APM Microfinance Webinar

Transcription

1 APM Microfinance Webinar Microfinance Investment Insights Arman Vardanyan, Head of Microfinance & Christoph Eckart, Portfolio Manager

2 Microfinance works 80 % of all businesses in developing countries owe their existence to microcredits In the last 40 years approx. half a billion people have used microcredits Source: 2

3 Absolute Portfolio Management 2006: company foundation of Absolute Portfolio Management ( located in Vienna focus on absolute return products and microfinance launch of the first microfinance fund Dual Return Fund Vision Microfinance launch of microfinance platform : launch of the second microfinance fund Dual Return Fund Vision Microfinance Local Currency First microfinance fund worldwide which distributes loans solely in local currencies on an unhedged basis 3

4 Overview Microfinance market review Investment outlook Social impact news from Ecuador and Mexico 4

5 The Market: MFI Loan portfolio Strong and steady growth of MFIs, Ø 20% in 2012, regional differences 5 Source: SYM50, Symbiotics

6 The Market: Portfolio quality PAR>30 days: stable throughout Source: SYM50, Symbiotics

7 The Market: Leverage Slightly increased financial leverage, sound mix of funding sources 7 Source: SYM50, Symbiotics

8 The Market: Profitability Profitability remains stable in most regions, better controlled operational expenses 8 Source: SYM50, Symbiotics

9 The Market: Rates High liquidity levels, strong competition => downward pressure on rates MFI Senior Debt (global Investment grade (>BBB-), USD, all maturities) Source: Symbiotics 9

10 The Market: MIV assets MIV portfolio annual growth (~16% in 2012) higher than in 2010 and 2011 Luxembourg Microfinance Investment Vehicles (MIVs) 10 Source: Symbiotics

11 The Market: MIV performance The highest annual return (in USD: 3.58% in 2012) since the pre-crisis levels SMX USD - Symbiotics Microfinance Index - U.S. Dollars 11 Source: Symbiotics

12 6 years Vision Microfinance Vision Microfinance selects its partners and investments for social and sustainable principles. The funds are monitored by independent authorities such as LuxFLAG and CGAP. 12 So far more than 344 m USD have been handed out in the form of 358 promissory notes to 161 different MFIs in 41 countries. More than micro-entrepreneurs have been financed.

13 Generating Alpha 13 Source: APM, Bloomberg, Symbiotics

14 Cross-border investment in microfinance Hard currency lending remained prevalent in the past. Now the trend is for more demand in LC financing 14 Source: CGAP

15 Growth potential Emerging Markets Growth in emerging market and developing economies is on track to build to 5.5 percent in Global growth is projected to increase during 2013, as the factors underlying soft global activity are expected to subside. However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States, according to forecasts from the Washington-based International Monetary Fund. Emerging-market public debt levels are expected to decline as a share of GDP, toward 30 percent, in contrary to the advanced economies, where public debt is in excess of 100 percent of GDP and rising, IMF estimates show. Source: IMF (01/2013) 15

16 Yields of EM LC Bonds with maturity of two years 9,0% 8,0% 8,0% 7,0% 6,7% 6,0% 5,8% 5,0% 4,0% 3,0% 5,2% 5,0% 4,9% 4,6% 3,9% 3,1% 2,9% 2,9% 2,8% 2,8% 2,0% 1,0% 0,0% 16 Source: Bloomberg, Oct. 2012

17 Yields of LC micro credits with maturity of one year 18,0% 16,0% 16,8% 15,3% 15,0% 15,0% 14,0% 13,8% 14,0% 12,0% 13,0% 12,0% 12,1% 10,0% 10,6% 10,6% 10,6% 10,5% 10,3% 9,9% 9,6% 8,0% 6,0% 6,3% 4,0% 2,0% 0,0% 17 Source: Dual Return Fund Portfolio

18 Vision Microfinance Local Currency enables investors to have an involvement in the microfinance industry in local currency promotes a sustainable delivery of financial services to the unbanked people aims at investing in microfinance either directly or indirectly: almost 100 % promissory notes in local currency follows a conservative approach: no investments in equity of MFIs no leverage is transparent and actively takes part in initiatives to safeguard the social impact and sustainable work of MFIs Certificated by Certified by 18

19 Vision Microfiance Local Currency Region Allocation Country Allocation 19

20 Currency Allocation 01/2013 (VMF Local Currency) Weighting YTD 2013 $ ,81 9% -1% $ ,13 8% 0% $ ,91 7% -1% $ ,48 7% 2% $ ,85 7% 2% $ ,22 6% 0% $ ,96 6% 0% $ ,26 6% 1% $ ,24 6% 0% $ ,44 6% 0% $ ,65 6% -1% $ ,03 5% 0% $ ,24 3% 1% $ ,67 3% 0% $ ,51 3% 0% $ ,43 3% -2% $ ,22 3% -1% $ ,82 2% -3% $ ,54 2% 1% $ ,09 2% -2% 20 Source: Fund Portfolio Vision Microfinance Local Currency

