MEET THE TEAM FOORD ASSET MANAGEMENT

Transcription

1 MEET THE TEAM FOORD ASSET MANAGEMENT November 2014

2 MEET THE TEAM SPEAKERS Celebrating Foord s 30-year investment track record Paul Cluer CEO Share focus Irina Gavrilova Equity Analyst Returns and macro environment Mike Soekoe International Director of Business Development 2

3 30 YEARS OF SUCCESSFUL INVESTING FOORD ASSET MANAGEMENT PAUL CLUER

4 RETIREMENT FUNDING HAVE A SAVINGS PLAN 4

5 30-YEAR TRACK RECORD IN MANAGING RETIREMENT FUND INVESTMENTS Average annualised return of 21.4% per annum for 30 years Inflation over this period averaged 8.3% Real return of 13.1% per annum Average pension fund s annualised return was 17.3% for 30 years Outperformance of 4.1% per annum for 30 years 5

6 R100,000 INVESTED 30 YEARS AGO RETURN PROFILE APPEARS EXPONENTIAL Source: Foord 6

7 30-YEAR TRACK RECORD REAL LIFE EXAMPLE Foord s approach, coupled with the avoidance of high cost structures, the appointment of a single manager and not being swayed by fads or trends has led to the almost unheard of scenario of our staff members retiring with more monthly income than they had whilst working. Roger Carter, Chairman of AJ North Pension Fund 7

8 30-YEAR TRACK RECORD INVESTMENT RETURNS ARE NOT EARNED SMOOTHLY Source: Foord 8

9 30-YEAR TRACK RECORD MANAGING THE RISKS Pension funds required to hold prescribed assets Rubicon speech Financial Rand US Savings and Loans Crisis ANC unbanned; domestic violence breaks out; fall of the Soviet blocs US recession Democratic elections Exchange controls first relaxed; Asian Financial Crisis 1998 Pension Fund investment limits substantially revised (Reg 28) Dot-com bubble US recession Global Financial Crisis and Great Recession China surpasses Japan as the world s 2nd largest economy Eurozone sovereign debt crisis 9

10 30-YEAR TRACK RECORD SAME RETURNS APPEAR SIGNIFICANTLY LESS RISKY Source: Foord 10

11 30-YEAR TRACK RECORD WE AIM FOR LONGER-TERM CONSISTENCY Domestic Balanced Regulation 28 Multi-Asset Class Mandates 3 YEARS 5 YEARS 7 YEARS 10 YEARS Foord 22.6% 19.3% 14.0% 19.8% Median manager 17.3% 15.4% 11.6% 17.3% Rank 3 / 14 1 / 14 1 / 14 1 / 14 Global Balanced Regulation 28 Multi-Asset Class Mandates 3 YEARS 5 YEARS 7 YEARS 10 YEARS Foord 21.5% 18.3% 13.1% 19.2% Median manager 19.1% 15.8% 11.3% 16.6% Rank 4 / 20 1 / 17 3 / 17 1 / 17 Source: Alexander Forbes Performance Surveys (September 2014) 11

12 FUND RANGE FOORD ASSET MANAGEMENT UNIT TRUST PORTFOLIO

13 FOCUSED FUND RANGE VIABLE LONG-TERM SAVINGS STRATEGIES ZA Reg 28 Foord Conservative Fund Max 60% equity exposure Conservative, typically retired investors Time horizon: 2 5 years MAX Sub-optimal for investors with a longer time horizon Prudentially compliant ZA Reg 28 Foord Balanced Fund Max 75% equity exposure Time horizon > 3 years Prudentially compliant 13

14 FOCUSED FUND RANGE VIABLE LONG-TERM SAVINGS STRATEGIES ZA Foord Flexible Fund Foord s best investment view fund 0 100% in equities; 0 100% offshore Should be default investment option ZA Foord Equity Fund Specialist fund Seeks to outperform FTSE/JSE All Share Index 80% of time it outperforms market in down months 14

