Introduction to KBI Global Investors Water Equities

Transcription

1 Introduction to KBI Global Investors Water Equities Noel O Halloran, Chief Investment Officer, KBI Global Investors Amundi Investment Day London, 9 June 2017 Signatory: UN Principles For Responsible Investment 1

2 5 indisputable trends support the Water investment thesis Insufficient Supply Increasing Demand Increasing Regulation Increasing Infrastructure Spend Increasing Technology WATER 2

3 Universal acceptance that Water is a key global risk TOP 5 GLOBAL RISKS IN TERMS OF IMPACT st Asset price collapse Asset price collapse Asset price collapse Fiscal crises Major systematic financial failure Major systematic financial failure Fiscal crises Water crises Failure of climatechange adaptation Weapons of mass destruction 2nd Retrenchment from Globalisation (developed) Retrenchment from Globalisation (developed) Retrenchment from Globalisation (developed) Climate change Water supply crises Water supply crises Climate change Rapid spread of infectious diseases Weapons of mass destruction Extreme weather events 3rd Slowing Chinese economy (<6%) Oil & gas price spike Oil price spikes Geopolitical conflict Food shortage crises Chronic fiscal imbalances Water crises Weapons of mass destruction Water crises Water crises 4th Oil & gas price spike Chronic disease Chronic disease Asset price collapse Chronic fiscal imbalances Diffusion of weapons of mass destruction Unemployment & underemployment Interstate conflict with regional consequences Large-scale involuntary migration Major natural disasters 5th Pandemics Fiscal crises Fiscal crises Extreme energy price volatility Extreme volatility in energy & agriculture prices Failure of climate change adaptation Critical information infrastructure breakdown Failure of climatechange adaptation Severe energy price shock Failure of climatechange adaptation 3 Source: World Economic Forum, Global Risks 2017

4 Why invest in Water now? More Investment Faster Growing Better Companies Stronger Tailwinds Government spend on Water/infrastructure is picking up globally Portfolio earnings growth faster than the market High profile & highly publicised pollution and quality problems leading to more regulation and enforcement Better, more sustainable companies emerging Long-term water spend drivers are becoming stronger over time 4 The views expressed are those of KBI Global Investors. We do not represent that this information is accurate or complete and it should not be relied upon as such.

5 Massive increase in water infrastructure spend required $7.5trn Required in global infrastructure spend by 2030 EQUAL TO >2.5x The GDP of the United Kingdom 5 Source: McKinsey & Co, Bridging Global Infrastructure Gaps, KBIGI, Thomson Reuters.

6 KBI has a unique way of building a portfolio $500bn market spread across multiple sectors Stocks in universe 158 Stocks in portfolio 45 Weighted avg. market capitalisation $7.8bn Utilities Infrastructure Technology Regulated utilities Non-regulated utilities Emerging markets utilities Pipes, plumbing Pumps and fluid control Irrigation equipment Construction Engineering and consulting Analytical equipment Water treatment Chemicals Meters 6 The listed stocks are a representative sample of stocks that may or may not be in the strategy. Size or profitability have not been used in determining the selection of stocks and their inclusion should not be construed as a stock recommendation.

7 Stock example - Pure Technologies Water leakage a big problem for ageing infrastructure Average leakage rate globally of 15-20% 1 Smart Ball acoustic technology employed to identify leaks Preventative measure of detecting leak & replacing pipe before it bursts Pure s infrastructure diagnostics save utilities money: $93k/km to assess & address versus capital replacement costs of $1.8 million/km 1 Source: The World Bank, KBI Global Investors analysis. The listed stocks are a representative sample of stocks that may or may not be in the strategy. Size or profitability have not been used in determining the selection of stocks and their inclusion should not be construed as a stock recommendation. 7

8 Stock example - Xylem Cities need to address more frequent and severe weather events In the immediate wake of Hurricane Sandy, Xylem pumps were deployed in hard-hit locations like Belmar, New Jersey 11 billion gallons of raw and partially treated sewage spewed into streets and waterways NY & NJ will spend $4.5 billion on plant repairs Catalyzes a process of awareness and planning that leads to spend over multiple years Sources: Climate Central, Sewage overflows from Hurricane Sandy. The listed stock is a representative sample of stock that may or may not be in the strategy. Size or profitability have not been used in determining the selection of stock and its inclusion should not be construed as a stock recommendation. 8

