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13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
13611 city wire draft4
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13611 city wire draft4

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  • 1. Investing in Unpopular Assets with InvestecCitywire Scotland, 13-14 June 2013Peter Lowery, Value Investment Team
  • 2. Page 213611Target audience RetailThis document is only for professional investors and professional financial advisors.No other person should rely on the information contained in this document.This document is not to be generally distributed to the public.
  • 3. Page 313611Seven capabilities designed to deliver distinctive highperformance strategies● Clear investment philosophies andprocesses applied across multiplestrategies● Focused teams with short lines ofcommunication for effective implementation● Clear performance accountability● Supported by a strong investment centreproviding leadership, support in talentmanagement, integration, governance, riskmanagement, execution, strategic andresearch support● Approximately £70 billion in assets undermanagementFocused teams, one culture, one missionSource: Investec Asset Management, as at 31 March 2013
  • 4. Page 413611Investec UK Special Situations FundKey factsFund Structure UK-based OEIC, Series i, UCITS* CompliantObjective The Fund aims to provide a combination of income and long-term capital growth, primarily through the application of acontrarian approach to investment in UK EquitiesComparative index FTSE All-ShareFund manager Alastair Mundy and teamFund size £893.5 million (31 May 2013)Annual management fee ‘A’ Shares – 1.50%‘I’ Shares – 0.75%General administrative charge ** 0.09%Charges taken from*** 50% capital, 50% incomeURL www.investecassetmanagement.com/ukspecialsituationsSource: Investec Asset Management, June 2013* Has extended investment powers which are currently not used, however they could be used without further shareholder notification** There will be additional charges for custody*** A proportion of the Fund’s expenses are charged to the capital account of the Fund rather than to its income, which for income shareshas the effect of increasing the Fund’s income distributions (which may be taxable) whilst reducing its capital to an equivalent extent.This could constrain future capital and income growth. For accumulation shares this has the effect of increasing the Fund’s incomedistributions automatically reflected in the value of your shares (which may be taxable) whilst reducing its capital to an equivalent extent.Fund ratings may be provided by independent rating agencies based on a range of investment criteria. For a full description of the ratingsplease see www.investecassetmanagement.com/ratings
  • 5. Page 513611Investec Cautious Managed FundKey factsFund Structure UK-based OEIC, Series i, UCITS CompliantObjective The Fund aims to provide a combination of income and long-term capital growth by investing conservatively in adiversified portfolio of equities, bonds and other fixed interestsecurities of high quality and marketability. At all times theFund’s equity exposure will be limited to a maximum of 60%of the portfolio value.Performance comparison index 50% FTSE All-Share / 50% ML GBP Broad MarketFund manager Alastair Mundy and teamFund size £2,620.0 million (31 May 2013)Annual management fee ‘A’ Shares – 1.50%‘I’ Shares – 0.75%General administrative charge 0.09%*URL www.investecassetmanagement.com/cautiousmanagedSource: Investec Asset Management, June 2013. Fund size valuation is preliminary* There will be additional charges for custodyFund ratings may be provided by independent rating agencies based on a range of investment criteria. For a full description of the ratingsplease see www.investecassetmanagement.com/ratings
  • 6. Page 613611Outperforming is difficult… what’s your edge?
  • 7. Page 713611How do you get your edge?
  • 8. Page 813611Unpopular assets… difficult to buy● Human beings are emotional and over-react● Tendency to extrapolate● Difficult to put yourself in the way of perceived danger● Overconfidence… ‘I’ll wait until it turns’
  • 9. Page 913611Unpopular assets… but likely to represent better value● Reversion to the mean● Future is uncertain● Less hope and more bad news baked in● More lowly valued!− Supply & Demand− Regulation− Complacency
  • 10. Page 1013611Investment Life-CyclesCompany profitabilityInvestor BehaviourTimeIn favour /expensiveEarnings Growth Relative /Return on capitalOverconfidenceIn trendsDeclineextrapolatedindefinitelyTension zoneTension zoneFair valueIncreasedinvestmentOut of favour /cheapCutting capacityTo be in our universe, shares must haveunderperformed by 50% from their peak relativeto the FTSE All-Share Index. This peak must nothave occurred in the last 2 years
  • 11. Page 1113611But there are dangers…● Very unpopular not slightly unpopular● The world is changing and some (more?) businesses are in terminal decline● Needs to have the time and the ability to make it to better times● Often takes longer and more bad news surfaces than expected● Turnaround shouldn’t be assumed and must be risk-adjusted● Make sure that it is cheap… adjust for real world costs
  • 12. Page 1213611We ask ourselves four questions1. Why is it unpopular? What are we standing in the way of?2. What has been missed? What were people saying when it was more highly valued?3. Does it have the balance sheet to get to better times?4. What is a reasonable estimate of fair value? Does this represent enough upside?
