Specialist International Share Fund Manager Profile January 2016 Adviser use only
Specialist International Share Fund process process for this Fund is structured in the following steps: Step 1 Objectives: AMP Research, in consultation with Licensees, determines the investment and operational s for the AMP Research sector Model Portfolio. This Fund aims to provide high relative investment growth over the long term by investing in international shares, which exceed the Fund s performance benchmark (Morgan Stanley Capital International (MSCI) World (ex-australia) Accumulation Index after costs and before tax. Step 2 Manager Selection: AMP Research supplies to AMP Capital with manager names that are included in its Model Portfolio. The underlying manager line up of the Fund may deviate from that of the Model, for a number of reasons. For example, some of the desirable managers may not be available to retail investors and therefore cannot be included in Model Portfolios but are accessible by AMP Capital as an extension of its institutional relationships; and/or strategy and portfolio construction considerations. The investment capabilities of underlying managers are reviewed annually at their business premises, in addition to on-going monitoring and research meetings throughout the year. Step 3 - Portfolio construction: Manager weights and exposures within the Fund are managed to minimise undesired exposures and to ensure that the Fund has an access to diversified sources of excess returns throughout the cycle. On-going exposures and risk monitoring and management: Underlying exposures of the Fund are monitored and managed by AMP Capital on an on-going basis, using best practice systems and methodologies. The Fund blends a portfolio of strategies that invest primarily in developed market international shares. The long terms strategic assets allocation for the Fund is 100% Australian equities, within a strategic range of 90%- 100% in Australian equities. Specialist International Share Fund - structure Defensive Outperforms in down markets Core Pro-cyclical Outperforms in recovering markets
Underlying Manager Composition Name Approach Target Allocation (%) American Century Growth Some momentum Large/Mid Cap Fundamental, bottom-up stock picker with a focus on companies with accelerating earnings growth, whose earnings potential is underappreciated by the market This strategy provides the Fund with exposures to growth, quality and momentum factors. We expect this strategy to generate superior returns over the longer term, particularly when the market is strong. It may underperform in weaker markets 15 Arrowstreet Capital Core Active, quantitative investment approach that seeks to consistently outperform its benchmark through varying market conditions. This manager targets a diverse range of sources of alpha, combining signals targeting value, momentum, quality and sentiment This strategy aims to generate consistent returns over full market cycle. However, it may experience some periods of underperformance around market turning points due to its tilt towards momentum. These periods are likely to be short-term in nature. This strategy is a core allocation in the Specialist International Share Fund 30 Magellan Quality Value bias Employs a fundamental strategy that seeks to invest in companies with a sustainable competitive advantage trading below their intrinsic value whilst managing risk based on their proprietary macroeconomics assessment. This strategy provides the Fund with exposure to quality and to stable growth factors, without sacrificing substantially on value metrics. This combined with the manager s ability to make tactical allocations to cash is expected to provide downside protection to the Fund. This manager tends to underperform in strong trending markets, but successfully plays a defensive role in volatile down markets 20 Orbis Contrarian value A thematic value investor. Seeks to invest in shares of companies that trade at a significant discount to Orbis assessment of the intrinsic value of the business, which reside within unpopular sectors. Provides exposure to under-value businesses. May underperform in growth/positively trending markets. Provides retail clients with unique access to an institutional manager 15 Schroders A blend of quality and value Mid/Small Cap bias This portfolio is well diversified across a large number of holdings which display both quality and value characteristics of various strength through time. Aims to generate consistent returns over full market cycle. It may underperform in momentum driven market but should do well in most market environment. It forms part of the Fund s core allocation. 20 Total Well diversified to deliver consistent outperformance An implemented Model Portfolio approach, enhanced with access to managers that are not otherwise available to retail investors This portfolio can be expected to deliver attractive excess returns under most market conditions, but may lag somewhat during periods driven by aggressive momentum. 100
