MEET THE TEAM FOORD ASSET MANAGEMENT November 2015
MEET THE TEAM SPEAKERS Welcome Paul Cluer Managing Director Share focus Michael Townshend Portfolio Manager and Resources Analyst Returns and macro environment Mike Soekoe International Director of Business Development 2
FOORD FUND RANGE Local and International Funds
FOORD FUND RANGE LOCAL AND INTERNATIONAL FLAGSHIP FUNDS Foord Flexible Fund Foord International USD* World-wide best investment view (BIV), multi-asset Global conservative BIV, multi-asset REGULATION 28 FUNDS Foord Balanced Fund Foord Conservative Fund Regulation 28, multi-asset, high (< 75%) equity Regulation 28, multi-asset, medium (< 60%) equity SPECIALIST FUNDS Foord Equity Fund Foord Global Equity Fund USD* SA shares only Developed and emerging market shares * Available via a South African feeder fund 4
FOORD BALANCED FUNDS ROLLING 5-YEAR ANNUALISED RETURNS 35% 30% Excess return 5% Hurdle Inflation Foord return 25% 20% 15% 10% 5% 0% -5% 1989 1994 1999 2004 2009 2014 5
FOORD INTERNATIONAL ROLLING 5-YEAR ANNUALISED RETURNS (US$) US Inflation Real Return Foord International FIF Annualised Average Return (USD) 16% 12% 8% 4% 0% 2002 2005 2008 2011 2014 6
FOORD FLEXIBLE FUND +3.2% PER ANNUM VS FOORD BALANCED FUND 3.2 Flexible Fund of Funds Regulation 28 15.4% 12.2% 1.6 0.8 2008 2009 2011 2012 2014 2015 7
FOORD EQUITY FUND OUTPERFORMS IN NEGATIVE MARKETS 10% Months when ALSI is negative Months when ALSI is positive 8% 6% 4% 2% 0% -2% -4% -6% -8% 2002 2004 2006 2008 2010 2012 2014 8
RESOURCES SECTOR FOCUS Mike Townshend
RESOURCES DIGGING FOR OPPORTUNITIES 10
INVESTMENT CRITERIA REMEMBER THE BASICS Quality companies Sustainable competitive advantage Decent growth prospects Sound balance sheets Strong management (best in class, depth) Earnings growth, predictability and reliability Underpinned by strong cash flow Dividends are important Appealing valuations 11
RESOURCES VS MARKET RESOURCES HAVE UNDERPERFORMED 160 130 100-75% 70 40 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Inet Bridge 12
RESOURCE SECTOR GREAT VARIATION BETWEEN COUNTERS 600 500 BHP Billiton Anglo American 400 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Inet Bridge 13
THE COMMODITY BOOM IS OVER IT S ALL ABOUT SUPPLY AND DEMAND $9,000 Copper price in $/ton Industry capex ($ billion) Forecast $180 $154 $7,000 $129 $103 $5,000 $77 $3,000 $51 $26 $1,000 92 94 96 98 00 02 04 06 08 10 12 14 16 $0 Source: Inet Bridge and Bloomberg 14
Australian iron ore exports, mt SUPPLY RESPONDING AS CAPITAL SPEND DELIVERS 220 Australian iron ore exports 180 140 100 60 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Source: Macquarie Securities 15
CHINESE DEMAND SLOWING NATURE OF GROWTH CHANGING 48 Manufacturing & Construction (% of GDP) Services (% of GDP) 45 42 39 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Source: China National Bureau of Statistics 16
LOOKING AHEAD DO RESOURCE STOCKS PRESENT AN OPPORTUNITY? Earnings have collapsed Free cash flow evaporated Despite the bonanza, balance sheets deteriorated All this despite a significantly weaker rand Supply glut to continue SA mining largely ex-growth 17
RESOURCES SUMMARY LOW EXPOSURE TO SECTOR Some quality resource companies growth prospects, good management and sound balance sheets Current over-supplied environment holds Earnings growth and predictability is poor Free cash flow questionable Dividends under threat (Glencore, PGMs, Anglos) Valuations dependant on price assumptions Low resources exposure BHP Billiton and Sasol our main exposure 18
RETURNS AND MACRO ENVIRONMENT Mike Soekoe
SA SHARE MARKET HAS BEEN VOLATILE AS ANTICIPATED 57,500 FTSE/JSE AFRICA ALL SHARE INDEX 55,000 52,500 50,000 47,500 Jan 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Sep 15 Oct 15 20
SHARE MARKET VOLATILITY HAS BEEN TRENDING UP 21