9 KBIGI Water - a diversified global portfolio Offense vs. Defence 44% Offense Water Segments Technol ogy, 33% Infrastructure, 28% China/H ong Kong, 7% Company Locations Other, 16% US, 43% UK, 11% Defence (6 year Offense min of 38%) Offense (6 year Offense max of 76%) Utilities, 38% France, 11% Canada, 12% Geographic Exposure* Portfolio Drivers Market Cap, USD N. America (27-56%) UK (6-18%) 45% 13% 27% 14% 2% EM (19-32%) Europe, ex-uk (11-29%) Japan (1-12%) Reg'd - other 4% Contract ops 22% Reg'd - UK 8% Reg'd - US 4% Oil/ commdty 4% Opex 9% Resi const. 10% Capex 11% Non-resi const 5% Gov't spending 23% <$0.4B $0.4-$1.5B 10% 16% $1.5-$7.5B 43% >$15B 11% $7.5-$15B 20% 9 Source: KBI Global Investors Analysis, 31 st March 2017, *Min & Max based on 5 year average, based on look-through revenues

10 Investing in Water equities has generated superior returns 3.5% ANNUALISED EXCESS RETURN Water Strategy Performance vs MSCI AC World NR index KBI Water $380 VS $216 Benchmark 10 Source: KBI Global Investors/Datastream, based on monthly gross performance from January 2001 to 30 th April KBIGI returns are gross of fees in USD at 30/04/2017. Annualised Excess Return is calculated (in US$) since inception, inception date is 5th December Superior returns based on annualised excess return of 3.5% p.a. since inception (in US$). MSCI benchmark returns assume the reinvestment of dividends after the deduction of withholding taxes. See performance disclaimer at end of presentation for further information. See disclaimers for description of index information.

11 KBI has a specialist experienced Water team The KBI team is an innovator in water investing Key staff Noel O Halloran Title Chief Investment Officer Experience (years) In firm (years) Catherine Ryan Senior Portfolio Manager 16 8 Specialised in the "water" theme for more than 15 years Matt Sheldon Martin Conroy Senior Portfolio Manager 14 5 Investment Analyst A long-term outlook to identify the best positioned companies in each sector Eoin Fahy Ultan O Kane Chief Economist, Investment Strategist Trader

12 KBI Global Investors a global specialist Diversifying alpha generating solutions and a global footprint 87.5% shareholder Founded in 1980: asset management company for institutional clients. 12% 11% Headquartered in Dublin, Ireland with office in Boston. An international team of 63 people. 45% 49% 15% 17% Global client base with mandates in the United Kingdom, Europe, North America and Asia. Strong growth in assets under management in the last three years, coming entirely from external institutional clients. 12 Global AUM as at 31 st March 2017.

13 TAKE THE PLUNGE 13

14 Additional Slides 14

15 Key summary points: Water Investment Thesis: Strategies Access: Strategies Deliver: KBI Global Investors: Inadequate supply: < 1% of water is available for use 1 Increasing demand: growing 40% by Increasing regulation and government support Increasing investment in infrastructure: $7.5 trillion required through 2030 ₃ Increasing investment in technology A $500 billion global market Infrastructure spending Natural resource scarcity US equity exposure M&A Small/mid cap stocks Sustainable solution providers Diversification: very small overlap with MSCI World Moderate risk and consistent performance Active management A broad opportunity set of companies & end markets High conviction stock portfolio Outperformed global equities 12 of last 16 years ₄ Experienced specialist team Early mover in Water investing Managing this strategy since ₁ Water, Our Thirsty World, National Geographic, April 2010; ₂ McKinsey Global Institute, Resource Revolution: meeting the world s energy, materials, food, and water needs, November 2011; ₃ McKinsey &Co Bridging Global Infrastructure Gaps June 2016, ₄ Based on Water strategy, vs MSCI AC World index in USD,