American Century American Century Global Growth Fund The Fund aims to outperform the MSCI World (ex-australia) Index in $A (net dividends reinvested) over a full market cycle. MSCI World (ex-australia) Index in $A (net dividends reinvested) American Century Global Growth is a fundamental growth strategy, seeking out companies with accelerating earnings growth whose earnings potential is underappreciated by the market. This strategy tends to do well when equity markets are driven by earnings rather than by non-fundamental influences such as short-term changes in investor risk tolerance or macroeconomic news. In markets where fundamentals are not rewarded, the strategy may underperform. The team is well resourced and is highly experienced. American Century is a growth manager with the investment philosophy that markets have been notoriously poor at spotting inflection points in the fundamental performance of companies as well as recognising the full magnitude of the likely improvement. Their focus is on identifying companies that are approaching a positive inflection point in their fundamentals and can be expected to significantly accelerate earning growth due to a variety of reasons including evolution in the market cycle, changes in the regulatory regime, technological advancement and new or enhance products. The manager employs a bottom-up investment approach seeking to identify companies with accelerating and sustainable improvements in growth and fundamentals. It seeks to exploit investors tendency to be slow in responding to the changes in business trajectories. The portfolio is managed by three portfolio managers, with over 18 years of investment experience. They are supported by eight sector analysts. The overall team is well resourced and appropriately structured, with a mix of skills and experience. American Century s strategy utilises a proprietary quantitative screen as part of its investment process to assist with idea generation. However, its key focus is on fundamental analysis with a dedicated team of analysts and significant emphasis placed on team collaboration across all of its investment professionals who all reside in New York. This strategy provides the Fund with exposures to growth, quality and momentum factors. We expect this strategy to generate superior returns over the longer term, particularly when the market is strong. It may underperform in weaker markets.
Arrowstreet Capital Arrowstreet Global Equity Fund The Arrowstreet Global Equity Fund aims to achieve a long-term total return (before fees and expenses) that exceeds the MSCI World ex Australia Index, in $A unhedged with net dividends reinvested (). MSCI World ex Australia Index, in $A unhedged with net dividends reinvested Arrowstreet adopts an active, quantitative investment approach that seeks to consistently outperform its benchmark through varying market conditions. Arrowstreet combines investment intuition with rigorous quantitative research in an effort to identify attractive stocks around the world. Please note: The strategy currently available on the platform is distributed by Macquarie Management which is slightly different to the strategy we utilise in the Specialist International Share Fund. Our strategy is managed to MSCI World ex Australia which is consistent with the Fund s benchmark. Arrowstreet believes the most valuable insights are derived from the information that is not obvious to the market, and that a well-constructed quantitative process, when applied to a broad universe, can add meaningful value from a large number of incremental bets. Arrowstreet is a core, long only quantitative strategy that aims to outperform the benchmark over a full market cycle. The strategy targets a diverse range of sources of alpha, with signals targeting value, momentum, quality, extreme sentiment. It aims to establish tactical, rather than systematic style tilts. This team comprises four senior investors who hold an overall responsibility for process design management and enhancement, and for establishing direction of research into market dynamics and quantitative signals to capture those dynamics. They are supported by nine quantitative investors/researchers, who are responsible for building and researching market signals. All have impressive backgrounds in academia and solid investment track records. Arrowstreet uses a sophisticated quantitative process, designed to deliver excess returns in a highly risk controlled manner. Stock forecasts are based upon a diverse set of predictive factors. In constructing the final portfolio, Arrowstreet uses an optimisation process to balance the trade-offs between a stock s expected returns of individual stocks and their contribution to portfolio risk. Additionally, the manager builds costs of trading considerations into their investment process. The strategy aims to generate consistent returns over full market cycles. However, the strategy may experience some periods of underperformance during rapid market turning points given its tilt towards momentum. These periods are likely to be short-term in nature. This strategy is a core allocation in the Specialist International Share Fund.
