Smaller Companies Webinar

Transcription

1 Smaller Companies Webinar 4 July 2018 Alan McCarthy

2 July 2018 Aberdeen Standard Investments This communication is intended for investment professionals only and must not be relied on by anyone else. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

3 Smaller Companies Graham McCraw

4 Standard Life Investments Smaller Companies Dedicated Smaller Companies team with 4.8bn AUM Bottom-up fundamental approach assisted by proprietary screening tool Proprietary quantitative screening tool (the Matrix) analyses full investment universe Matrix is a multi-factor model: Quality, Growth, Momentum and Value Fundamental analysis of companies, with a focus on high quality companies that have strong earnings and sustainable growth prospects Smaller Companies team conduct 400+ company meetings per year Concentrated, diversified portfolio of best ideas that are held for the long term Portfolio characteristics High active share High stock specific risk Quality, growth and momentum bias Buying tomorrow s larger companies today 3

5 The Small Cap process UK, Europe, Global 2000 Standard Life Investments UK Smaller Companies Inst Acc Numis Smaller Companies ex Investment Trust TR FTSE 100 TR 1,450% UK 20 years % 172% Europe 10 years SLI SICAV European Smaller Companies D EUR FTSE Developed Europe Small Cap TR FTSE Developed Europe TR 223% 97% 45% Global 6 years 250 SLI Global Smaller Companies Inst Acc MSCI ACWI Small Cap TR MSCI AC World TR % 143% 123% Source: Lipper Investment Manager, base currency, 31 May Standard Life Investments claims compliance with the Global Investment Performance Standards (GIPS ). The fund specific data presented above is supplementary information to the Mutual Funds UK Smaller Companies GIPS composite report, which is enclosed in the Appendix for your reference Investment process the same for all geographies 4

6 Aberdeen Standard Investments Smaller Companies team UK Smaller Companies 20 year track record Top decile since launch Harry Nimmo Abby Glennie Information ratio of 0.54 Andrew Paisley Anjli Shah European Smaller Companies 10 year track record Top decile since launch Information ratio of 0.95 Alan Rowsell Kirsty Desson Global Smaller Companies 6 year track record Top decile since launch Information ratio of 0.64 Laura Odikanekwu Imogen Harris Custodian of the Smaller Companies Regional Stock Selection Tools Matrix Source: Aberdeen Standard Investments, 31 March UK Smaller companies from 01/12/98. Benchmark is Numis SC ex IT. European Smaller Companies from 01/10/07. Benchmark is FTSE Developed Europe Small Cap. Global Smaller Companies from 01/02/12. Benchmark is MSCI ACWI Small Cap 5

7 Consistent application of process Concentrated portfolios Stock specific risk the primary driver of returns Lower risk approach Predictable performance profiles Fund Number of stocks Active share Stock specific risk Period beta Downside capture Upside capture UK 52 88% 65% % 103% Europe 47 95% 82% % 112% Global 52 99% 66% % 98% Period beta, downside capture, upside capture since respective launch dates; UK 01 December 1998, Europe, 01 October 2007, Global 01 February Source; Aberdeen Standard Investments, Axioma, 31 March 2018 Predictable alpha within a broader portfolio 6

8 Why Global Smaller Companies?

9 Global Smaller Companies Market cap Number of companies 85% Large 15% Small 70% Small 30% Large Source: * Factset, Thomson Reuters DataStream, Bloomberg, 01 January 2000 to 31 March 2018 in GBP Small caps provide a large and under-researched asset class Market cap No. of companies Performance* No. of analysts MSCI AC World Index 85% % 22 MSCI AC World Small Cap Index 15% % 6 8

10 Why Global Smaller Companies? 1. Outperforming asset class 2. Active management has the potential to lower risk 3. Diversification benefits Proven outperformance over the long term 9

11 Smaller companies generate higher returns The small cap effect continues to work MSCI AC WORLD MSCI AC WORLD SMALL CAP % % Source: Thomson Reuters DataStream, 01 January 2000 to 31 March 2018 in GBP 10

