VALERIE GUELFI Fund Manager International Equities Edmond de Rothschild Asset Management ASSET MANAGEMENT

Transcription

1 Selecting Value stock VALERIE GUELFI Fund Manager International Equities Edmond de Rothschild Asset Management ASSET MANAGEMENT

2 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 2

3 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 3

4 Edmond de Rothschild Global Value: Competitive Edge Unique Stock-picking Potential Contrarian investment approach, away from fads and conventions Well-known expertise in value / deep value management Uncompromising selection of value stocks and deep value stocks with high potential for appreciation Source: Edmond de Rothschild Asset Management. Istockphoto EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 4

5 Investment Philosophy A truly «Value» approach aiming at benefiting from Equity markets inefficiencies Investment Style Relative Value Minimum 70% of assets are invested in discounted companies 70% 30% Deep Value Maximum 30% of the portfolio is invested in Deep Value stocks with high potential for appreciation (P/B <1) The data shown refers to past years and it is not a reliable indicator of future results. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 5

6 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 6

7 Experienced international equity specialists Stock-picking expertise in International Equities Portfolio managers with an average of 10 years industry experience Dual expertise in terms of in-depth in-house fundamental analysis and investment management The support of equity specialist in every geographical zone EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 7

8 Experienced international equity specialists The international managers benefit from the expertise of specialized teams on every geographical zone US and International Equities European Equities (Large/ MidCaps) Emergingequitiesand commodities The selection of Japanese securities is based on the expertise of our partner Sumitomo Mitsui Asset Management EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 8

9 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 9

10 Investment Process Investment Process overview EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 10

11 Operational research universe definition 1 Multi-criteria Quantitative filter : Market capitalizations: excluding companies with a market capitalization below USD 500 mln, Liquidity: min. USD 5 mln daily trading volume, Turnover: min USD 1 bn Debt level: EBIT > 3 x Interest Expense Relative Value 2 - Idea generation => attractive Value Stocks identification via a multifactor screening Valuation ratios (P/E, forward P/E, EV/EBITDA, Price/Cash-Flow, Price/Sales, P/B, etc.) Operation ratios (sales, expected revenues and earnings growth, net debt/ebitda, net debt/shareholders equity, EBIT/total interest expense) Other indicators (dividend yield, 12 month momentum, Short interest) Deep Value 2 Deep value opportunities stock assessment through a two-fold screening: A first filter to identify stocks whose P/B <1 Then, a second filter based on the net debt / total assets ratio 3 Strongest convictions of the other equity teams The fund managers benefit from EdRAM capabilities : 30 Portfolio Managers, each one specialized in a specific area and/or sector EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 11

12 Qualitative Analysis In-depth fundamental analysis: Focus Criteria Methodology Business model Quality and soundness of the company s strategy Financial health Underlying markets Publications Company visits Brokers research Market and sector characteristics Barriers to entry Market and sector trends Competitive environment Legal and regulatory environment Interaction with other investment teams (notably equity teams) Sell-side analysts Third party research Other companies within the sector/cross channel check Political, country and currency risks Independence of central banks Currency policy/pegging GDP, PMI, fiscal deficit, etc. Interactions with other investment teams (notably fixed income and asset allocation specialists) World Bank publications Financial and valuation analysis Financial analysis: Debt levels and structure, sales and profit growth, evolution of net income, quality of earnings, cash flow analysis & generation, matching of cap. ex. vs cash flows Valuation analysis: P/E, P/B, EV/Ebitda, DCF, Sum-Of-Parts In-depth analysis of financial statements Valuation models: DCF, multiples, sum-of-theparts, etc. Management Quality of management Corporate governance Meeting with the management On-site visits EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 12

13 Risk Reward Ratio approach Risk Reward Ratio (R.R.R) = (Target Price Current Price) (Current Price Floor price) A high R.R.R is positive indicator Target Price Floor Price The weight of each holding is based on the combination of : - Fund Managers conviction - Its R.R.R. 5 0 The data shown refers to past years and it is not a reliable indicator of future results. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 13