Magellan Magellan Global Fund The primary s of the Fund are to achieve attractive risk-adjusted returns over the medium to long-term, while reducing the risk of permanent capital loss. MSCI World Net TR Index Magellan Asset Management Limited employs a fundamental strategy that seeks to invest in companies with a sustainable competitive advantage trading below their intrinsic value whilst managing risk based on their proprietary macroeconomics assessment. The manager plays a defensive role in the portfolio. The Magellan Global Fund applies a long-term investment approach focused on capital preservation and absolute wealth accumulation. The Magellan Global Fund seeks to invest in outstanding companies at attractive prices, while exercising a deep understanding of the macroeconomic environment to manage investment risk. Magellan perceives outstanding companies to be those that are able to sustainably exploit competitive advantages in order to continually earn returns on capital that are materially in excess of their cost of capital. Magellan believes that an appropriately structured portfolio of 20 to 40 investments can provide sufficient diversification to ensure that investors are not overly correlated to any single company, industry-specific or macroeconomic risk. Magellan is focused on companies that have strong quality characteristics (in particular, low levels of gearing). These tend to be large cap stocks with low market beta. The Magellan Global Fund will invest in companies that have relatively high price-to-earnings and price-to-book multiples, provided that their businesses are outstanding and their shares are trading at an appropriate discount to their assessed intrinsic value. These tend to be large cap stocks with low market beta. The portfolio manager and investment team are well respected and highly regarded in the market. There are 33 people in the investment team who are all sector specialists. The portfolio manager is responsible for individual stock decisions and portfolio construction. Magellan selects stocks based on their view of a company s long term intrinsic value and their three year forecast of total shareholder return. The intrinsic value of each stock is derived through a three-stage discounted cash flow (DCF) valuation after in-depth industry analysis and detail company research. The portfolio construction is a portfolio manager driven, judgmental process. This manager can allocate up to 20% of the portfolio to cash. This strategy provides the Fund with exposure to quality and to stable growth factors, without sacrificing substantially on value metrics. This combined with the manager s ability to hold up to 20% in cash is expected to provide downside protection to the Fund. This manager tends to underperform in strong trending markets, but successfully plays a defensive role in volatile down markets.
Orbis Orbis Global Equity Fund The Fund seeks higher returns than the average of the world s equity markets, without greater risk of loss over the long term. MSCI World Index (net dividends reinvested) AUD Orbis is a value-focused contrarian investment manager. Orbis seeks to invest in shares of companies that trade at a significant discount to their assessment of the intrinsic value of the business, believing the share prices will eventually reflect intrinsic value. Orbis is prepared to be patient as an investor in these companies and prefers wide gaps between share price and intrinsic value as a margin of safety. Orbis believes that behavioural biases drive the investors to focus on short-term news rather than the long-term fundamentals. As a result, the share prices of companies can deviate significantly from their long-term intrinsic values. Orbis seeks to exploit these opportunities by applying a disciplined, bottom-up approach with thematic/sectoral insights, and in-depth company research. The manager believes that currency exposures present both risk and opportunities, so actively manages this in the portfolio. Orbis is best viewed as a contrarian thematic value style investor focusing on companies with strong balance sheets, whose share prices have struggled due to cyclical factors. Orbis prefer companies that are cheap based on book value but in some cases may appear expensive based on historical earnings ratios. These often reside within sectors that are impacted by negative cyclical factors or sentiment, but have clearly articulated and realistic catalysts for improvement. Most of these companies generally display good long term growth that the market has overlooked due to investors short term investment horizon. There are 47 investment analysts in the investment team including 7 senior portfolio managers. The investment analysts are divided by both countries and global sector line and they will generate ideas from the area they are responsible for. The investment process starts by applying a proprietary quantitative screening process. Only the stocks that meet the minimum liquidity requirements are included for further research. Quantitative screens will screen the companies based on four drivers of intrinsic value: earnings, dividends, revenue and tangible net assets per share. Analysts dive deep into the quality of management, company s competitive positioning, strength of balance sheet, ability to generate superior cash flows, earnings and dividends growth in prevailing economic environment. Separately, the manager actively manages currency exposures. The Specialist International Share Fund s allocation to Orbis provides thematic value exposure. Given its long-term focus, this strategy may experience volatility over the short term. While Value managers tend to deliver strong performance during market recovery periods, they often underperform in tough economic environments. Historically Orbis has been a little different producing good relative performance when overvalued (bubble like) markets decline even when this coincides with a weaker economic environment. Orbis is an institutional manager, thus the Specialist International Share Fund provides retail clients with unique access to a thematic contrarian, value expert, in addition to actively managed currency exposures.
