G10\MMF Roadshow template.ppt

Transcription

1 G10\MMF Roadshow template.ppt

2 Cazenove Capital Multi-asset investing to beat inflation 13

3 Multi-asset Investing Asset Class A 50/50 Portfolio Asset Class B 14

4 Multi-asset investing Single asset class considerations: Expected return: Historic and future Volatility of returns: Average peak to trough Time horizon: Short tactical/long term strategic Liquidity: Availability/trading Accessibility: Institutional investment/retail Cost: Price/projected Something better: Another asset class 15

5 Return expectations Expected nominal return Expected nominal volatility (% pa) (% pa) UK Equity Overseas Developed Equity Emerging Market Equity Government Bonds (UK or hedged) 5 5 Inv Grade Corp Bonds (UK or hedged) High Yield Bonds (UK or hedged) Property Hedge Funds 7 7 Commodities 9 22 Cash ( ) Source: Cazenove Capital Economics and Strategy team 31/08/11 16

6 Volatility UK Equities: Avg return = 8.25% pa Standard deviation = 15% pa /3 rd of time returns are within 15% of the long average Annual return (%) Source: Cazenove Capital 17

7 Multi-asset investing Multi-asset investing: 3 considerations: 1. Correlation 18

8 Correlation Sales 19

9 Correlation coefficients Return Correlation of 1.0 Risk 20

10 Correlation coefficients Return Correlation of 0.8 Risk 21

11 Correlation coefficients Return Correlation of 0.4 Risk 22

12 Correlation coefficients Return Correlation of 0.0 Risk 23

13 Correlation coefficients Return Correlation of -0.4 Risk 24

14 Correlation coefficients Return Correlation of -0.8 Risk 25

15 Correlation coefficients Return Correlation of -1.0 Risk 26

16 Equity market correlation UK US Europe Emerging Markets Japan Why are the equity markets so well correlated? Source: Cazenove Capital Economics and Strategy team 31/08/11 27

17 The USA (it consumes approx 50% of the world s stuff!) US states renamed for countries with similar GDPs Turkey Israel Ukraine Ireland Peru France Thailand Tunisia Uzbekistan Finland Hungary Ecuador Philippines Norway S. Africa Croatia Brazil Argentina Czech Venezuela Netherlands Republic Australia Mexico Denmark Algeria Malaysia Poland Portugal Pakistan Saudi Arabia Dominican Republic Sweden Singapore Morocco Bangladesh Belgium Vietnam Greece Russia Romania Hong Kong New Zealand Nigeria Canada Chile Indonesia Iran Switzerland S Korea Belarus Source: Strangemaps.wordpress.com: June

18 Asset class correlation (to UK Equities) 98-08/ UK Global Eq (ex UK) Gilts UK Corp European High Yield Hedge Commodities Property Cash Source: Cazenove Capital Economics and Strategy team 31/08/11 29

19 Asset class correlation (to UK Corporate Bonds) 98-08/ UK Corp Global Eq (ex UK) Gilts UK Equites European High Yield Hedge Commodities Property Cash Source: Cazenove Capital Economics and Strategy team 31/08/11 30

20 Multi-asset investing Multi-asset investing: 3 considerations: 2. Time 31

21 Time horizon Traditional Balanced Funds: Generally: 60% UK Equity 40% UK Bonds = = = Limited diversification Source: Cazenove Capital Economics and Strategy team 31/08/11 32

22 Evolution of multi-asset investing Traditional Balanced Funds: Generally: 60% UK Equity 40% UK Bonds Limited diversification Multi-asset: Equity (UK and Overseas) Bonds (UK and Overseas) Property Commodities Hedge Funds Structured Products Private Equity Other Alternative Investments Greater Diversification 33

23 Return expectations: Beating inflation? Expected nominal return Expected nominal volatility (% pa) (% pa) UK Equity Overseas Developed Equity Emerging Market Equity Government Bonds (UK or hedged) 5 5 Inv Grade Corp Bonds (UK or hedged) High Yield Bonds (UK or hedged) Property Hedge Funds 7 7 Commodities 9 22 Cash ( ) Simple average return expectation 7.25/volatility 12 Source: Cazenove Capital Economics and Strategy team 31/08/11 34