ASSET CLASS RETURNS YEAR TO 31 OCTOBER 2015 Oct 15 Oct 14 Oct 15 Oct 14 Shares % % Bonds % % JSE All Share (R) 11.6 12.5 SA bonds (R) 4.9 9.0 JSE All Share ($) -10.8 2.7 SA cash (R) 5.5 5.2 MSCI World ($) 2.3 9.3 World bonds ($) -4.7-0.2 Emerging markets ($) -14.2 1.0 S&P500 ($) 5.2 17.3 FTSE 100 (in ) 4.4 1.0 China (in $) -0.5 6.7 Commodities Currency Gold -2.6-11.3 R/$ -20.1-8.8 Copper -24.9-5.5 $/ 14.6 7.7 Oil -41.9-21.5 R/ -9.2-1.2 Property R/ -17.1-8.7 SA real estate (R) US housing (Case Schiller) * 23.6 5.1 19.9 4.4 * To 31 August 2015 Source: Deutsche Securities, Bloomberg 22
LOOKING BACK WHAT WE SAID LAST YEAR US growth continues Stronger consumer spending Housing market recovery Gradual increase in interest rates European growth to recover slowly but geopolitical risk remains a threat Chinese growth will slow but still remains at a high level In SA, growth will slow and the rand remains vulnerable 23
LOOKING BACK ECONOMIC THESIS WAS MOSTLY CORRECT WHAT WE SAID LAST YEAR US growth continues Stronger consumer spending Housing market recovery Gradual increase in interest rates US growth continued Consumer spending accelerated New housing starts now over 1 million Interest rates stayed at zero European growth to recover slowly but geopolitical risk remains a threat Chinese growth will slow but still remains at a high level Ukraine and Greece settled with no impact on European growth Growth slowed to a rate of 7% In SA, growth will slow and the rand remains vulnerable Growth slowed sharply and the rand depreciated to over R13/$ 24
FOORD BALANCED FUND RETURNS TO 31 OCTOBER 2015 1 year 3 years 5 years 7 years 10 years % % % % % Foord Balanced 11.7 14.5 14.9 15.2 14.6 Inflation* 4.8 5.4 5.6 5.3 6.1 Average fund # 11.2 13.3 12.5 13.0 11.8 Rank # 64/135 39/100 11/69 9/56 3/34 * CPI estimated for October 2015 # Provisional returns to 31 October 2015 Source: Foord, INET Bridge, Morningstar Average : South African Multi Asset High Equity Foord Balanced Fund (Class R). The above portfolio performance is calculated on a NAV to NAV basis. Income is reinvested on the ex-dividend date. Individual investor performance may differ as a result of the actual investment date, the date of reinvestment of income and withholding taxes. Periods greater than one year are annualised to show the average twelve month return. Actual annual figures are available on request. Past performance is not necessarily an indication of future performance. 25
FOORD EQUITY FUND RETURNS TO 31 OCTOBER 2015 1 year 3 years 5 years 7 years 10 years % % % % % Foord Equity 9.5 18.4 18.6 20.4 17.6 FTSE/JSE ALSI 11.6 16.6 15.5 17.8 15.9 Average Fund # 8.4 13.8 12.6 15.0 13.7 Rank # 77/160 20/121 5/92 1/82 1/58 # Provisional returns to 31 October 2015 Source: Foord, INET Bridge, Morningstar Average: South African Equity General Foord Equity Fund (Class R). The above portfolio performance is calculated on a NAV to NAV basis. Income is reinvested on the ex-dividend date. Individual investor performance may differ as a result of the actual investment date, the date of reinvestment of income and withholding taxes. Periods greater than one year are annualised to show the average twelve month return. Actual annual figures are available on request. Past performance is not necessarily an indication of future performance. 26
FOORD FLEXIBLE FUND RETURNS TO 31 OCTOBER 2015 1 year 2 years 3 years 5 years 7 years % % % % % Foord Flexible 17.8 13.6 19.8 20.3 18.7 Inflation* 4.8 5.3 5.4 5.6 5.3 Average Fund # 16.4 13.8 18.3 16.3 13.8 Rank # 17/43 17/40 10/29 5/26 1/22 * CPI estimated for October 2015 # Provisional returns to 31 October 2015 Source: Foord, INET Bridge, Morningstar Average : Worldwide Multi Asset Flexible Foord Flexible Fund (Class R). The above portfolio performance is calculated on a NAV to NAV basis. Income is reinvested on the ex-dividend date. Individual investor performance may differ as a result of the actual investment date, the date of reinvestment of income and withholding taxes. Periods greater than one year are annualised to show the average twelve month return. Actual annual figures are available on request. Past performance is not necessarily an indication of future performance. 27