Schroders Schroder QEP Global Blend Fund To generate long-term returns before fees in excess of traditional capitalisation weighted global equity indices. MSCI World ex Australia or MSCI AC World ex Australia for performance measurement purposes only Schroders QEP team employs a quantitative Blend strategy which is an actively managed, unconstrained Strategy that combines two fundamental return drivers which have historically outperformed over time but typically at different stages of the economic cycle: Value which aims to deliver higher long run returns and Quality which tends to perform strongly during periods of heightened risk aversion. The Global Blend portfolio is benchmark unaware with bottom-up stock selection to construct a highly diversified portfolio of typically over 400 stocks targeting a long term return before fees in excess of traditional capitalisation weighted global equity indices. Schroder Global Blend is an active, index-unconstrained strategy designed to deliver higher long-run returns with reduced stock-specific risk. Analysing a universe of over 15,000 companies, the QEP team constructs a highly diversified portfolio typically containing over 400 stocks. Stock selection for this strategy is grounded in the analysis of company fundamentals indicating Value and Quality, and portfolios will typically exhibit a style bias towards both of these factors. The advantage of investing in both Value and Quality is that, while both tend to outperform over time, they deliver their returns at different stages of the economic cycle, creating the potential for outperformance across a broad range of market environments. The portfolio is constructed based upon fundamentals by combining Value and Quality opportunities. The Value of a company is determined across measures of dividends, cash flow, earnings sales and assets. Quality is assessed using measures of Profitability, Stability and Financial Strength, as well as specialised balance sheet measures for Financials. The QEP team is comprised of 29 staff based in London, Sydney, New York and Hong Kong. The portfolio is managed by two seasoned and well regarded senior portfolio managers whose investment and technical skills and expertise are highly complementary. Schroders QEP invest from the broadest possible global universe of stocks while screening for sufficient liquidity to trade without undue market impact. We analyse the fundamentals of 15,000 companies every day from both developed and emerging markets and rank them in terms of their Value and Quality. These Value and Quality Ranks are then combined to create a Blend Rank. The QEP Team then selects stocks from the top third of the Blend Rank, focusing on stocks with a favourable combination of both Value and Quality. The team then decide how much of each stock to own by further assessing each company on additional fundamental factors, including management indicators and dividend history. Other considerations in scaling position sizes include measures of risk and also the liquidity and volatility of the stock (i.e. the likely market impact of trading it). Portfolio construction is bottom-up, driven by stock selection. Portfolio managers assess the portfolio every day and re-balance according to the opportunities available. QEP portfolio managers are responsible for controlling the overall risk budget of the fund, ensuring an efficient trade-off between potential risks and rewards. Exceptional diversification is one of the most important tools, maximising exposure to return opportunities access sectors, countries and market capitalisation while minimising stock-specific risk. Portfolio managers ensure that the portfolio is sufficiently diversified, typically invested across in excess of 400 stocks. Portfolio managers implement every trade decision and as experienced investors, provide an important overlay in terms of awareness of future opportunities and risks in global markets. The strategy aims to generate consistent returns over full market cycle. It may underperform in a momentum driven market but should do well in most market environments. It forms part of the Fund s core exposure, and provides it with an access to quality value opportunities and to the smaller end of the market.
Important note The information in this presentation is provided only for the use of advisers/financial planners; it is not intended for investors. The adviser/financial planner remains responsible for any advice/services they provide to clients including making their own inquiries and ensuring that the advice/services are appropriate and in accordance with all legal requirements. Therefore, advisers/planners must not attribute any advice/service to AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497)(AMP Capital) or in any way suggest that AMP Capital or any member of the AMP Capital Group is the author of any part of that advice/service. AMP Capital Funds Management Limited (ABN 15 159 557 721) (AFSL 426455) (AMPCFM) is the responsible entity and issuer of units in the Specialist International Share Fund (Fund). To invest in the Fund, investors will need to obtain the current Product Disclosure Statement (PDS) from AMP Capital. The PDS contains important information about investing in each Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Funds. Neither AMP Capital, AMPCFM nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this document. While every care has been taken in the preparation of this document, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor s s, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor s s, financial situation and needs. Each of the managers listed in this document has consented to the inclusion of, and the statements contained in, the relevant manager profile in this document.