15 FOCUSED FUND RANGE VIABLE LONG-TERM SAVINGS STRATEGIES LUX GG ZA Foord International US$ denominated global flexible fund Conservatively managed, focused on developed markets Aims to achieve 10% p.a. in US$ over rolling 5-year periods Luxembourg domiciled; SA and Guernsey Feeder Funds SG ZA Foord Global Equity US$ denominated Global Equity Fund Aims to outperform MSCI All Country total return index Singapore domiciled; SA Feeder Fund 15

16 MEDICLINIC SHARE FOCUS IRINA GAVRILOVA

17 Cape Town Sandton Newcastle 17

18 GLOBAL POPULATION NOW ABOVE 7 BILLION PEOPLE 8,000 World population (millions) 7,000 6, year compound annual growth rate (CAGR) of +1.09% p.a. 5,000 4,000 3,000 2,000 1, Source: United Nations Statistics 18

19 AGEING GLOBAL POPULATION RAPID INCREASE IN LIFE EXPECTANCY 85 Life expectancy at birth (years) UAE (CAGR 0.7%) Switzerland (CAGR 0.3%) SA (CAGR 0.2%) World (CAGR 0.6%) Source: OECD 19

20 HEALTHCARE COSTS INCREASE WITH AGE 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 26% of world population < 15 yrs old Relative healthcare spending by age 66% of world population yrs old 8% of world population > 65 yrs old 0.0x Birth < >85 Source: OHE Compendium,

21 INCREASED MORBIDITY DISEASE BURDEN GROWING New breast cancer cases per 100,000 people, USA vs. UK ( ) USA CAGR +0.6% p.a UK CAGR +1.5% p.a Source: Cancer Organisation 21

22 TECHNOLOGICAL ADVANCEMENTS ALLOWS MINIMALLY INVASIVE SURGERY 22

23 HEALTHCARE PROVISION PUBLIC / PRIVATE SECTOR BALANCE Healthcare is provided by the public and private sectors Deciding on the supplier of healthcare: Capacity and quality of healthcare Employment Cost Public sector Private sector 23

24 PRIVATE HEALTHCARE ADVANTAGES High barriers to entry Defensive earnings Healthy cash generation Moving into higher acuity work Public and private co-operation Source: The Economist Work until you drop, 11/10/

25 PRIVATE HEALTHCARE DISADVANTAGES BARGAINING POWER Concentration of providers vs funders 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 29% Mediclinic 21% Life Healthcare 24% Netcare 26% Hospital groups Other 7% Metropolitan 31% Medischeme 32% Discovery 31% Health insurers 25

26 PRIVATE HEALTHCARE DISADVANTAGES BARGAINING POWER 350 Pricing increases - providers vs funders (2000=100) Medical aids Hospitals CPI Source: Deutsche Securities, INET Bridge 26

27 PRIVATE HEALTHCARE DISADVANTAGES - REGULATION Japan Japan Russia Russia Germany Germany Switzerland Austria New Zealand Czech Rep. China Hungary Belgium Poland Canada France UK Estonia Czech Rep. Switzerland Estonia Netherlands Spain SA (private*) Austria Australia Italy Italy Poland Ireland UK Australia Denmark Portugal Israel Netherlands Canada Chile Portugal France Spain South Africa US Hungary Sweden MDC Swiss Turkey US South Africa Denmark Chile Israel China Turkey Brazil Indonesia Mexico Mexico Indonesia SA (private*) India UK (private*) Hospital beds per 1,000 population Average length of stay (days) Source: OECD (for both charts) 27

28 MEDICLINIC A QUALITY COMPANY Third largest private hospital group in SA Good quality earnings Earnings contribution by geography Well diversified geographically Good non-resource rand hedge Extensive property portfolio Switzerland, 47% Southern Africa, 35% Strong management team Healthy balance sheet UAE, 18% Management aligned with shareholders Source: Mediclinic 28