14 Portfolio Construction (2/2) Main guidelines Each stock held in portfolio meets 2 criteria: It posts a significant appreciation potential (i.e. High R.R.R) It suits to diversification guidelines (country / sector / holding) Best R.R.R (Risk Reward Ratio) Short list : 120 stocks Sector Allocation: max 30% per sector Geographical allocation: +/- 20% versus MSCI WORLD Investment limit by holding: Deep Value : 2% maximum Relative Value : 5% maximum Portfolio holdings EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 14

15 Portfolio monitoring A robust portfolio monitoring performed by the investment team on a daily basis BOTTOM-UP Liquidity Risk Business related Risk Financial Risk Portfolio holdings ENHANCED BOTTOM-UP Political/ country risk FX risk PASSIVE TOP-DOWN Sector diversification Country Allocation EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 15

16 Sell discipline Relative Value A stock s absolute performance (purchase price compared to current price) and its relative performance (in the fund s case, change in sector discount) are permanently monitored to assess whether it should be reduced or sold outright Deep value deep value stocks bought for the portfolio are expected to return 50% over a two to three year horizon. When the target price is reached, the investment case is reassessed and the position is generally sold. Depreciation of a stock held in the portfolio by more than 15% leads to review of the investment case The data shown refers to past years and it is not a reliable indicator of future results. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 16

17 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 17

18 Thematic breakdown in the portfolio Themes Healthcare spending Healthcare reform Property market normalization Energy & industrial revolution Commercial aerospace Global auto cycle Recovery in IT spending Improving credit quality Regulatory changes Under valued assets Stocks Merck, Roche, Medtronic, Bayer, Novartis Aetna, Unitedhealth, Express Scripts Owens Corning, Masco, Axiall, Wolesley, Stanley Black&Decker, Suntrust, Zion Baker Hughes, Whiting, Vallourec, Nexans Allegheny, Meggit, Boeing Ford, Faurecia Cisco, AsusTek, Nokia, Netapp, EMC Citigroup, CIT, BBVA Telecom Italia, RWE Melia Hotels, Abengoa, Air France, Vivendi The data shown refers to past years and it is not a reliable indicator of future results - Source : Edmond de Rothschild Asset Management, data at EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 18

19 Sector allocation versus MSCI WORLD 7,4% 5,4% 5,0% 0,2% 0,2% -1,2% -0,2% -0,6% -1,2% -7,7% -7,3% Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom Services Utilities Cash Source : Edmond de Rothschild Asset Management, données au ,, Les performances passées ne préjugent pas des performances futures qui peuvent varier dans le temps. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 19

20 Country Allocation & Main Holdings Country Allocation Main Holdings North America 50,0% Stock % of ptf Euro Ex-France France Europe Ex-Euro Asia Ex-Japan Japan 14,7% 15,2% 8,5% 4,3% 2,2% 1 Citigroup Inc 3,1% 2 MERCK & CO 2,8% 3 Roche Holding AG 2,5% 4 Macy's Inc 2,2% 5 Express Scripts Inc 2,1% Total 12,7% Cash 5,0% Source : Edmond de Rothschild Asset Management, data as of , The data shown refers to past years and it is not a reliable indicator of future results. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 20

21 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 21

22 Edmond de Rothschild Global Value (I) (data as at ) 170 EdR Global Value (I) 160 MSCI World (NR) ,5% Key features: AuM: EUR 194m Morningstar Rating: Morningstar Ranking o 1 year: 1st decile o 3 years: 2nd quartile o 5 years: 1st decile Performance data YTD EdR Global Value (I) 51,1% 15,9% -14,1% 14,8% 32,9% -1,1% MSCI World (NR) 25,9% 19,5% -2,4% 14,0% 21,2% -1,6% Performance data 1 year 3 years 5 years Inception* EdR Global Value (I) 25,4% 26,3% 139,2% 64,8% MSCI World (NR) 16,8% 32,7% 101,9% 41,3% Indicators (52 weeks) Fund Benchmark Volatility 12,4% 11,0% Sharpe Ratio 2,0 1,5 Information Ratio 2,2 Tracking Error 3,8 The figures referred to in that document are related to the past. Past figures are not reliable indicators of future results. Source : Edmond de Rothschild Asset Management, data as of * Inception date: 09/06/2008. The Morningstar ratings are not market rankings and cannot be interpreted as recommendations to buy, sell or hold the shares or units of the above mentioned Fund. The references to market rankings or awards of these funds are not a reliable indicator of the future results of the Fund or of the Management Company. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 22