FOORD INTERNATIONAL RETURNS TO 31 OCTOBER 2015 1 year 3 years 5 years 10 years 15 years % % % % % Fund ($) 2.3 5.3 5.3 6.4 7.0 Average fund ($) # -3.0 2.5 1.7 3.8 4.1 Rank # 19/116 15/73 6/46 2/13 3/8 Fund in rands 28.1 23.0 20.7 14.4 11.4 # Provisional returns to 31 October 2015 Source: Foord, Morningstar Ranking: USD Moderate & Flexible Allocation Foord International Trust. The above portfolio performance is calculated on a NAV to NAV basis. Income is reinvested on the ex-dividend date. Individual investment performance may differ as a result of the the actual investment date, the date of reinvestment of income and withholding taxes. Periods greater than one year are annualised to show the average twelve month return. Actual annual figures are available on request. Past performance is not necessarily an indication of future performance. 28
FOORD GLOBAL EQUITY RETURNS TO 31 OCTOBER 2015 1 year 3 years Since Inception (01/06/2012) % % % FGEF in Dollars* -2.6 4.9 7.2 MSCI AC World Index ($)** 0.0 9.9 12.1 Average Fund # 0.8 8.7 11.6 Rank # 1191/1479 1031/1210 1028/1172 FGEF in Euros* 10.8 10.7 11.0 FGEF in Sterling* 1.0 6.4 7.2 FGEF in Rands* 21.9 22.5 23.5 # Provisional returns to 31 October 2015 * Net of fees and expenses (Class B) ** MSCI AC World Total Return Net USD Ranking: Global Large-Cap Blend Equity Class B performance, net of fees, is calculated on a single pricing basis (i.e. NAV to NAV rolling monthly basis). Since the date of inception for Class B Units, there were no subscription fees or realization fees charged and no dividends or distributions were declared or made by the Fund. Individual investor performance may differ as a result of the actual investment date, the date of investment of income and withholding taxes, where applicable. For investment in Class B Units held less than 12 months, the total returns may also differ due to the realization fees of 1% that may be imposed at the discretion of the Investment Manager. Past performance of the Fund is not necessarily indicative of the future performance of the Fund. 29
MACRO OUTLOOK US ECONOMIC GROWTH REMAINS ON TRACK Job creation remains intact, wage growth improving Consumer spending recovering from poor Q1 Consumer tailwinds low-end especially (lower oil & food prices) Interest rate rise by Q1 probable, but cycle will be shallow 30
US GDP GROWTH RECOVERING AFTER WEAK Q1 2015 GDP, QoQ (% 1yr) GDP, YoY Recession Periods US 31
US UNEMPLOYMENT RATE HEADING TOWARDS FULL EMPLOYMENT Total Monthly Nonfarm Payrolls (left) Unemployment Rate - %, SA US (right) Recession Periods US 32
MACRO OUTLOOK EURO LOW GROWTH CONTINUES Weaker euro and energy continue to boost exporters Greek and Iranian agreements a boost for sentiment Recovery gaining traction 33
MACRO OUTLOOK CHINA GROWTH TO MODERATE Economic transition will take time Policy easing on many fronts likely to continue near term Property market improving/consumer confidence strong 34
MACRO OUTLOOK SA ECONOMY FACING HEADWINDS Slow growth in 2016 Lower real wage growth affecting consumer Electricity constraints, policy uncertainty and lack of job creation remain negatives Current account deficit has improved Rand remains vulnerable longer term 35
RAND OUTLOOK DEPRECIATION TO CONTINUE R 14 R 12 R 10 R 8 R 6 R 4 R 2 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 36
STRATEGY Equities (domestic and offshore) our preferred asset class International equities attractive vulnerable rand, greater diversity and better valuations High volatility cautious in the short term equity market weakness will be used to increase equity exposure Outlook for local bonds has improved local bond valuations reasonable will look to increase exposure at higher yields listed property not attractive at present 37
FOORD FLEXIBLE FUND OF FUNDS EFFECTIVE ASSET ALLOCATION AT 31 OCTOBER 2015 Foreign Assets, 67.6% SA Equities, 15.4% Cash, 14.5% Commodities, 2.5% 38
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