SKAGEN Tellus Status Report February 2017
Key numbers as of 28 February 2017 EUR, net of fees February QTD 2016 1 years 3 years 5 years Since inception* SKAGEN Tellus 1,6% 0,7% 5,7% 5,5% 5,9% 4,7% 5,4% JPM Broad GBI Unhedged * 2,2% 0,7% 4,4% 1,1% 8,3% 3,9% 5,0% Excess return -0,6% -0,1% 1,3% 4,4% -2,5% 0,8% 0,4% *Inception date: 29/09/2006 **Benchmark index before 01/01/2013 was Barclay's Capital Global Treasury Index 3-5 years Unless otherwise stated, all performance data in this report relates to class A units, measured in EUR and is net of fees. 2
The return of the Mexican peso The global economy is starting the year on a strong footing. Both soft and hard numbers have been higher than expected. This supports our view of stable or somewhat higher long-term interest rates in the US and central Europe. The duration of SKAGEN Tellus is currently 3.3 years, which is substantially lower than the index s duration of 7.7 years. Given the current state of the business cycle, we only take interest rate risk in countries where there is still a solid case for a fall in the interest rate going forward and/or the yield is attractive. We have longer duration in countries were we expect the credit premium to fall, such as Portugal and Croatia, or where there is a high interest rate, e.g. Peru and Chile. We have very low duration on our investments in the US, UK, Canada, Mexico and Norway. These holdings are based on an expectation of an appreciation of the currency. Currency appreciation contributed most to the fund performance in February. The Mexican peso appreciated by 5.5 percent, implying that our short dated Mexican bond was the largest contributor the fund. The appreciation is partly due to measures introduced by the central bank to stabilise the peso. The peso is now at its strongest level since before the US presidential election. A stronger USD and appreciating emerging market currencies also contributed positively to the return in February. The interest rates in peripheral Europe decreased after the Eurogroup Finance Ministers agreed there was enough common ground for the creditors to return to Athens. This led to increased hopes of a final agreement and release of the last tranche of the bailout funds to Greece. The fund underperformed its index in February. This was mainly due to an underweight in JPY and USD. 3
Accumulated gain since inception of fund from currency fluctuations, bond price changes and coupons 70% 60% 64% 50% 40% 30% 20% 10% 0% -10% -20% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 40% 14% 10% Fund total Currency Bond price changes Coupons 4
Accumulated gain YTD from currency fluctuations, bond price changes and coupons 1,2 % 1,0 % 0,8 % 0,6 % 0,4 % 0,2 % 0,0 % -0,2 % -0,4 % -0,6 % -0,8 % 01.01.2017 31.01.2017 0,93% 0,64% 0,43% -0,14% Fund total Currency Bond price changes Coupons 5
Top and bottom 5 contributors to absolute return YTD 0,30% 0,20% 0,10% 0,00% -0,10% -0,20% -0,30% New Zealand Peru Chile Norway Mexico Greece USA Spain Slovenia Absolute return 0,22% 0,22% 0,21% 0,18% 0,18% -0,25% -0,08% -0,05% -0,05% -0,04% Dominican Republic 6
Top and bottom 5 contributors to absolute return (1 year) 1,40% 1,20% 1,00% 0,80% 0,60% 0,40% 0,20% 0,00% -0,20% -0,40% Peru Chile Greece Croatia New Zealand Portugal Mexico Japan Germany Absolute return 1,18% 0,90% 0,85% 0,76% 0,70% -0,22% -0,06% -0,02% 0,00% 0,06% Great Britain 7