23 Edmond de Rothschild Global Value (A) (data as at ) EdR Global Value (A) MSCI World (NR) +15,5% Key features: AuM: EUR 194m Morningstar Rating: Morningstar Ranking o 1 year: 1st decile o 3 years: 3rd quartile o 5 years: 1st decile Performance data YTD EdR Global Value (A) 49,9% 14,9% -14,8% 13,8% 31,8% -1,2% MSCI World (NR) 25,9% 19,5% -2,4% 14,0% 21,2% -1,6% Performance data 1 year 3 years 5 years Inception* EdR Global Value (A) 24,4% 23,0% 129,1% 56,8% MSCI World (NR) 16,8% 32,7% 101,9% 41,3% Indicators (52 weeks) Fund Benchmark Volatility 12,4% 11,0% Sharpe Ratio 1,9 1,5 Information Ratio 1,9 Tracking Error 3,8 The figures referred to in that document are related to the past. Past figures are not reliable indicators of future results. Source : Edmond de Rothschild Asset Management, data as of * Inception date: 09/06/2008. The Morningstar ratings are not market rankings and cannot be interpreted as recommendations to buy, sell or hold the shares or units of the above mentioned Fund. The references to market rankings or awards of these funds are not a reliable indicator of the future results of the Fund or of the Management Company. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 23

24 Contents I. Executive summary II. Investment team III. Investment process IV. Portfolio structure V. Performance VI. Risk control EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 24

25 Fully integrated and permanent risk control An independent Risk Control department Oversight & Control of market risks and liquidity, operational risk management and counterparty risks Performance analysis Permanent investment risk and liquidity oversight of our portfolios Simcorp Dimension: an integrated information system Permanent control of Edmond de Rothschild Asset Management activity Access to information in real time for both Managers and Risk Control Highly customised risk management for each portfolio A unique reference tool shared by all business lines and affiliates with no data loss EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 25

26 Dimension: highly customisable integrated information system Portfolio Management Order Management Risk Management Performance analysis Dimension developped by Simcorp Settlement Accounting Fund accounting Reporting Analysis, order processing and system monitoring Pre-validation of NAV Pre and post-trade limit controls Client reporting Positions, transactions, corporate actions reconciliation with the fund custodian and administrator Market, liquidity and issuer risk calculation Performance calculation and analysis EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 26

27 Terms & Conditions Amf classification Benchmark NAV frequency International Equities MSCI World Daily Entry fee Redemption charges 4,50% max. None Share A Share B Share E Share I Share Isin code FR FR FR FR Bloomberg Ticker LCFSLRA FP Equity LCFSLRB FP Equity LCFSLRE FP Equity LCFSLRI FP Equity Currency EUR USD EUR EUR Currency hedging none none none none Dividend policy accumulation accumulation accumulation accumulation Management fees 2,00% 2,00% 2,40% 1,00% Performance commission 15 % per year of the outperformance compared with the benchmark Subscribers All subscribers All subscribers All subscribers Legal entities Minimum subscription 1 share 1 share 1 share EUR Inception date 09/06/ /08/ /08/ /06/2008 Share R Share Isin code FR Bloomberg Ticker LCFSLRR FP Equity Currency EUR Currency hedging none Dividend policy accumulation Management fees 1,15% Performance commission none Subscribers Legal entities Minimum subscription EUR Inception date 12/01/2009 EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 27

28 Global Valuations : no evident sign of excesses Global Equities Price to book over time Global Equities Price to earnings over time Source: Barclays, Bloomberg EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 28

29 Potential risks (1/2) The risks described below and in the next slide are not exhaustive. It is the responsibility of each investor to analyze the risk associated with such an investment and to form his/her own opinion. Risk of capital loss: The UCITS does not guarantee or protect the capital invested; investors may therefore not get back the full amount of their initial capital invested even if they hold their units for the recommended investment period. Discretionary management risk: The discretionary management style is based on expectations of the performance of different markets (equities, bonds). However, there is a risk that the Fund may not be invested in the best-performing values at all times. Equity risk: The value of a stock may change depending on factors specific to the issuer but also on exogenous, political or economic factors. The FCP may be exposed to the equity markets either via direct investments in equities and/or via financial contracts and/or UCITS. Fluctuations of the equity markets may lead to substantial variations in the net assets which may have a negative impact on the performance of the FCP. Fund performance will depend on companies picked by the investment company. Emerging Markets risk: The fund will be exposed to emerging countries or may invest in financial instruments traded on the emerging markets. In addition to the specific risks per issuer, exogenous risks exist, particularly in those markets. Operation and supervision conditions in emerging markets may deviate from the standards that prevail on the major international stock exchanges. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 29