  • 13. Page 1313611Protecting on the downside is key to long-term successFor illustrative purposes onlyWarren Buffett£100 £100-25%£75+33%£75Rule No.1 of investing is:Don’t lose money!““£100 £100-50%£50+100%£50
  • 14. Page 1413611Example: Signet● Largest jeweller in US, >10% market share =sales of approx. $3.5bn● Largest jeweller in UK, >20% market share =sales of $410m● Mainly bought in 2008-2009 consumer gloom● Jewellery market very attractive –− Knowledge asymmetry− Lack of price comparison− Prestige purchase− Low stock risk− Limited threat from discounters & internet● Gaining market share from independents● Trading as Kay and Jared in the US, andH. Samuel and Ernest Jones in the UK050100150200250300Jun-03Dec-03Jun-04Dec-04Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Jun-09Dec-09Jun-10Dec-10Jun-11Dec-11Jun-12Dec-12Jun-13Signet Jewelers Price relative to FTSE All ShareBuysSource: Thomson Reuters DataStream, June 2013This is not a buy or sell recommendation for any particular stock.
  • 15. Page 1513611050100150200250300350400Dec-00Aug-01Mar-02Oct-02May-03Dec-03Jul-04Feb-05Sep-05Apr-06Nov-06Jun-07Jan-08Aug-08Mar-09Oct-09Jun-10Jan-11Aug-11Mar-12Oct-12May-13Carnival Price relative to FTSE All-ShareExample: Carnival● No.1 global cruise operator (c.45% marketshare) in a growing and consolidated cruisemarket (RCL c.25%, NCL c.7%)● Favourable industry dynamics with ‘mobilehotels’, possible all year demand etc● Current returns depressed by excessivepipeline of vessels from before downturn andpoor consumer spending… plus CarnivalConcordia sinking and Carnival Triumphbreaking down in the middle of the sea!● Pipeline of vessels has reduced which bodeswell for future pricing and profitability● Consumers have shown themselves to haveshort memories● $40bn of assets making EBIT of only $2bnSource: Thomson Reuters DataStream, June 2013This is not a buy or sell recommendation for any particular stock.Buys
  • 16. Page 1613611What is really riskier... unpopular or popular?Little bad news in the priceHigh expectationsComplacencyTrading at new highsDangers of reversionEasy to love… fickle trend chasersLikely to be highly valuedUnpopular PopularLots of bad news in the priceLow expectationsHeightened desire to release valueShown ability to be more highly valuedReversion to meanHard to love… no momentum moneyLikely to be lowly valued
  • 17. OEICInvestec UK Special Situations FundAn ideal fund to blend with the best in the industry
  • 18. Page 1813611Why Investec UK Special Situations Fund?● Strong historic risk adjusted returns● Blends very well with funds with other investment styles● Particularly strong historic performance in down markets● Has typically bounced back quickly after underperformance● Award winning and highly rated fund managerPast performance should not be taken as a guide to the future, losses may be made. Data is not audited
  • 19. Page 1913611192.5135.6149.60%50%100%150%200%250%May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13PercentagegrowthInvestec UK Special Situations A Acc Net (MF)IMA UK All Companies sectorFTSE All-Share indexInvestec UK Special Situations FundA top long term performerPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, dates to 31 May 2013, NAV based, income reinvested (inclusive of management fees but excluding any initialcharge) net of UK basic rate tax, in GBPPeriodSectorranking1 year 86/2682 years 53/2643 years 89/2585 years 15/23410 years 27/166
  • 20. Page 20136110%50%100%150%200%250%300%Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Apr-08Jul-08Oct-08Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Jan-12Apr-12Jul-12Oct-12Jan-13Apr-13Rolling 10 year returns positive over 100% of periodsPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, from 30 April 2004 to 31 May 2013, NAV based, income reinvested (inclusive of management fees but excludingany initial charge) net of UK basic rate tax, in GBP
  • 21. Page 2113611156.6130.3141.5111.5151.3119.302040608010012014016018020012-Mar-03 to 15-Jun-07 03-Mar-09 to 31-Mar-13PercentagegrowthInvestec UK Special Situations A GBP Acc Net IMA UK All Companies FTSE All-Share TRIn aggregate, the fund has outperformed peers over bullmarketsPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper to 31 March 2013, NAV based, income reinvested (inclusive of management fees but excluding any initial charge) net ofUK basic rate tax, in GBPThe bull and bear markets are defined by the peaks and troughs in FTSE All-Share performance