12 Are smaller companies higher risk? Small caps are slightly more volatile Annualised volatility (Jan 01 Dec 17) 25% Larger companies Smaller companies 20% 15% 10% 5% 0% ACWI USA Europe x UK UK Japan Pacific ex Japan EM MSCI All Country World Index and MSCI All Country World Small Cap Index. Source: Aberdeen Standard Investments, 01 January 2001 to 31 December 2017 in GBP 11

13 % return per % unit of risk Better risk-adjusted returns Smaller companies deliver superior risk-adjusted returns Risk adjusted return (Jan 01 Dec 17) Larger companies Smaller companies 0.00 ACWI USA Europe x UK UK Japan Pacific ex Japan EM MSCI All Country World Index and MSCI All Country World Small Cap Index. Source: Aberdeen Standard Investments, 01 January 2001 to 31 December 2017 in GBP 12

14 Return Risk / return of MSCI equity indices Global smaller companies are not as risky as you think 12.0% 10.0% Global Small Cap Pacific ex Japan Emerging Markets 8.0% 6.0% 4.0% UK USA Global Large Cap Europe ex UK 2.0% Japan 0.0% 12.0% 14.0% 16.0% Risk 18.0% 20.0% 22.0% Source: Standard Life Investments, MSCI equity indices data, 01 January 2001 to 31 March 2017 (in GBP) 13

15 Downside resilience Quality companies are more resilient in down markets Months since inception when global equities fell by 2%+ % Large Cap Small Cap Fund Aug 15 Jun 15 Aug 13 May 12 Mar 18 Jan 14 Jun 13 Apr 12 Jan 16 Sep 15 Source: Aberdeen Standard Investments, 01 February 2012 to 31 March 2018 Source: Aberdeen Standard Investments, gross monthly returns of fund vs MSCI AC World, MSCI ACWI Small Cap in 10 largest negative months for MSCI AC World 14

16 Return % p.a. Diversification benefits % 50% 40% 60% 60% 40% 70% 30% 80% 20% 30% 70% 20% 80% 90% 10% % 90% Volatility % p.a. 80% 20% 60% 40% 40% 60% 100% 100% 20% 80% 100% MSCI AC World MSCI ACWI Small Cap Standard Life Investments Global Smaller Companies Fund* Source: Morningstar Direct, 19 January 2012 to 31 March

17 The US market is more than the S&P % % +49.0% +9.8% +3.0% 75 S&P 500 RUSSELL 2000 GRUBHUB ALIGN TECHNOLOGY ABIOMED Source: Thomson Reuters DataStream, 01 January June

18 European Smaller Companies

19 European Small Caps, more domestically focussed Smaller companies are more geared into European growth story Standard Life Investments European Smaller Companies Revenues Europe Large Caps Revenue 10% 3% 5% 20% Europe Americas 17% 49% Europe Americas 68% Asia/Pacific 27% Asia/Pacific Source: Aberdeen Standard Investments, 31 March Geographic revenue split of MSCI Europe Source: Aberdeen Standard Investments, 31 March Geographic revenue split of MSCI Europe 18

20 European Smaller Companies stock positions Top 10 positions - Absolute Holding Portfolio weight % Country Business Fenner 3.97 UK Industrial belting and other polymer-based products Nemetschek 3.97 Germany Software for construction market Intermediate Capital 3.59 UK Private market asset manager Teleperformance 3.34 France Business process outsourcing FinecoBank 3.31 Italy Financial services, on-line Plastic Omnium 3.21 UK Automotive supplier Jungheinrich 3.17 Germany Forklift trucks, warehouse automation NORMA 3.03 Germany Joining technology Interpump 2.95 Italy High pressure plunger pumps Kesko 2.75 Finland Food / DIY retailer Source: Aberdeen Standard Investments, 31 March

