Emerging Markets Flexible Management

Transcription

1 Emerging Markets Flexible Management Alexandre Narboni Pavillon Cambon, Paris For Professional Investors only

2 2 MAGELLAN Performance* (net, in EUR) Cumulative performance since inception (%) % change Dec 1994 Fund MSCI EM - NR Rolling performance (%) Dec 1999 Dec 2004 Dec 2009 QTD YTD 1 Year 3 Years annualised 5 Years annualised 10 Years annualised Inception annualised Portfolio Index *Net performance in EUR as of 31/10/2014 Source: FactSet/Comgest. *Past performance is no guarantee of future results. Indices are used for comparison of past performance only. Performance calculation based on NAV to NAV variation expressed in euros. Fund volatility is calculated using weekly performance data. The index used for comparative purposes changed from MSCI Emerging Markets price to MSCI Emerging Markets dividends reinvested from 01/01/2006. Comgest S.A. assumed full management of the fund on 31/12/1994 and 'performance since inception' is as of this date Morningstar, Inc. All rights reserved. Ratings and awards mentioned in this document can change at any time and do not constitute a buy recommendation.

3 3 MAGELLAN VS. MSCI EM: HISTORICAL DRAWDOWNS Magellan & MSCI Emerging Markets: worst drawdowns ( ) 0% % -20% -30% -24% -25% MSCI EM -40% -33% -42% -38% Magellan -50% -49% -60% -70% -60% -61% -58% -66% 09/03/ /09/ /09/ /10/ /10/2011 Trough of the MSCI EM Comgest s quality growth expertise in the emerging markets with reduced volatility and drawdowns Source: Comgest / Bloomberg, Data is EUR Simulated performances are not a reliable indicator of present or future performance. Indices are used for illustrative purposes only.

4 4 OUR APPROACH TO FLEXIBLE MANAGEMENT What do other flexible funds typically do? Why we are different Use of alternative asset classes: bonds, precious metals, short-selling Our expertise: invest in quality growth companies Use of options to hedge downside risk Options are expensive when we need them! Discretionary and therefore opaque risk-on / risk-off strategy Our research on companies must be the least affected by short-term noise

5 5 COMGEST S GEM FLEX CONCEPT Systemic equity market risk hedging, using solely equity index futures Net exposure to equity after hedging: 20% to 100% A flexible emerging markets equity fund Systematic hedging level strategy, indexed on emerging markets volatility Strict focus on quality growth companies

6 6 RISK DIVERSIFICATION DOES NOT ALWAYS MEAN RISK REDUCTION FX 3 sources of risk EM Equity market Alpha Comgest GEM Flex Dynamic equity exposure HEDGING Balanced Funds Diversification to other risks EM Equity market FX Equities Cash / Cash equivalents Active management of EM equity risk Alpha Bonds Precious metals / Commodities

7 EMERGING MARKETS: BONDS DO NOT ALWAYS HEDGE EQUITIES 2013 Emerging Markets Equities vs. EM Sovereign Bonds Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Bloomberg Emerging Sovereign Bond Index (USD) MSCI Emerging Markets (USD) Source: Bloomberg, 02/10/2013 Past performance is no guarantee of future results. Indices are used for comparison of past performance only.

8 Hedging approach

9 9 THE BIG PICTURE 100% EMERGING MARKETS QUALITY GROWTH PORTFOLIO CASH BASKET OF INDICES MOST CORRELATED TO THE EQUITY PORTFOLIO PORTION OF PROXY ACTUALLY SOLD WITH FUTURES NET EQUITY EXPOSURE: 20% TO 100% OF NAV 50% 0 EQUITY PORTFOLIO PROXY = HEDGING PORTFOLIO ACTUAL HEDGE NET PORTFOLIO Two steps run on a daily basis Step 1 Statistical calculation of the proxy based on portfolio of stocks Step 2 Systematic calculation of hedging level based on market volatility

