ASSET ALLOCATION WORKSHOP November 17, 2017
ASSET ALLOCATION WORKSHOP Warren Buffet Peter Thiel
Asset Management Industry USD 63.9 Trillion Global Asset Under Management Expected Grow Rate 6% USD 100 Trillion by 2020 Fundamental shift to low-cost funds USD 334.8 Billion Indian Asset Under Management 30% USD 895 Million Bangladesh Asset Under Management In 1998, AIMS, the first AMC, started Took 10 years to launch a second one, LR Global Bangladesh AUM increased by five times since 2010, despite the crash
About LR Global Bangladesh BDT 1,127 Crore Asset Under Management 2008 2010 Inception First Mutual Fund OUR TEAM 50 Years of Cumulative Experience 100% from Top Business Schools What We Do Managing institutional investors money Across six Mutual Funds since 2009 Objective is to earn superior risk-adjusted return on a consistent basis Our Moto: NEVER LOSE YOUR INVESTOR S MONEY
30-12-08 30-03-09 30-06-09 30-09-09 31-12-09 31-03-10 30-06-10 30-09-10 31-12-10 31-03-11 30-06-11 30-09-11 31-12-11 31-03-12 30-06-12 30-09-12 31-12-12 31-03-13 30-06-13 30-09-13 31-12-13 31-03-14 30-06-14 30-09-14 31-12-14 31-03-15 30-06-15 30-09-15 31-12-15 31-03-16 30-06-16 30-09-16 31-12-16 31-03-17 30-06-17 30-09-17 A Tale of Two Stocks 30000 25000 20000 15000 10000 5000 British American Tobacco Bangladesh Company Limited 24,885.8 0 BDT 207.3 1 January, 2009 BDT 3,297.9 16 November, 2017 CAGR 49.4% In Last 9 Years BDT 1.0 Crore invested in BATBC in 2009 would have become BDT 25.0 Crore
30-12-08 30-03-09 30-06-09 30-09-09 31-12-09 31-03-10 30-06-10 30-09-10 31-12-10 31-03-11 30-06-11 30-09-11 31-12-11 31-03-12 30-06-12 30-09-12 31-12-12 31-03-13 30-06-13 30-09-13 31-12-13 31-03-14 30-06-14 30-09-14 31-12-14 31-03-15 30-06-15 30-09-15 31-12-15 31-03-16 30-06-16 30-09-16 31-12-16 31-03-17 30-06-17 30-09-17 A Tale of Two Stocks 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Prime Finance & Investment Ltd. 750.7 BDT 1,105.5 30 December, 2008 BDT 11.6 16 November, 2017 Market Cap After Adjustment CAGR (3.5%) In Last 9 Years Since its Peak in 5 December, 2010, Prime Finance Lost 91.3% of its
Performance of LR Global Bangladesh GREEN DELTA MUTUAL FUND AIBL 1ST ISLAMIC MUTUAL FUND DBH FIRST MUTUAL FUND 145 120 95 70 LR_GREENDELMF 133 91 150 125 100 75 LR_AIBL1STMF 140 81 195 170 145 120 95 LR_DBH1STMF 164 115 45 20 Sep-10 Jan-12 May-13 Sep-14 Jan-16 May-17 50 25 Jan-11 Apr-12 Jul-13 Oct-14 Jan-16 Apr-17 70 45 20 Feb-10 Oct-11 Jun-13 Feb-15 Oct-16 LR GLOBAL BANGLADESH MF ONE MBL 1ST MUTUAL FUND NCCBL MUTUAL FUND-1 175 150 150 LR_LRGLOBMF1 LR_MBL1STMF 146 157 125 175 150 LR_NCCBLMF1 155 125 100 105 100 75 88 125 100 131 75 50 75 50 Sep-11 Dec-12 Mar-14 Jun-15 Sep-16 25 Feb-11 May-12 Aug-13 Nov-14 Feb-16 May-17 50 May-12 May-13 May-14 May-15 May-16 May-17
Our Performance Performance Statistics (From Feb, 2010 to Sep, 2017) LR Funds Benchmark Annualized Return (ɼ) 8.1% 1.9% Annualized Std. Deviation (Ϭ) 11.7% 22.7% Return Per Unit of Risk (ɼ/Ϭ) 0.69 0.08 Alpha (α) 4.8% Beta (β) 0.46 Performance Attribution Analysis: Alpha (α) Drivers Asset Allocation 67% Security Selection 33% So, What is our secret sauce?
How to Design A Portfolio 4 Steps Deciding which ASSET CLASSES to include and which to exclude Deciding WEIGHTS for each of the asset classes allowed Strategically altering the weights to capture excess returns, aka MARKET TIMING SECURITY SELECTION Investment Policy Investment Strategy
The Importance of Asset Allocation 4.8% Alpha Generated 67% Asset Allocation 33% Security Selection 93.6% of Return Variations Come from Asset Allocation Determinants of Portfolio Performance* * Determinants of Portfolio Performance was a seminal research by Gary P. Brinson, L. Randolph Hood and Gilbert L. Beebower published in 1995, one of the first works that academically analyzed performance of portfolio managers of mutual funds during 1985-94 period
Asset Allocation of LR Global Bangladesh Since Inception, Our Material Outperformance Enabled Funds to Disburse Cash Dividend to Unit Holders Even in Down-Markets 100% Active Management and Asset Allocation Asset Size BDT 1,048 Crore (From Feb, 2010 to Sep, 2017) 21.4% 75% 5.5% 11.7% 13.3% 50% 11.0% 1.3% 11.6% Banks & 25% 3.2% FI 0.0% 0% 21.0% Cash 2010 2011 2012 2013 2014 2015 2016 2017 2017
Takeaway