21 European Smaller Companies Fund (SICAV) Parameter Guidelines Strategy characteristics Strategy Benchmark Benchmark Outperformance Target +3% Limits Stock Sector FTSE Small Cap Developed Europe Max 10% of the Fund Min 5 sectors invested Number of holdings (target 40-50) Tracking Error 4-8% Structure SICAV Holdings by Market Cap (EUR) Portfolio (%) Benchmark (%) Market Cap (> 2.0bn) Market Cap ( 1.0bn - 2.0bn) Market Cap (< 1.0bn) Market capitalisation 2.7bn 2.3bn Dividend yield 1.7% 2.5% Price / earnings 21.7x 15.6x Price / book 3.3x 1.9x Historic 3yr EPS growth 27.5% 17.1% Return on equity 20.3% 13.3% Long term debt / capital 22.6% 28.4% Predicted beta Predicted volatility 11.8% 11.8% Active share 95.0% - Predicted tracking error 4.0% - % stock specific risk 81.8% - % factor risk 18.2% - Source: Aberdeen Standard Investments, 31 March 2018 Meaningful risk control while retaining flexibility to express conviction 20

22 European Smaller Companies Fund performance Strong track record of outperformance 20% 15% European Smaller Companies Fund FTSE Small Cap Developed Europe 10% 5% 0% -5% Q % 1 Year % 3 Years % p.a. 5 Years % p.a. 7 years % p.a. 10 years % p.a. Q % 1 year % 3 years % p.a. 5 years % p.a. 7 years % p.a. 10 years % p.a. European Smaller Companies Fund FTSE Small Cap Developed Europe Relative return Tracking error Information ratio Source: Standard Life Investments, gross performance in EUR with geometric returns, 31 March Standard Life Investments claims compliance with the Global Investment Performance Standards (GIPS ). The fund specific data presented above is supplementary information to the SICAV European Smaller Companies GIPS composite report, which is enclosed in the Appendix for your reference 21

23 Return p.a. Opportunity to enhance returns from your European equity allocation % % Volatility p.a. MSCI Europe 50% 50% * D Accumulation share class in EUR Source: Morningstar Direct, 01 April 2008 to 31 March 2018 MSCI Europe Small Cap 50% 50% 100% Standard Life Investments European Smaller Companies Fund* 22

24 Appendices Global Smaller Companies

25 Global Smaller Companies: Investment process Consistent application of the investment process across geographies Idea generation Idea validation Portfolio construction Matrix screen Total company meetings (>7,500 in 2017) In-house analysts External research Fundamental research Valuation analysis Smaller Companies meetings (>400 per year) Smaller Companies portfolios Best ideas lists (c.100) Peer review Risk management Portfolio Bottom up approach assisted by proprietary screening tool 24

26 Global Smaller Companies Fund Parameter Guidelines Strategy characteristics Strategy Benchmark Benchmark Relative Limits Stock Sector Country MSCI AC World Small Cap +/-5% +/-15% +/-20% Market capitalisation 4.9bn 2.5bn Dividend yield 0.7% 1.9% Price / earnings 33.2x 18.2x Price / book 4.8x 1.9x Number of holdings Tracking Error 5-10% Structure OEIC/SICAV Holdings by Market Cap (GBP) Portfolio (%) Benchmark (%) Market Cap (> 5.0bn) Market Cap ( 2.0bn - 5.0bn) Market Cap ( 1.0bn - 2.0bn) Historic 3yr EPS growth 34.3% 17.6% Return on equity 21.4% 10.9% Long term debt / capital 18.6% 30.4% Predicted beta Predicted volatility 11.9% 10.8% Active share 98.1% - Predicted tracking error 4.5% - % stock specific risk 69.8% - % factor risk 30.2% - Market Cap (< 1.0bn) Source: Aberdeen Standard Investments, 31 May 2018 Meaningful risk control while retaining flexibility to express conviction 25