10 10 PROXY COMPOSITION: Comgest Growth Emerging Markets Flex Daily rebalancing based on the portfolio holdings correlations with indices Euro Stoxx 1% Kospi (Korea) 2% Top 40 (South Africa) 3% FTSE (UK) 3% MexDer (Mexico) 9% MSCI Emerging Markets 30% Nifty (India) 10% Hang Seng 19% MSCI Taiwan 12% S&P % Date: 31/10/2014 Source: Comgest Majority of emerging market indices

11 11 CALCULATING THE HEDGING LEVEL Equity Exposure* in % of NAV 100% 80% 60% 40% 20% 0% VEM proprietary indicator *Net of hedge and cash equity exposure. Source: Comgest

12 12 HEDGING LEVEL INDEXED TO VOLATILITY Traditional Emerging Market volatility index Standard deviation of past MSCI Emerging Markets returns Average absolute returns Traditional volatility is typically too slow to respond to change The solution: Proprietary EM dynamic volatility indicator (VEM) Weighted average of absolute variations More weight on recent observations More weight on negative returns

13 13 ESTIMATING EMERGING MARKETS VOLATILITY Proprietary Estimate: as reactive as VIX but less noisy Historical EM Volatility Proprietary EM Volatility MSCI Emerging Markets Data between 01/01/2013 and 30/09/2013 Source: Comgest The proprietary EM volatility indicator is expected to be more reactive to market stress

14 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct HEDGING LEVEL SINCE LAUNCH Comgest Growth Emerging Markets Flex 70% 60% 50% 40% 30% 20% Average 25% 10% 0% Source: Quantam

15 15 COMGEST GROWTH EMERGING MARKETS FLEX Performance since inception in EUR* Since inception CGEM FLEX MSCI EM net 60% (11/07/2012, in %) EUR I Acc +CASH (EUR) 40% MSCI EM - NR Magellan C Annualised Performance Annualised Volatility Magellan outperformance (stock picking) Moderate average hedging level Outperformance 86% of Magellan s performance captured in bull market EM currencies vs. EUR Annualised volatility reduced by 12.7% compared to Magellan *Net performance data as at 31/10/2014. Past performance is no guarantee of future results. Indices are used for comparison of past performance only. Volatility is calculated using weekly performance data. Source : Factset / Comgest.

16 16 SOLID PROTECTION DURING THE LAST MARKET CORRECTION % % Aug 9-Aug 17-Aug 25-Aug 2-Sep 10-Sep 18-Sep 26-Sep 4-Oct 12-Oct 20-Oct 10 CGEM Flex I (left scale) MSCI Emerging Markets (left scale) Hedging Level (Right scale) Net performance data as at 22/10/2014. Past performance is no guarantee of future results. Indices are used for comparison of past performance only. Source : Factset / Comgest.

17 17 COMGEST GROWTH EM FLEX CHARACTERISTICS UCITS IV compliant fund launched on 11/07/2012 AUM as at 31/10/2014: EUR 94.5m Benchmark: 60% MSCI Emerging Markets NR (Eur) + 40% Cash (EUR) 2 available share classes: EUR I Acc Class EUR R Acc Class

18 18 CONCLUSION Investing in quality growth companies within the emerging market universe... An experienced and diverse investment team 20-year track record, 9.1% compound annual performance* A portfolio with equity holdings in-line with our flagship Global Emerging Markets funds... while reducing volatility Systematic, transparent and simple hedging method using only equity index futures Equity market exposure hedged between 0 and 80% Hedging basket of futures revised daily based on portfolio holdings and market stress *Data as of end October Comgest S.A. assumed full management of Magellan C on 31/12/1994. Magellan C was use during the backtesting phase.