30 Potential risks (2/2) Interest rate risk: By holding debt securities and money market instruments, funds are exposed to changes in interest rates. This risk is defined as a rise on interest rates causes a decline in bonds valuation and therefore a fall in of the fund s NAV. Credit risk: The main risk is that of the issuer defaulting on payment, failing to pay the interest and/or repay the capital. Credit risk also relates to the downgrading of an issuer. Investors attention is drawn to the fact that the FCP s net asset value may drop in the event of a total loss being recorded on an operation following a counterparty default. The presence of corporate bonds in the portfolio either directly or through UCITS exposes the FCP to the effects of changes in credit quality. Currency risk: The capital may be exposed to foreign exchange risk when the securities or investments it is composed of are denominated in a currency other than that of the FCP. Currency risk is the risk of a reduction in the net asset value of the FCP when an investment is made in a currency other than the euro and such currency depreciates against the euro on the currency market. Risk associated with engagement in financial contracts and counterparty risk: The risk related to engagement in financial contracts resulting from the use of financial instruments may induce a decrease in UCITS assets higher than market on which the fund is invested. These financial contracts may be OTC with one or more counterparties which might not be able to fulfill their commitment under these contracts. This is a counterparty risk which can result in a decrease of the fund s NAV. EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 30

31 Disclaimer Written on 12/02/2014. This is a non-binding document from Edmond de Rothschild Asset Management Benelux - Avenue Louise Brussels - N This document has been prepared exclusively for information purposes. This marketing document is exclusively for use by professional clients in the Netherlands, Belgium and Luxembourg and is not for use by non-professional clients or retail clients. Please do not redistribute. A copy of this document for use by non-professional or retail clients can be obtained on request. This document does not represent a public offer of the previously cited funds in the countries mentioned. The data, comments and analyses in this bulletin reflect the opinion of Edmond de Rothschild with respect to the markets and their trends, regulation and tax issues, on the basis of its own expertise, economic analyses and information currently known to it. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of Edmond de Rothschild Asset Management. In no event shall Edmond de Rothschild Asset Management assume responsibility for any decision to invest, to disinvest or to maintain a position on the basis of these comments or analyses. It is the responsibility of each and every investor to obtain the various regulatory prospectuses for each fund or financial product prior to making any investment and to analyse the risk incurred and establish his or her own opinion, independent of the Edmond de Rothschild Asset Management, and where necessary, to take specialist advice regarding such questions, and especially in order to determine the relevance of such investment to his or her own financial situation. This document is designed exclusively for institutional or professional investors as understood in the Belgian law of July relating to certain forms of collective management of investment portfolios. This document is also exclusively designed for investors other than consumers as understood in the Belgian law of July on commercial trading and on information and consumer protection. Past performance and volatility is not a reliable indication of future performance and volatility and is not constant over time. The funds investment polices do not intend to replicate the index. Consequently their performance may differ from that of the index. The prospectuses and key information documents of these Funds domiciled in France are available on request and on our website ( or for the UCITS which may be publicly offered in Belgium with CACEIS Belgium, Avenue du Port 86C bte 320, 1000 Brussels - Belgium - Tel: 02/ Fax: 02/ RPM Brussels: Any particular tax treatment may depend on the individual situation of a client and may be changed in the future. Edmond de Rothschild Asset Management Benelux IT Tower - Avenue Louise, 480 B 1050 Brussels info@edram.be - N Branch of Edmond de Rothschild Asset Management SA RCS of Paris (France) n Edmond de Rothschild Asset Management - 47 rue du Faubourg Saint-Honoré Paris Cedex 08 Tél. +33 (0) Fax +33 (0) Société anonyme Numéro d agrément AMF GP R.C.S. Paris - info@edram.fr EDMOND DE ROTHSCHILD I ASSET MANAGEMENT 31