.-registered broker-dealer, provides marketing services in connection with the distribution of Pioneer Investments products. PFD markets these products to financial intermediaries, both within and outside of the U.S. (in jurisdictions where permitted to do so) for sale to clients who are not United States persons. For Broker/Dealer Use Only and Not to be Distributed to the Public. Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Date of First Use: 11 March 2010 For Broker/Dealer Use Only and Not to be Distributed to the Public Page 29