21 MFIs key indicators (VMF Local Currency) Data as of 01/2013 Dual Return Fund Vision Microfinance LC Benchmark SYM 50 Index Total assets of a MFI (m USD) 114,51 235,00 Loan portfolio (m USD) 104,18 175,00 Number of clients of a MFI Average micro-loan of a MFI (USD) Debt/equity ratio 3,81 4,76 Portfolio yield 35% 30% Borrowing costs ~ 12% - Operational expense ratio 15% 17% Operational self-sufficiency ratio 124% 120% Return on equity 19% 17% Portfolio at risk > 30 days 2,23% 3% Write-off ratio 1,0% 1,4% 21 Source: Symbiotics, Fund Portfolio Vision Microfinance Local Currency

22 Performance VMFLC versus Emerging Market Debt Vision Microfinance Local Currency USD + 14,47% PIMCO Emerging Local Debt Fund + 17,39% 22 Source: Bloomberg, Symbiotics

23 Overview Microfinance market review Investment outlook Social impact news from Ecuador and Mexico 23

24 Microfinance asset class The attractiveness of microfinance stays strong, because of stabilized market and healthy MFI indicators increasing importance of emerging and frontier economies the search for new growth markets the new drive for global sustainability 24

25 Market Outlook 2013 Growth in emerging and frontier markets fuels growth in microfinance Further progress in the MFI performance expected Regional differences will persist, but to a lesser extent Risk of over-indebtedness will exist, market has to be monitored carefully High liquidities existing in some markets can drive rates downwards Political interference risk will remain a significant risk Improvements in social performance Microfinance as part of a broader Impact investing agenda 25

26 Overview Microfinance market review Investment outlook Social impact news from Ecuador and Mexico 26

27 Country Visits Ecuador and Mexico Quito Ecuador, October 2012 FINCA Ecuador Fundación Espoir INSOTEC Fundación Alternativa Mexico City, Villaflores and Zinacantepec Mexico, November 2012 Solución Asea Forjadores 27

28 Country Visit: Ecuador, October 2012 Presidential and parliamentary elections are scheduled for February 2013 (Sunday,17 th ). Experts forecast - the President Rafael Correa will be reelected. Strong macroeconomic indicators, though the economy is highly dependent on the oil price. Well regulated microfinance market. A new law aiming to regulate the credit bureaus has been approved in Interest rate cap on microfinance lending: 30.50% Several taxes on international payments affect the MFI s international funding environment. 28

29 Fundación Alternativa - Ecuador Fundación Alternativa para el Desarrollo NGO founded in 1991 and located in Quito Total Assets of 12.7 mil USD Relationship with Dual Return Vision Microfinance since 2010 Currently investments of USD with the NGO Fundación Alternativa follows the mission to improve the quality of life and foster financial inclusion among vulnerable people, their families and communities through: Education Health services Insurance Women empowerment 29

30 Country Visit: Mexico, November 2012 Presidential and parliamentary elections took place on July 1 st 2012 resulting in the election of Enrique Peña Nieto (PRI ) and replacing Felipe Calderón (PAN ) as President. Microfinance demand is getting stronger, but security issues are still problematic. North-south divide regarding the impact of organized crime. Currently Dual Return has investments of 1 mil USD in Mexican Pesos in the country. 30

31 Solución Asea and Forjadores - Mexico Villaflores in the state of Chiapas: Solución Asea Founded in 2002, relations since 2011 Total assets of 16 mil USD Currently investments of 1 mil USD in MXN Zinacantepec, Estado de Mexico: Forjadores Founded in 2005 now part of Grupo ACP Total assets of 8 mil USD Currently no exposure 31

32 Contact Absolute Portfolio Management GmbH Wallnerstraße 3/ Vienna Austria Phone: info@absolutepm.at Web: The greatest good you can do for another is not just to share your riches but to reveal to him his own. Benjamin Disraeli 32

33 Legal Disclaimer This presentation is for general information only. It does not constitute any recommendation to buy or sell nor offer any investment advice. It merely summarises the key characteristics of the fund. The content of this document is not a substitute for investment advice or other consultations. The full details of the fund can be found in the simplified or full prospectus, supplemented by the respective latest audited annual reports and the respective semi-annual reports ( if these are more recent than the last annual reports). These previously mentioned documents are the only binding basis for the purchase of fund shares. They are available for free in electronic or printed form at Axxion S.A., 1B, rue Gabriel Lippmann, L-5365 Munsbach, Luxemburg, Phone: , Investment funds are subject to currency fluctuations which can lead to a loss of the invested capital to the point of a total loss. The risk disclosure statement is explicitly referred to in the fund prospectus. The information in this presentation is to be used under one s own responsibility only. Prior to an investment decision, potential investors are strongly recommended to read the full prospectus, the annual report and the semi-annual report (where applicable) and to consult a financial advisor, lawyer and tax accountant. All data and information has been compiled with utmost care and we rate the used sources as trustworthy. However, we cannot guarantee their completeness and correctness. No liability is accepted for any and all liability for investment losses or other damages resulting from investment decisions based on this information. Past performance is not a guide to future performance. 33