29 MEDICLINIC MEDIUM-TERM OPPORTUNITIES Procurement benefits Broaden the international footprint Source: Mediclinic 29

30 MEDICLINIC SHARE PRICE OUTPERFORMANCE Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Mediclinic price (2008=100) JSE All Share price (2008=100) Source: INET Bridge, cob 25/10/

31 MEDICLINIC CONCLUSION Strong absolute share price performance 5 year absolute growth is 285% or 31% per annum Strong relative outperformance vs JSE All share index 5 year relative outperformance is 115% or 17% per annum Mediclinic complements existing healthcare exposure 31

32 RETURNS AND MACRO ENVIRONMENT MIKE SOEKOE

33 LOOKING BACK ECONOMIC THESIS WAS MOSTLY CORRECT WHAT WE SAID LAST YEAR Global synchronised growth Impact of austerity diminishes Corporate investment should improve First phase of normalisation USA will end QE Long bond rates will normalise Short-term rates will stay low for an extended period In SA, large current account deficit leaves rand vulnerable 33

34 LOOKING BACK ECONOMIC THESIS WAS MOSTLY CORRECT WHAT WE SAID LAST YEAR WHAT HAPPENED Global synchronised growth Impact of austerity diminishes Corporate investment should improve First phase of normalisation USA will end QE Long bond rates will normalise Short-term rates will stay low for an extended period In SA, large current account deficit leaves rand vulnerable US GDP Chinese GDP Europe muddling through QE ended 31 October 2014 No normalisation Short-term rates still low SA current account and fiscal deficits remained high and rand depreciated 34

35 ASSET CLASS RETURNS 12 MONTH RETURNS TO 31 OCTOBER 2014 Oct 14 Oct 13 Oct 14 Oct 13 Shares % % Bonds % % JSE All Share (R) SA bonds (R) JSE All Share ($) SA cash (R) MSCI World ($) World bonds ($) Emerging markets ($) S&P500 ($) FTSE 100 (in ) China (in $) Commodities Currency Gold R/$ Copper $/ Oil R/ Property R/ SA real estate (R) US housing (Case Schiller) * * To 31 August 2014 Source: Deutsche Securities, Bloomberg 35

36 FOORD BALANCED FUND RETURNS TO 31 OCTOBER year % 3 years % 5 years % 7 years % 10 years % Inception (1/9/2002) % Foord Balanced Inflation Average fund Rank 56/107 12/86 4/62 5/51 2/27 Source: Foord, INET Bridge, Morningstar Average: South Africa Multi-Asset High Equity 36

37 FOORD EQUITY FUND RETURNS TO 31 OCTOBER year % 3 years % 5 years % 7 years % 10 years % Inception (1/9/2002) % Foord Equity FTSE/JSE ALSI Average fund Rank 40/123 3/98 1/85 3/73 2/45 Source: Foord, INET Bridge, Morningstar Average: South African Equity General 37

38 FOORD FLEXIBLE FUND RETURNS TO 31 OCTOBER year % 2 years % 3 years % 5 years % Inception (1/4/2008) % Foord Flexible Inflation Average fund Rank 20/28 7/18 3/17 1/16 Source: Foord, INET Bridge, Morningstar Average: Worldwide Multi-Asset Flexible 38

39 FOORD INTERNATIONAL RETURNS TO 31 OCTOBER year % 3 years % 5 years % 7 years % 10 years % Inception (10/3/97) % Fund ($) Average fund ($) Rank 180/214 56/146 18/102 12/78 2/44 Fund in rands Source: Foord, Morningstar Ranking: USD Moderate & Flexible Allocation 39

40 FOORD GLOBAL EQUITY RETURNS TO 31 OCTOBER year % 2 years % Inception (1/6/12) % Fund ($) MSCI AC World Index ($) * Fund in rands * All Country Total Return Index Source: Foord, Bloomberg 40