16 Attractive valuations versus long term history KBI Global Investors Water vs. MSCI AC World: Valuation Forward P/E ratio (bottom up estimates) Relative Valuation vs. ACWI Strategy 23% avg. premium MSCI AC World Still below average relative valuation versus the MSCI AC World Index KBIGI expecting double digit, above market EPS growth in 2017 & 2018 Increasing confidence in earnings forecasts within the KBIGI Water Strategy Source: KBI Global Investors, 31 st March See disclaimers for description of index information. ACWI index is the MSCI All Country World Index. The views expressed are those of KBI Global Investors. We do not represent that this information is accurate or complete and it should not be relied upon as such. 16

17 GLOBAL WATER COMPOSITE $ Water Performance Strategy: Water Reporting Date: 31 March 2017 Benchmark: MSCI AC World (NR) Index Term of Strategy (Yrs): Strategy Inception: 3 March 2006 Return Type: Gross Base Currency: EUR Reporting Currency: USD Composite Benchmark Relative Calendar Years Composite Benchmark Relative Period % % % Year % % % Quarter to date * One Year Three Years pa Five Years pa Ten Years pa Note A GIPS composite presentation to the latest quarter * end is attached as an appendix * Partial year return 17 Source: KBI Global Investors, Datastream and Bloomberg. Returns are gross of fees in USD at 31/03/2017 using GIPS Composite. See disclaimer for further information. MSCI AC World Net Return benchmark returns assume the reinvestment of dividends after the deduction of withholding taxes. See disclaimers for description of index information.

18 Conviction-based investment process Step 1 Universe Creation Identify solutions providers Ensure sufficient purity (relevance) Pure Plays: 50% or more of relevant revenue Industry Leaders: If <50%, needs to be >10% and be a leader in their niche Approval required by the Responsible Investing committee Step 2 Intensive Research Specialist knowledge: decades of experience per team and extensive industry contacts Fundamental research: trade shows, conferences, plant visits, management meetings, earnings models Key valuation tool: proprietary upside/downside model Step 3 Conviction-Based Portfolio Best ideas derived from most upside to probability-adjusted fair value Largest positions reflect strength of view and liquidity Portfolio structuring considerations are overlaid to manage risk Purity, liquidity, volatility, quality, and diversity Step 4 Ongoing Challenge Maintain and develop industry knowledge through industry trade shows, investor conferences, company meetings, and site visits Work with Natural Resource team on our 5 Weekly Cycle to update, share insights, and challenge 18 18

19 Key Fund information Fund Water Water Water Inception of Strategy December 2000 Fund Share Class and its inception date A Full Track Record 05/12/2000 H Institutional 09/03/2012 I Retail 16/03/2012 Name of Fund/ Management Co. KBI Institutional Fund ICAV Promoter/Investment Manager KBI Global Investors Ltd. Custodian Northern Trust Fiduciary Services (Ireland) Limited Sub-Fund Base Currency USD Share Class Base Currency & Name EUR A EUR H EUR I Share Category Accumulation Accumulation Accumulation ISIN Code IE00B2Q0L939 IE00B64V3N43 IE00B5630V84 BLOOMBERG Ticker KBWATEA KBIWATH KBIWATI Minimum initial Investment Not open to investment; provides long term track record None None Frequency of NAV calculation Cut-Off Time for Dealing Daily. NAV calculated using 12 midday valuation point Dublin Dealing days before 11am (Dublin time) Subscription Fee 0% 0% 0% Maximum Annual Management Fee 0% 0.60% 1.80% Annual Custodian & Administration Fee 0.113% 0.113% 0.113% Performance Fee Redemption Fee Minimum recommended investment horizon None None 5 years EUR A share class should be used to source the long term track record as these funds have track records that go further back than inception of the relevant UCITS share class 19

20 KBI Global Investors Natural Resource team biographies Noel O'Halloran, B.E., C.DiP A.F., A.S.I.P, Director - Chief Investment Officer 29 years industry experience, 25 years with the firm Noel joined the firm in 1992, was promoted to Head of Equities in 1996 and was appointed CIO in As CIO, he has overall responsibility for investment process and performance of the firm s assets under management across the various asset classes and specialist equity portfolios. The firms team of investment professionals report to Noel. He has specifically managed equity portfolios across Irish, European, Asian & US equity markets. Prior to joining the firm, Noel worked for Irish Life Investment Managers as a US Equity Asset Manager. He is an engineer by profession having graduated with 1st Class honours degree from University College Cork. He is a member of the CFA Institute, the Society of Investment Analysts in Ireland and the UK Society of Investment Professionals. Matthew Sheldon, CFA, BS, MBA Senior Portfolio Manager 15 years investment experience, 6 years with the firm Matt is a senior portfolio manager on the Natural Resource equity team and is responsible for the development of investment strategy as well as the day-to-day management of the Water strategy. Matt joined the team in April He has extensive specialist knowledge and experience in investing in the water sector, including both global public listed equities and private equity. Prior to joining the firm, Matt worked at Water Asset Management where he was an Investment Analyst and at Wedge Capital Management where he was an Equity Analyst. Matt graduated summa cum laude from Tufts University with a BS in Chemical Engineering, holds an MBA in Finance from Columbia Business School & is a CFA charterholder. 20