24 Observations Source: Cazenove Capital Economics and Strategy team 31/08/11 35

25 Multi-Asset investing Multi-asset investing: 3 considerations: 3. Weighting 36

26 The efficient frontier The efficient frontier and randomly generated portfolio space % Commodities 100% UK Eq 100% OS Eq % cash 100% bonds Source: FTSE, Cazenove Capital 37

27 Cazenove MM Diversity Fund A cautious multi-asset, fund of funds Target CPI +4% pa, over the medium term* AMC 0.5%, TER 1.3%** 577m FUM 1/3 Equities 1/3 Fixed Income & Cash 1/3 Alternatives - Property - Hedge - Commodities *Not guaranteed. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. **Source: Cazenove Capital. X share class at Source: Cazenove Capital 31/08/11. 38

28 Diversity Fund portfolio management Where are we in the economic cycle? Where are valuations most attractive? Slowdown Recession Recovery Richard Jeffrey (CIO) Expansion Which regions have the best long term potential? Robin Griffiths (Technical Strategist) Asia & Emerging Markets Which fund managers have the best track record in Asia & Emerging Markets? Is their current strategy consistent with our own conservative approach? Are their fees reasonable? Marcus Brookes & Robin McDonald (Multi-Manager Team) Entering recovery phase P/E Ratios in Asia at historic lows Cazenove Multi-Manager Diversity Fund Aberdeen Asia Pacific Fund (Hugh Young) /3/ China trend P/E P/E Reduce cash in favour of equities Add to Asia ex-japan equities Buy Aberdeen Asia Pacific Fund ABERDEEN INV.SERVICES GLB.ASIA PACIFIC EQ.A2 - TOT RETURN IND MSCI AC ASIA PAC EX JP U$ - NET RETURN Source: Thomson Datastream 39

29 Cazenove Multi-Manager Diversity Fund current positioning 40

30 Tactical views: 1/3 Equities Strategy We favour sectors or companies with: Stable business model (utilities, staples, healthcare) Strong balance sheets Reliable dividend yields Unloved and under-owned We are avoiding companies: With dangerous debt levels That are reliant on the economy Key Positions Invesco Perpetual Income JOHCM UK Opportunities First State Asia Pacific Leaders 1/3 Equities 41

31 Defensive Woodford vs growthy Buxton Invesco Perpetual Income relative to Schroder UK Alpha Plus Percentage Growth Invesco Perpetual Income Inc (MF) relative to Schroder UK Alpha Plus Inc (MF) -28% +25% -25% +55% 07/02 01/03 07/03 01/04 07/04 01/05 07/05 01/06 07/06 01/07 07/07 01/08 07/08 01/09-62% Percentage Growth Total Return, Tax Default, In LC Source: Lipper at 31/12/10. (mid to mid net) 42

32 Tactical views: 1/3 Fixed Income & Cash Strategy Corporate Bonds remain favoured Good yield Lower risk as debt levels have fallen. Government Bonds look unattractive Inflation rising Possible further Quantitative Easing (printing money) Key Positions M&G Optimal Income JPM Income Opportunities Invesco Perpetual Tactical Bond 1/3 Fixed Income & Cash 43

33 Corporate vs Government Bonds UK Corporate Bond Yield Spreads: High Yield still attractive, Inv Grade fully priced Yield Spread AAA-AA AAA-A BBB Source: Thomson Datastream 44

34 Tactical views: 1/3 Alternatives Strategy Low correlation to equity markets Relative Value strategies Cautious strategies We retain a modest position in Gold Still don t like property Key positions Jupiter Absolute Return The Eclectica Fund Majedie Tortoise ETFS Physical Gold 1/3 Alternatives 45

35 Our Property exposure is unconventional /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/2009 Percentage growth 03/08/ /10/ /12/ /02/ /04/ /06/ /08/2010 Thames River Longstone C (HF) SWIP Property Trust Acc (MF) Source: Lipper at 30/09/10.