41 MACRO ENVIRONMENT OUTLOOK FOR 2015 USA remains global engine Interest rates expected to gradually rise Geopolitical risk increases probability of European recession Chinese growth rate slowing relative to previous years but remains high Fiscal constraints and policy uncertainty points to slow growth in SA Interest rate normalisation globally increases downside risk for SA economy and the rand 41

42 USA IS LOOKING STRONGER US GROWTH WILL DRIVE GLOBAL RECOVERY 115 GDP indices: G1 2007= Dec 06 Aug 07 Apr 08 Dec 08 Aug 09 Apr 10 Dec 10 Aug 11 Apr 12 Dec 12 Aug 13 Apr 14 USA UK Japan Euro zone Source: Datastream 42

43 RECOVERY IN US WAGES WILL SUPPORT STEADY ECONOMIC GROWTH Hourly wages (US$) USA unemployment rate (%) Dec 84 Dec 87 Dec 90 Dec 93 Dec 96 Dec 99 Dec 02 Dec 05 Dec 08 Dec 11 Average hourly earnings, YoY change USA unemployment rate Source: US Bureau of Labour Statistics 43

44 US HOUSING CONSTRUCTION BELOW LONG-TERM SUSTAINABLE AVERAGE 1,800 SCOPE FOR RECOVERY Dec 84 Dec 87 Dec 90 Dec 93 Dec 96 Dec 99 Dec 02 Dec 05 Dec 08 Dec 11 Housing Starts, thousand units Average = 1.5m new homes / year Source: INET Bridge 44

45 EUROPE CONTINUES TO STRUGGLE PERIPHERAL ECONOMIES STILL BELOW 2007 LEVELS 110 GDP indices: Q1 2007= Dec 06 Aug 07 Apr 08 Dec 08 Aug 09 Apr 10 Dec 10 Aug 11 Apr 12 Dec 12 Aug 13 Apr 14 Germany France Eurozone Greece Ireland Italy Portugal Spain Source: Datastream 45

46 SLOWING CHINESE GROWTH REFLECTING ECONOMIC REBALANCING Chinese GDP decomposition Consumption Investment Net Exports Real GDP 16% 14% 12% 10% 8% 8.4% 8.3% 9.1% 10.0% 10.1% 11.3% 12.7% 14.2% 9.6% 9.2% 10.4% 9.3% 7.7% 7.7% 7.4% 6% 4% 2% 0% -2% -4% Source: CEIC, Macquarie Research, October

47 LARGE SA FISCAL DEFICIT SHIFT TO AUSTERITY WILL INHIBIT GROWTH Fiscal balance as % of GDP in 2013 Peru Nigeria Chile Russia Philippines Indonesia Turkey Thailand China Hungary Brazil Poland Mexico South Africa Argentina Malaysia Czech Republic India Source: IMF WEO April

48 SA FISCAL CONSTRAINTS REFLECTED IN GOVERNMENT SPENDING PLANS 15 Main budget non-interest spending growth (%, real) FYO3 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Source: IMF WEO April 2014 and National Treasury October

49 SA CURRENT ACCOUNT DEFICIT NO SIGN OF IMPROVEMENT Nigeria Malaysia Russia Philippines China Hungary Thailand Argentina Mexico Brazil Czech Republic Indonesia Chile Peru Poland India South Africa Turkey Sri Lanka Current account as % of GDP in Source: IMF WEO April

50 MODERATE RAND DEPRECIATION BUT UNIT LABOUR COSTS CONTINUE TO RISE 220 8% per annum increase in unit labour costs 90% difference % per annum depreciation in rand Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 SA unit labour costs Rand / $ Source: INET Bridge 50

51 INVESTMENT STRATEGY OUTLOOK FOR 2015 Equities preferred but short-term caution advocated Bonds and cash likely to yield negative returns after adjusting for inflation Poor SA economic prospects will affect local share valuations; good share selection therefore essential International equities especially favoured for their attractive valuations, diverse economic drivers and rand hedge qualities 51

52 THANK YOU