21 KBI Global Investors Natural Resource team biographies Catherine Ryan, BA International Business Senior Portfolio Manager 17 years investment experience, 9 years with the firm Catherine is a senior portfolio manager on the Natural Resource equity team and is responsible for the development of investment strategy as well as day to day management of the Water strategy. She joined the Natural Resource team in October 2009 and has been at the firm since 2008 when she joined to manage the firm s Irish equity portfolios. She has 12 years of investment management experience. Catherine previously worked for various fund management companies including Seneca Capital Management in San Francisco, Goodbody Stockbrokers & Pilot View Capital in Ireland. Catherine holds a BA International Business from Dublin City University and is a registered representative of the Irish Stock Exchange. Martin Conroy, BA Economics & Legal Science, Masters in Economics (Policy & Planning) Investment Analyst Water 13 years investment experience, 13 years with the firm Martin joined the Asset Management team in November 2014 as an Investment Analyst. Previously he worked in the Portfolio Structuring unit since joining the firm in 2004, where he undertook trade allocations, FX trading & cash management of portfolios. Martin graduated from National University of Ireland (Galway) in 2004 with a Masters in Economics (Policy & Planning) having previously completed a BA in Economics & Legal Science. After completing his studies Martin worked as Economic Researcher with Dublin City Development Board. Martin is a member of the CFA Institute & passed Level 1 of the CFA exam in December