19 Appendices

20 20 COMGEST GROWTH EMERGING MARKETS FLEX EUR R ACC Performance since inception* (net, in EUR) Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Comgest Growth Emerging Markets Flex EUR R Acc MSCI EM (net) 60% + Cash (Eur) 40% MSCI Emerging Markets Net Return COMGEST GROWTH EMERGING MARKETS FLEX EUR R ACC MSCI EM (NET) 60% + CASH (EUR) 40 % Since inception CGEM FLEX MSCI EM net 60% MSCI EMF (Emerging Markets ) - Net Return (25/09/2012, in %) EUR R Acc +CASH (EUR) 40% MSCI EM - NR Annualised Performance Annualised Volatility Magellan C *Performance data as at 31/10/2014. Past performance is no guarantee of future results. Indices are used for comparison of past performance only. Volatility is calculated using weekly performance data. Source : Factset / Comgest.

21 21 OUR HEDGING INSTRUMENTS: LISTED INDEX FUTURES Fixed universe of index futures Index Zone Stock Exchange Location Currency No OTC Futures S&P 500 USA Chicago USD DJ EURO STOXX 50 Europe Berlin EUR HANG SENG Hong Kong/China Hong Kong HKD KOSPI Korea Seoul KRW IPC Mexico Mexico City MXN TAIWAN MSCI Taiwan Singapour SGD NIFTY India Singapour SGD TOP 40 South Africa Johannesburg ZAR Settlement in cash Liquid instruments Prices available on Bloomberg Large geographical coverage FTSE 100 UK London GBP MSCI EMERGING MARKETS Emerging markets New York USD

22 22 COMGEST: KEY CONTACTS EQUITY PMs Vincent Strauss has over 35 years investment experience, 20 of which were gained with Comgest. He graduated from the HEC business school (Lausanne) and holds a PhD in Economics. He started his career at Crédit Commercial de France and was responsible for the firm's institutional operations. In 1982, he joined Banque Indosuez (Paris) as a portfolio manager supervising the Pacific Basin markets. He was a Director at Batif before moving on to Multifinance International. Vincent joined Comgest in 1994 and is today Chairman of Comgest Global Investors (the Comgest Group s holding entity) and CEO and CIO of the Comgest Group. Vincent is one of the lead portfolio managers of Comgest s Global Emerging Markets strategies and a Portfolio Manager within the firm s Global Equity strategy. Wojciech Stanislawski graduated from the Panthéon-Assas University (Paris) with a joint Master s Degree in Business and Financial Management. Following several internships with financial institutions in Poland, he joined Comgest s investment team in Wojciech has worked in Comgest s Global Emerging Markets team for the past 15 years, being named a Portfolio Manager of the flagship GEM Magellan fund in Wojciech is responsible for the daily supervision and management of the fund managers and analysts within the GEM equity investment team and he is one of the lead Portfolio Managers of Comgest s GEM, GEM Promising Companies, Latin American and Indian equity strategies. Emil Wolter graduated from the University of London with a BSc in Financial Economics. He has worked as a financial analyst since 1995 and as an analyst and portfolio manager on Asian and Emerging Markets equities since Initially an analyst and portfolio manager with Pictet Asset Management in London, Emil went on to head up the emerging markets franchise at Polar Capital Partners in both London and Singapore. More recently he was Head of Asian Equity Strategy in Singapore at the securities brokerage units of Royal Bank of Scotland and Macquarie. Emil joined Comgest in 2012 as Portfolio Manager covering Asian and Global Emerging Market equities.

23 23 COMGEST: KEY CONTACTS HEDGING STRATEGY Alexandre Narboni graduated from ENSAE (School of Economics, Statistics and Finance in Paris) and holds a Master s Degree in Financial Mathematics from the University of Columbia. He began his career in loan securitisation with Société Générale in New York before moving on to HSBC where he was responsible for the credit risk of hedge funds. He joined Comgest in 2009 and is a Portfolio Manager specialised in US equity. Charles Biderman completed a Masters in Engineering at the Institut National des Télécommunications in France, majoring in Finance and undertaking part of his studies in Buenos Aires. He joined Comgest s investment team in 2006 and is a Portfolio Manager in the Emerging Markets team, specialising in Latin American companies. Charles is a Portfolio Manager of Global Emerging Markets equity portfolios and is the co-lead Portfolio Manager of the firm s Latin American equity strategy, having been a key decision maker since the product s inception in 2009.