  • 22. Page 2213611-24.0-39.1-43.6-45.4-46.4-45.4-50-45-40-35-30-25-20-15-10-5031-Dec-99 to 12-Mar-03 15-Jun-07 to 03-Mar-09PercentagegrowthInvestec UK Special Situations A GBP Acc Net IMA UK All Companies FTSE All-Share TRFund has exhibited excellent bear market capturePast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper to 4 October 2011, NAV based, income reinvested (inclusive of management fees but excluding any initial charge) net ofUK basic rate tax, in GBP31.6 77.3 86.6 64.2 83.2 83.2Performancenecessary to return tobreak-even
  • 23. Page 2313611-70.0-60.0-50.0-40.0-30.0-20.0-10.00.0Investec UK Special Situations (ranked 17/165)Maximum drawdown top quartile versus sector over 10 yearsPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, based on total returns from 31 May 2003 to 31 May 2013, NAV based, income reinvested (inclusive of managementfees but excluding any initial charge) net of UK basic rate tax, in sterling. Performance refers to A Inc share class
  • 24. Page 2413611An ideal fund to blend with the best in the industryInvestec UK SpecialSituationsBlackRock UK SpecialSituationsAXA Framlington UK SelectOpportunitiesCazenove UK OpportunitiesInvesco Perpetual UKAggressiveFranklin UK Mid CapOld Mutual UK Mid CapSchroder UK Alpha PlusM&G Recovery0246810121416182010 12 14 16 18 20 22 24Annualisedperformance%changeAnnualised standard deviationPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper to 31 May 2013, annualised, NAV based, income reinvested (inclusive of management fees but excluding anyinitial charge) net of UK basic rate tax, in GBP. Chart axes converge on IMA UK All Companies sector averagesPerformance refers to the A Acc share class
  • 25. Page 2513611Low historic correlation vs. key competitorsPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedLipper to 31 March 2013, annualised, NAV based, income reinvested (inclusive of management fees but excluding any initial charge) net of UK basic rate tax, inGBP. Correlation data are based on the relative returns of the funds in the IMA UK All Companies sector vs. the average fundagainst the FTSE All-Share over the ten year period to 31 December 2012. Chart axes converge on sector averagesPerformance refers to the A Acc share classThis chart illustrates thecorrelation of ouroutperformance against theFTSE All-Share Index withthe outperformance of theaverage fund in the sectoragainst the FTSE All-ShareIndex, compared with thealpha of the funds.-7.0-5.0-3.0-1.01.03.05.07.00.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9Alpha(yaxis)Correlation (x axis)Schroder UKAlpha PlusM&GRecoveryAXA Framlington UKSelectOpportunitiesInvestec UKSpecialSituationsBlackRock UKSpecial SituationsCazenove UKOpportunitiesInvesco PerpetualUK Aggressive
  • 26. OEICInvestec Cautious Managed FundAiming for attractive returns with lower volatility
  • 27. Page 2713611Why Investec Cautious Managed?● Strong long-term track record● Sufficient flexibility to purchase a spread of assets that help to dampen volatility● Has only underperformed sector in 1 of the last 13 years● Rolling 5 and 10 year returns have always been positive● Award winning and highly rated fund managerPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, dates to 31 May 2013, NAV based, income reinvested (inclusive of management fees but excluding any initialcharge) net of UK basic rate tax, in GBP. Performance is preliminarySector rankings based on IMA Mixed Investment 20-60% Shares
  • 28. Page 2813611Investec Cautious Managed FundOutperformer and portfolio diversifierPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, dates to 31 May 2013, NAV based, income reinvested (inclusive of management fees but excluding any initialcharge) net of UK basic rate tax, in GBP. Performance is preliminarySector rankings based on IMA Mixed Investment 20-60% Shares104.567.437.5-2020406080100120May 03 May 04 May 05 May 06 May 07 May 08 May 09 May 10 May 11 May 12 May 13%Investec Cautious Managed A Acc IMA Mixed Investment 20-60% SharesUK Retail Price IndexPeriodSectorranking1 year 58/1492 years 53/1403 years 46/1235 years 3/8610 years 7/23
  • 29. Page 291361110 year rolling total returns are strongPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper, 08 June 1993 to 31 May 2013, NAV based, income reinvested (inclusive of management fees but excluding anyinitial charge) net of UK basic rate tax, in GBP. Performance is preliminary0%20%40%60%80%100%120%140%160%180%Jun-03 Jan-04 Sep-04 Apr-05 Nov-05 Jul-06 Feb-07 Oct-07 May-08 Dec-08 Aug-09 Mar-10 Oct-10 Jun-11 Jan-12 Sep-12 Apr-13%
  • 30. Page 3013611Evolving the asset allocationThe portfolio may change significantly over a short period of timeSource: Investec Asset Management, 30 April 20130.05.010.015.020.025.030.035.040.0Cash andshort datedGovernmentBondsGoldSharesIndex-linkedbondsCorporateBondsNorwegianGovernmentBondsUKEquitiesEuropeanequitiesUSEquitiesJapaneseEquities31-Mar-11 30-Sep-11 31-Mar-12 30-Sep-12 Current (30-Apr-13)