22 Disclaimers EUROPE: KBI Global Investors Ltd. is regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority in the UK. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. IMPORTANT RISK DISCLOSURE STATEMENT : This material is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase any security, product or service including any group trust or fund managed by KBI Global Investors Ltd., or any of its affiliates (collectively, KBI Global Investors ). The information contained herein does not set forth all of the risks associated with this strategy, and is qualified in its entirety by, and subject to, the information contained in other applicable disclosure documents relating to such a strategy. KBI Global Investors Ltd s investment products, like all investments, involve the risk of loss and may not be suitable for all investors, especially those who are unable to sustain a loss of their investment. The views expressed in this document are expressions of opinion only and should not be construed as investment advice. Past performance may not be a reliable guide to future performance and the value of investments may fall as well as rise. Investments denominated in foreign currencies are subject to changes in exchange rates that may have an adverse effect on the value, price or income of the product. Income generated from an investment may fluctuate in accordance with market conditions and taxation arrangements. Performance for periods of more than 1 year is annualized. All MSCI data is provided as is. In no event shall MSCI, its affiliates, or any MSCI data provider have any liability of any kind in connection with the MSCI data. No further distribution or dissemination of the MSCI data is permitted without MSCI s prior express written consent. Net total return indices reinvest dividends after the deduction of withholding taxes, using (for international indices) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. A composite presentation is available upon request. The products mentioned in this Document may not be eligible for sale in some states or countries, nor suitable for all types of investors. In some tables and charts, due to rounding, the sum of the individual components may not appear to be equal to the stated total(s). GIPS Performance Disclaimer: Our firm claims GIPS compliance and is annually verified by an independent verification firm to be so. The verification report from our verifier and our GIPS composite presentation are available upon request. The performance record disclosed here is that of the firm s composite for this strategy. Natural Resource Strategies Europe: Energy Solutions Representative Strategy Performance Disclaimer: Returns up to 30/04/08 are based on a Belgian Fund which followed the Energy Solutions Strategy and was managed by KBI Global Investors. Returns from 01/05/08 are based on the KBI Global Investors Energy Solutions Strategy. Water Representative Strategy Performance Disclaimer: Returns up to 30/04/08 are based on a Belgian Fund which followed the Water Strategy and was managed by KBI Global Investors. Returns from 01/05/08 are actual returns from the KBI Global Investors Water Strategy. The S-Network Global Water Indexes are calculated, distributed and marketed by S-Network Global Indexes, LLC which have been licensed for use. All content of the S-Network Global Water Indexes 2011 are the intellectual property of S-Network Global Indexes, LLC. AGRI Representative Strategy Performance Disclaimer: Returns since inception are based on the KBI Global Investors Agri Strategy. GRS Representative Strategy Performance Disclaimer Returns since inception to 28/02/2015 are based on a simulated portfolio using the combined return of three representative strategies of KBI Global Investors, i.e. Water, Agribusiness and Energy Solutions, each weighted at 1/3 of the portfolio, rebalanced quarterly. Returns from 01/03/2015 are actual returns from the GRS Strategy. Simulated performance is hypothetical and is provided for informational purposes only to indicate historical performance had the strategy been available over the relevant time period. It is not a reliable guide to future performance. Water returns since inception are based on the KBI Global Investors Water Strategy. Agribusiness returns since inception are based on the KBI Global Investors Agri Strategy. Energy Solutions returns since inception are based on the KBI Global Investors Energy Solutions Strategy. Global Equity Strategies Europe: KBIGI Global Equity Representative Strategy Performance Disclaimer: Returns from 01/06/03 to 31/07/04 are based on a Belgian Fund which followed the KBI Global Investors Global Equity Strategy and was managed by KBI Global Investors. Returns from 01/08/04 are actual returns from the KBI Global Investors Global Equity Strategy. KBIGI Global Developed Equity Representative Strategy Performance Disclaimer: Returns from 01/06/03 to 31/07/04 are based on a Belgian Fund which followed the KBI Global Investors Developed Equity Strategy and was managed by KBI Global Investors. Returns from 01/08/04 are actual returns from the KBI Global Investors Developed Equity Strategy. KBIGI Emerging Markets Equity Representative Strategy Performance Disclaimer: Returns from 01/08/10 are actual returns from the KBI Global Investors Emerging Markets Equity Strategy. KBIGI Emerging Markets ESG Equity Representative Strategy Performance Disclaimer: Returns since inception are based on the KBI Global Investors Emerging Markets ESG Equity Strategy. KBIGI North America Equity Representative Strategy: Returns are gross, in EUR. Returns from 01/11/13 are actual returns from the KBI Global Investors North America Strategy. Returns since inception to 31/10/13 are based on the KBI Global Investors North America Developed Equity component of a segregated account (KBI Global Investors Developed Equity Strategy) managed by KBI Global Investors to an identical process applied to all KBI Global Investors Global Equity Strategies. KBIGI Global Developed Equity Representative Strategy Performance Disclaimer: Returns from 01/06/03 to 31/07/2004 are based on a Belgian Fund which followed the KBI Global Investors Developed Equity Strategy and was managed by KBI Global Investors. Returns from 08/01/2004 are actual returns from the KBI Global Investors Developed Equity Strategy. KBIGI Global ESG Equity Representative Strategy Performance Disclaimer: Returns since inception are based on the KBIGI Global ESG Strategy. KBIGI ACWI Performance Disclaimer: KBI Global Investors All World Equity Strategy Performance Returns from 01/08/11 are actual returns from a KBI Global Investors segregated portfolio managed in line with the KBI Global Investors All World Equity Strategy. KBIGI European Equity Representative Strategy Performance Disclaimer: Returns from 01/06/15 are actual returns from the KBI Global Investors Pan European Equity Strategy. Returns from 31/07/04 to 31/05/15 are based on the Pan European equity component of the KBI Global Investors Developed Equity Strategy managed by KBI Global Investors to an identical process applied to all KBI Global Investors Global Equity Strategies. KBIGI Global Developed Equity Representative Strategy Performance Disclaimer: Returns from 01/06/03 to 31/07/2004 are based on a Belgian Fund which followed the KBI Global Investors Developed Equity Strategy and was managed by KBI Global Investors. Returns from 08/01/2004 are actual returns from the KBI Global Investors Developed Equity Strategy. 22

23 GIPS composite presentation Water 23