24 24 OPERATIONAL CHART A transparent division of responsibilities

25 25 IMPLEMENTING THE HEDGING METHODOLOGY ON A DAILY BASIS Comgest s resources remain focused on fundamental equity research Quantam brings its sophisticated calculation & trading capabilities: Best execution of futures through state-of-the-art trading platform (slippage minimisation, roll management) Data cleaning, data mining and statistical analysis Proprietary and adjustable systematic calculation programs Active in research regarding hedging techniques Quantam is responsible for calculating the proxy and placing the relevant futures orders on the different exchanges on behalf of Comgest Comgest s Middle Office performs post-trade compliance checks and NAV reconciliation with the fund Administrator Equity exposure may be raised at Comgest s discretion should a strong discrepancy occur between our views on the market volatility and the hedging strategy s output

26 26 OUR PARTNER: QUANTAM Who is Quantam? Independent Asset Management firm Proprietary futures trading activities since investment professionals based in Paris and Miami with solid quantitative background Quantam has developed proprietary software and methods which are able to screen and analyse, on a daily basis, huge tick-by-tick historical databases on all major electronic exchanges Quantam develops and implements advanced algorithmic techniques in order to continually fine tune and increase the robust nature of its tools Risk Control Quantam only operates on regulated and liquid markets Quantam does not practice OTC activities Exchange member & co-located at Registered with Affiliated with

27 27 IMPORTANT INFORMATION This document has been prepared for professional investors only and may only be used by these investors. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The contents of this document should not be treated as advice in relation to any potential investment. The securities discussed herein may not be held in the portfolio at the time you receive this presentation. Performance figures are provided net of all fees unless otherwise stated and are calculated on a time-weighted, total return basis. Funds which specialise in a particular region or market sector may entail higher risks than those which hold a very broad spread of investments. Past investment results are not necessarily indicative of future investment results. The value of all investments and the income derived therefrom can decrease as well as increase. This may be partly due to exchange rate fluctuations in investments that have an exposure to currencies other than the base currency of the Fund. Reference to market indices or other measures of relative market performance over a specified period of time are provided for your information only. Reference to an index does not imply that the portfolio will achieve returns, volatility or other results similar to the index. The composition of the index will not reflect the manner in which a portfolio is constructed. The information and any opinions have been obtained from or are based on information from sources believed to be reliable, but accuracy can not be guaranteed. No liability is accepted by Comgest in relation to the accuracy or completeness of the information contained in this document. The information in this document is not comprehensive and is presented for informational purposes only. All opinions and estimates constitute our judgment as of the date of this presentation and are subject to change without notice. Comgest does not provide tax or legal advice to its clients and all investors are strongly urged to consult their own tax or legal advisors concerning any potential investment. Before making any investment decision, investors are advised to check the investment horizon and category of the Fund in relation to any objectives or constraints they may have. Investors must read the latest Fund prospectus and the Key Investor Information Document ( KIID ), available at our offices and on our website Investors shall undertake to respect the legal, regulatory and deontological measures relative to the fight against money laundering, as well as the texts that govern their application, and if modified investors shall ensure compliance with the applicable texts. This material is in no case an offer for people living in a specific jurisdiction which does not authorize the distribution of the Funds mentioned herein. The investment professionals listed in this document are employed either by Comgest S.A., Comgest Asset Management International Limited, Comgest Far East Limited, Nippon Comgest Inc, Comgest Singapore Pte. Ltd. Comgest S.A. is regulated by the Autorité des Marchés Financiers (AMF). Comgest Far East Limited is regulated by the Hong Kong Securities and Futures Commission. Comgest Asset Management International Limited is regulated by the Central Bank of Ireland. Nippon Comgest Inc. is regulated by the Financial Service Agency of Japan (registered with Kanto Local Finance Bureau (No. Kinsho 1696)). Comgest Singapore Pte Ltd, created 18 August 2010, is a Licensed Fund Management Company & Exempt Financial Advisor (for Institutional and Accredited Investors) regulated by the Monetary Authority of Singapore.