27 Top 10 holdings High conviction no benchmark pressure Company name Country Business % Market Leader ABIOMED United States Health Care 3.30 Heart pumps GrubHub United States Information Technology 3.11 Takeaway food website 51job China Industrials 3.02 Online recruitment Fevertree Drinks United Kingdom Consumer Staples 2.82 Premium mixers Sunny Optical Technology China Information Technology 2.78 Camera lenses ServiceMaster Global United States Consumer Discretionary 2.67 Pest Control Aspen Technology United States Information Technology 2.55 Process optimisation software Pigeon Japan Consumer Staples 2.55 Baby products HEICO United States Industrials 2.55 Aircraft parts Align Technology United States Health Care 2.50 Dental aligners Source: Aberdeen Standard Investments, Bloomberg, 31 May

28 Market leaders in structural growth areas Food and drink Grubhub, Fevertree, Wessanen, Domino s Pizza Automation Cognex, Jungheinrich, Aspen Tech Healthcare Abiomed, Japan Lifeline, Align Tech, Evolent Health 27

29 Global Smaller Companies Country allocation Country weights Overweight / Underweight positions 8% 10% 7% 11% 0% 0% 2% 2% 2% 1% 2% 14% 41% United States United Kingdom Japan China Italy Germany France Australia Netherlands Taiwan Ireland Spain Sweden United States Czech Republic Hungary Peru Georgia Colombia Qatar United Arab Emirates Russia Greece Pakistan Egypt Philippines Poland Portugal Chile Turkey Indonesia Austria Mexico New Zealand Malaysia Australia Thailand Taiwan Finland Japan Israel Spain Denmark Singapore Brazil South Africa Norway Belgium Hong Kong Sweden India Switzerland Canada Korea France Ireland Netherlands Germany China United Kingdom Italy -10.0% -5.0% 0.0% 5.0% 10.0% Source: Aberdeen Standard Investments, 31 March 2018 Source: Aberdeen Standard Investments, 31 March

30 Global Smaller Companies Sector allocation Sector weights Overweight / Underweight positions 13% 8% 1% Information Technology 1% 2% Industrials 23% Consumer Discretionary Health Care Consumer Discretionary Industrials Health Care Consumer Staples Information Technology Financials Consumer Staples Telcommunication Services Financials 14% 15% 22% Energy Materials Real Estate Real Estate Materials Energy Utilities -15% -10% -5% 0% 5% 10% 15% Source: Aberdeen Standard Investments, 31 March 2018 Source: Aberdeen Standard Investments, 31 March

31 European Smaller Companies country allocation Country weights Overweight / Underweight positions 5% 12% 2% 2% 2% 1% 3% 3% 3% 12% 23% 32% United Kingdom Germany Italy France Switzerland Spain Finland Netherlands Ireland Sweden Denmark Norway Germany France Italy Ireland Finland Portugal Spain Netherlands Denmark Austria United Kingdom Switzerland Norway Belgium Sweden Source: Aberdeen Standard Investments, 31 March 2018 Source: Aberdeen Standard Investments, 31 March

32 European Smaller Companies sector allocation Sector weights Overweight / Underweight positions 8% 10% 15% 4% 3% 45% 15% Industrials Consumer Goods Financials Technology Consumer Services Health Care Basic Matrials Financials Telecomms Basic Materials Oil & Gas Health Care Consumer Services Utilities Consumer Goods Technology Industrials Source: Aberdeen Standard Investments, 31 March 2018 Source: Aberdeen Standard Investments, 31 March