36 Pulling it all together The current portfolio Alternatives Jupiter Absolute Return = 7.0% Cazenove UK Absolute Target = 5.1% Majedie Tortoise = 4.4% Eclectica = 3.6% ETFS Physical Gold = 2.1% Artemis Strategic Assets = 2.0% ETFS FX Short E Long $ = 1.5% Thames River Longstone = 1.4% OEI MAC = 1.4% Nevsky Fund = 0.9% CITI Autocall = 0.6% Equities Invesco Perpetual Income = 7.3% JOHCM UK Opportunities = 5.2% Findlay Park American = 4.0% ishares FTSE 100 Fund = 2.7% First State Asia Pac Ldrs = 2.6% Walker Crips UK Growth = 2.1% GLG Japan Core Alpha = 2.0% Investec UK Special Sits = 2.0% Rensburg UK Mid-Cap = 1.5% Gartmore US Growth = 1.7% Neptune European Opps = 1.5% Cash = 15.5% Invesco Tactical Bond = 3.0% Fixed Interest & Cash M&G Optimal Income = 7.6% Thames River Global Bond = 2.1% JPM Income Opps = 7.3% Aegon Strat Global Bond $ = 2. 0% Source: Cazenove Capital at 31/08/11 47

37 CPI+4%: How has the fund done since launch? *Source: Lipper, Datastream and Cazenove Capital 01/09/05 to 29/07/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/2011 Cazenove Multi-Manager Diversity A Acc IMA Cautious Managed CPI +4%

38 From Launch How has the fund done? Cazenove Multi-Manager Diversity Fund relative to IMA Cautious Managed Sector Percentage growth *Source: Lipper, relative to IMA Cautious Managed sector, annualised data 01/09/05 to 29/07/11 Cazenove Multi-Manager Diversity A Acc (MF) relative to IMA Cautious Managed (IN) 01/09/ /01/ /05/ /09/ /01/ /05/ /09/ /01/ /05/ /09/ /01/ /05/ /09/ /01/ /05/ /09/ /01/ /05/2011 Top quartile returns 2 nd best volatility (2 nd lowest) 1 st information-ratio (a measure of riskadjusted returns)* Lower risk has not meant lower returns 49

39 Stay informed: Monthly Asset Allocation Dashboard 50

40 Summary Correlation is the key element of multi-asset investing Short term correlations can be volatile The past only tells you what has happened, not what will happen Multi-asset investing can help achieve a real return over the medium term Cazenove MM Diversity has a record of delivering a real return It is low cost and accesses some of the industry s best investment talent Asset Allocation Dashboard designed to keep you up-to-date with asset classes, markets and fund positioning Source: Cazenove Capital at 31/08/11 51

41 Regulatory statements and warnings This document is issued by Cazenove Capital Management (Cazenove Capital). It is for information purposes only and does not constitute an offer to enter into any contract/agreement nor a solicitation to buy or sell any investment or to provide any services referred to therein. This document is solely for the use of professional intermediaries and is not for general public distribution. The contents of this document are based upon sources of information believed to be reliable, however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to its accuracy or completeness, and Cazenove Capital or connected companies, directors, officers and employees do not accept any liability or responsibility in respect of the information or any recommendations expressed herein which, moreover, are subject to change without notice. This document has been produced based on Cazenove Capital Management s research and analysis and represents our house view. Unless otherwise stated all views are those of Cazenove Capital Management. It may not be reproduced in any form without the express permission of Cazenove Capital Management and to the extent that it is passed on, care must be taken to ensure this is in the form which accurately reflects the information given here. Unless otherwise indicated, the source for all data is Cazenove Capital. Past performance should not be seen as an indication of future performance. The value of investments and the income from them can go down as well as up and an investor may not get back the amount invested and may be affected by fluctuations in markets and exchange rates. Cazenove Capital Management is the name under which Cazenove Capital Management Limited (registered No ) and Cazenove Investment Fund Management Limited (registered No ) each authorised and regulated by the Financial Services Authority and of 12 Moorgate London EC2R 6DA provide investment products and services. 52