  • 31. Page 3113611The Fund has outperformed the Sector in 11 of the last 13calendar yearsPast performance figures are not audited and should not be taken as a guide to the futureSource: Lipper, total returns from 31 December 1999 to 31 May 2013, NAV based, income reinvested (inclusive ofmanagement fees but excluding any initial charge) net of UK basic rate tax, in GBP. Performance is preliminary2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD-20-15-10-50510152025Investec Cautious Managed A Acc Net IMA Mixed Investment 20-60% Shares   =    
  • 32. Page 3213611Good bull market capture relative to sectorPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper to 31 March 2013, NAV based, income reinvested (inclusive of management fees but excluding any initial charge)net of UK basic rate tax, in GBP73.0 76.854.9 52.2151.3119.302040608010012014016018020012-Mar03 to 15-Jun-07 03-Mar-09 to 31-Mar-13PercentagegrowthInvestec Cautious Managed A Acc Net IMA Mixed Investment20-60% Shares FTSE All-Share TR
  • 33. Page 3313611Good bear market capture relative to sector-4.3-22.9-11.3-23.4-46.4-45.4-50-45-40-35-30-25-20-15-10-5031-Dec-99 to 12-Mar-03 15-Jun-07 to 03-Mar-09PercentagegrowthInvestec Cautious Managed A Acc Net IMA Mixed Investment20-60% Shares FTSE All-Share TRPast performance should not be taken as a guide to the future, losses may be made. Data is not auditedSource: Lipper to 4 October 2011, NAV based, income reinvested (inclusive of management fees but excluding any initial charge)net of UK basic rate tax, in GBP
  • 34. Page 3413611Value investing with Investec Asset Management● Focused on identifying out of favour, cheap stocks with appropriate balance sheets● Strong historic risk-adjusted returns● Particularly strong performance in down markets● Award winning and highly rated fund manager● Investec UK Special Situations Fund – could be ideal to blend with the best inthe industry● Investec Cautious Managed Fund – may be suitable for clients who need a lowervolatility solutionPast performance should not be taken as a guide to the future, losses may be made. Data is not audited
  • 35. Thank youwww.investecassetmanagement.com
  • 36. Page 3613611Important information GSY BOEICThis communication is not for general public distribution. If you are a private investor and receive it as part of a general circulation, pleasecontact us at +44 (0)20 7597 1900. The value of this investment, and any income generated from it, will be affected by changes ininterest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating tothe assets in which it invests. The Fund’s investment objective will not necessarily be achieved and investors are not certain to makeprofits; losses may be made. Past performance should not be taken as a guide to the future. Performance would be lower had initialcharges been included and will vary between different share classes dependant upon their applicable charges. Returns to individualinvestors will vary in accordance with their personal tax status and tax domicile.All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions statedare honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particularsecurity. The portfolio may change significantly over a short period of time.This communication is provided for general information only. It is not an invitation to make an investment nor does it constitute an offer forsale. The full documentation that should be considered before making an investment, including the Prospectus and Key InvestorInformation Documents or Offering Memorandum, which set out the fund specific risks, is available from Investec Asset Management.This communication should not be distributed to private customers who are resident in countries where the Fund is not registered for saleor in any other circumstances where its distribution is not authorised or is unlawful. Please visitwww.investecassetmanagement.com/registrations to check registrations by country. For Funds registered in Switzerland, the Prospectus,Key Investor Information Documents and Report & Accounts may be obtained free of charge from the Swiss Representative and PayingAgent, RBC Investor Services Bank S.A., Esch-sur-Alzette, Badenerstrasse 567, P.O. Box 101, CH-8066 Zurich.In the USA, this communication should only be read by institutional investors, professional financial advisers and, at their exclusivediscretion, their eligible clients, but must not be distributed to US Persons.THIS INVESTMENT IS NOT FOR SALE TO US PERSONS.Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management Limited, which isauthorised and regulated by the Financial Conduct Authority, June 2013.