33 Mutual Funds Global Smaller Companies Composite Name Mutual Funds Global Smaller Companies Inception Date Firm Standard Life Investments Currency GBP Report End Date Benchmark MSCI (All Countries World Index) Small Cap Anlzd Return (Composite) Anlzd Return (Benchmark) 3 Year Anzld StdDev (Composite) 3 Year Anzld StdDev (Benchmark) Dispersion Market Value Total Firm Assets % of Firm Assets Number of Portfolios Dec Dec Dec Dec Dec ,021, ,922,900, Dec ,917, ,971,000, Dec ,131, ,550,800, Dec ,145, ,454,110, Dec ,386, ,136,780, Dec ,690, ,686,080, Firm Disclosures A complete list and description of all of the firm's composites are available from Aberdeen Standard Investments. There are no minimum asset levels set below which portfolios are not included in a composite. All performance calculations and returns have been calculated gross of management fees. All returns are presented on an all-inclusive basis and as such all capital gains interest income and withholding taxes have been taken into account in market valuations and returns. All indices are on a gross of tax basis apart from FTSE UK indices which are net of Withholding Tax. There are no Non-Fee-Paying portfolios included in any composite. The Daily True Time Weighted Rate of Return methodology has been used from 2001 apart from unitised Cash, Property, GARS and Myfolio products where NAV performance is used. Prior to this NAV performance was used for all products. Additional information regarding policies for calculating and reporting returns is available upon request. Dispersion is calculated using high/low difference. Where there are less than 36 months of returns, the Composite and Benchmark Standard Deviations have not been calculated. Aberdeen Standard Investments 'The Firm' consists of all fee-paying funds managed by Aberdeen Standard Investments and its Subsidiaries which include Aberdeen Standard Investments (Mutual Funds) Limited SLTM Limited Aberdeen Standard Investments (Corporate Funds) Limited Aberdeen Standard Investments (USA) Limited and Aberdeen Standard Investments (Hong Kong) Limited. Past performance results from Aberdeen Standard Investments Limited UK Firm and Aberdeen Standard Investments Limited Irish Firm have been linked to form the performance record of the new firm Aberdeen Standard Investments. The new firm was created on 01 Jan Standard Life Investments claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared and presented this report in compliance with the GIPS standards. Aberdeen Standard Investments has been independently verified by PricewaterhouseCoopers LLP for the periods 1996 to The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. Composite Disclosures Includes part period return for 2012 from 01 February. The standard annual fee applicable to this composite is 0.85%, but individual fees are negotiated on an account basis. Derivatives may be used for efficient portfolio management purposes. This composite includes funds that invest in smaller companies listed on the global stock markets and will be benchmarked against MSCI (All Countries World Index) Small Cap. 32

34 European Smaller Companies Fund Please note that the information shown below relates to the D Accumulation share class. More information on share classes can be found on the website, The following risk factors apply specifically to this Fund. These are in addition to the generic risks of investing. A full list of the risks applicable to this Fund can be found in the Prospectus which is available on the website or upon request. (a) The fund invests in equities and equity related securities. These are sensitive to variations in the stock markets which can be volatile and change substantially in short periods of time (b) The fund may invest in equities and equity related securities in European emerging markets. Investing in emerging markets involves a greater risk of loss than investing in more developed markets due to, among other factors, greater political, tax, economic, foreign exchange, liquidity and regulatory risks (c) The shares of smaller companies may be less liquid and more volatile than those of larger companies (d) The use of derivatives carries the risk of reduced liquidity, substantial loss and increased volatility in adverse market conditions, such as a failure amongst market participants. The use of derivatives may result in the fund being leveraged (where market exposure and thus the potential for loss by the fund exceeds the amount it has invested) and in these market conditions the effect of leverage will be to magnify losses. The fund does not make extensive use of derivatives The information shown relates to the past. Past performance is not a guide to the future. The value of an investment can go down as well as up. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the Owner ) and is licensed for use by Standard Life Aberdeen**. Third Party Data may not be copied or distributed. Third Party Data is provided as is and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. **Standard Life Aberdeen means the relevant member of Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time. Standard Life Investments Limited is registered in Ireland (904256) at 90 St Stephen s Green, Dublin 2 and Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is authorised and regulated in the UK by the Financial Conduct Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training Standard Life Aberdeen, images reproduced under licence 33