Portfolio as of 28 February 2017 Holding Name Currency Numbers of Bonds Percent Maturity Date Coupon Norwegian Government NOK 95 000 10,2 19.05.2017 4,3 US Government USD 10 800 9,4 30.06.2017 0,6 US Government USD 10 000 8,7 31.03.2017 0,5 Croatia Government International Bond EUR 8 300 8,5 30.05.2022 3,9 Chilean Government CLP 4 410 000 6,2 05.08.2020 5,5 Portugese Government EUR 7 000 6,1 15.10.2025 2,9 New Zealand Government NZD 8 000 5,9 17.04.2023 5,5 Spanish Government EUR 6 000 5,7 30.04.2025 1,6 Peruvian Government PEN 20 000 5,5 12.08.2037 6,9 UK Government GBP 5 000 5,4 07.09.2017 1,0 Canadian Government CAD 8 000 5,3 01.03.2018 1,3 Mexican Government MXN 120 000 5,2 15.06.2017 5,0 UK Government GBP 4 500 5,1 25.08.2017 8,8 Slovenia Government EUR 3 500 4,5 30.03.2026 5,1 Dominican Republic DOP 150 000 3,0 10.05.2024 11,5 European Bank Recon & Dev INR 200 000 2,7 19.03.2018 5,8 8
Interest rate risk exposure PERU 0,59 PORTUGAL 0,45 MEXICO 0,01 NORWAY 0,02 EBRD* 0,03 UNITED STATES 0,04 CANADA 0,05 BRITAIN 0,05 SPAIN 0,43 DOMINICAN REPB. 0,13 CHILE 0,19 GREECE 0,22 CROATIA 0,40 NEW ZEALAND 0,30 SLOVENIA 0,33 As of 28 February 2017 EBRD* : European Bank of Reconstruction & Development 9
Interest rate exposure relative to benchmark 3,00 2,50 2,00 1,50 1,00 0,50 SKAGEN Tellus Benchmark - PERU PORTUGAL SPAIN CROATIA SLOVENIA NEW ZEALAND GREECE CHILE DOMINICAN REPB. BRITAIN CANADA UNITED STATES EBRD* NORWAY MEXICO GERMANY JAPAN FRANCE NETHERLANDS POLAND ITALY DENMARK IRELAND CZECH AUSTRALIA AUSTRIA HONG KONG HUNGARY ISRAEL BELGIUM FINLAND SWEDEN SOUTH KOREA SINGAPORE SOUTH AFRICA As of 28 February 2017 10
29. sep. 2006 28. feb. 2007 31. jul. 2007 31. des. 2007 31. mai. 2008 31. okt. 2008 31. mar. 2009 31. aug. 2009 31. jan. 2010 30. jun. 2010 30. nov. 2010 30. apr. 2011 30. sep. 2011 29. feb. 2012 31. jul. 2012 31. des. 2012 31. mai. 2013 31. okt. 2013 31. mar. 2014 31. aug. 2014 31. jan. 2015 30. jun. 2015 30. nov. 2015 30. apr. 2016 30. sep. 2016 28. feb. 2017 Interest duration since the fund s inception 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 Duration Average duration = 4.30 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 11
Currency exposure DOP 3,0 % INR 2,7 % EUR 26,8 % CAD 5,3 % MXN 5,5 % PEN 5,5 % USD 18,5 % NZD 6,0 % CLP 6,2 % As of 28 February 2017 NOK 10,2 % GBP 10,9 % 12
45% Currency exposure relative to benchmark 40% 35% SKAGEN Tellus Benchmark 30% 25% 20% 15% 10% 5% 0% EUR USD GBP NOK CLP NZD PEN MXN CAD DOP INR TRY JPY BRL CNY AUD RUB PLN ZAR CZK HKD HUF ILS KRW CHN SGD CNH PHP DKK SEK As of 28 February 2017 13
Moody s rating on Tellus portfolio relative to benchmark 60 % 50 % SKAGEN Tellus Benchmark 40 % 30 % 20 % 10 % 0 % Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 As of 28 February 2017 14
For more information please see: SKAGEN Tellus A on our web pages SKAGEN s Market report Unless otherwise stated, all performance data in this report relates to class A units and is net of fees. Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager s skill, the fund s risk profile and subscription and management fees. The return may become negative as a result of negative price developments. SKAGEN seeks to the best of its ability to ensure that all information given in this report is correct, however, makes reservations regarding possible errors and omissions. statements in the report reflect the portfolio managers viewpoint at a given time, and this viewpoint may be changed without notice. The report should not be perceived as an offer or recommendation to buy or sell financial instruments. SKAGEN does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. Employees of SKAGEN AS may be owners of securities issued by companies or governments that are either referred to in this report or are part of the fund's portfolio.