  • 37. Page 3713611SecurityFund(%)Index*(%)Active(%)Diageo PLC 0.00 2.46 -2.46AstraZeneca PLC 0.00 2.12 -2.12Barclays PLC 0.00 2.06 -2.06BG Group PLC 0.00 2.05 -2.05BHP Billiton PLC 0.00 2.03 -2.03Rio Tinto PLC 0.00 1.79 -1.79SABMiller PLC 0.00 1.56 -1.56Reckitt Benckiser Group PLC 0.00 1.53 -1.53Standard Chartered PLC 0.00 1.52 -1.52Tesco PLC 0.00 1.47 -1.47Investec UK Special Situations FundActive positionsTop 15 overweight positions Top 10 underweight positionsThe portfolio may change significantly over a short period of timeThis is not a buy or sell recommendation for any particular stockData as at 31 May 2013. Source: Investec Asset Management* Index is FTSE All-ShareSecurityOverweightEstablishedFund(%)Index*(%)Active(%)Signet Jewelers Ltd. 2006 5.59 0.00 5.59Grafton Group PLC 2008 5.20 0.00 5.20GlaxoSmithKline PLC 2004 7.95 4.23 3.72SIG PLC 2009 3.46 0.05 3.41Avon Products Inc. 2010 2.58 0.00 2.58Kingspan Group PLC 2009 2.55 0.00 2.55QinetiQ Group PLC 2010 2.56 0.06 2.50Royal Bank of Scotland Group Plc 2012 2.73 0.35 2.38BT Group PLC 2003 3.18 1.19 1.99Travis Perkins PLC 2007 2.10 0.20 1.90Unilever PLC 2003 3.37 1.68 1.70Direct Line Insurance Group PLC 2012 1.66 0.08 1.58Carnival PLC 2012 1.57 0.21 1.36Carrefour S.A. 2011 1.11 0.00 1.11TNT Express N.V. 2011 1.10 0.00 1.10
  • 38. Page 3813611UK Equities26.4%US Equities4.3%JapaneseEquities 10.5%EuropeanEquities 2.3%Gold Shares3.8%Physical Gold4.7%UK Index-LinkedGovernmentbonds7.9%CorporateBonds 1.5%NorwegianGovernmentBonds 9.7%Cash and shortdatedGovernmentBonds29.0%Investec Cautious Managed FundAsset allocation and holdingsSource: Investec Asset Management, 30 April 2013The portfolio may change significantly over a short period of time. This is not a buy or sell recommendation for any particular stockTop 5 gold holdings % of fundSource Physical Gold ETC 4.7Newmont Mining 1.1Anglogold Ashanti ADR 0.7Barrick Gold Corp 0.7Gold Fields ADR 0.6Top 5 Japanese equity holdings % of fundJapan Airlines Co. Ltd. 1.2T&D Holdings Inc. 1.0Casio Computer Co. Ltd. 0.7Yamaha Corp. 0.6Konica Minolta Inc. 0.4Top 10 equity holdings (excl. gold shares) % of fundHSBC Holdings PLC 2.8Signet Jewelers Ltd. 2.6Grafton Group PLC 2.6Royal Dutch Shell PLC (CL B) 2.4Kingspan Group PLC 2.0GlaxoSmithKline PLC 1.9Avon Products Inc. 1.7Travis Perkins PLC 1.3Japan Airlines Co. Ltd. 1.2QinetiQ Group PLC 1.2

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