20131017 citywire pictet emerging corporate bonds-final
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20131017 citywire pictet emerging corporate bonds-final Presentation Transcript

  • 1. Niche no more: emerging corporate debt Alain-Nsiona Defise 17-18 October 2013 Citywire Miami Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt
  • 2. Q1. Which bar represents EM USD Corporate YTD 2013 performance? A. Red 0.0% -1.0% B. Grey C. Blue -2.0% -3.0% -4.0% D. Green -5.0% -6.0% E. Purple -7.0% -8.0% Source: JP Morgan, as at 30.09.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 2
  • 3. EM USD Corporate YTD 2013 performance D. Green EMERGING CORPORATE PERFORMANCE VS USD AND LOCAL CURRENCY SOVEREIGNS 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% EM LC Sovereigns EM USD Corporates EM USD Sovereigns EM HY Corps (USD) EM IG Corps (USD) Source: JP Morgan, as at 30.09.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 3
  • 4. How has Bernanke’s talk impacted EM Fixed Income so far? EM has sold off since May but bounced back in September EMERGING CORPORATE PERFORMANCE VS USD AND LOCAL CURRENCY SOVEREIGNS EM Fixed Income YTD to end Aug YTD to end Sep Duration YTM EM USD Corporates -3.9% -2.5% 5.2yrs 5.8% EM USD Sovereigns -9.0% -6.7% 6.8yrs 5.9% EM LC Sovereigns -11.5% -7.6% 4.7yrs 6.6% EM IG Corps (USD) -4.4% -2.8% 5.4yrs 4.9% EM HY Corps (USD) -2.7% -1.6% 4.6yrs 7.8% Source: JP Morgan, as at 30.09.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 4
  • 5. Q2. What has been the biggest component of EM Corporate return YTD? A. Carry B. US Treasury Yield Return C. Spread Return Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 5
  • 6. Q2. What has been the biggest component of EM Corporate return YTD? A. Carry Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 6
  • 7. YTD losses have been driven by US Treasuries and spread widening But high carry has partially compensated CEMBI YEAR-TO-DATE RETURNS BY COMPONENT CEMBI HISTORICAL RETURNS BY COMPONENT Source: Estimates from JP Morgan CEMBI Broad Diversified index, as at 30.09.2013 Source: Estimates from JP Morgan CEMBI Broad Diversified index, as at 30.09.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 7
  • 8. Q3. Valuations – where is CEMBI BBB spread now? A. 1x the spread of US IG B. 2x the spread of US IG C. 1x the spread of US HY D. 2x the spread of US HY Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 8
  • 9. Q3. Valuations – where is CEMBI BBB spread now? A. B. 2x the spread of US IG Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 9
  • 10. Emerging corporates look attractive relative to US IG CEMBI IG rising discount to US IG CEMBI IG vs US IG SPREADS CEMBI BBB SPREAD AS MULTIPLE OF US BBB SPREAD 2.0 2.0x 1.8 1.6 1.4 1.2 1.0 Jan-13 Jan-12 Jan-11 Jan-10 Jan-09 0.8 CEMBI BBB Spread vs US BBB spread Source: JP Morgan, as at 30.09.2013 Source: JP Morgan, as at 31.08.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 10
  • 11. Media offline
  • 12. Q4. How many countries are in the EMBI but not in the CEMBI? A. 5 B. 16 C. 33 D. 45 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 12
  • 13. Q4. How many countries are in the EMBI but not in the CEMBI? A. 5 B. 16 C. 33 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 13
  • 14. EM corporate vs EM sovereign country comparison Country Angola Azerbaijan Bahrain Barbados Belarus Belize Bolivia Bulgaria Costa Rica Cote D'Ivoire Czech Republic Ecuador Gabon Georgia Ghana Honduras Hong Kong Iraq Israel Jordan Korea Kuwait Latvia Lebanon Lithuania % of CEMBI % of EMBI 0.3% 0.5% 0.5% 0.3% 0.5% 0.1% 0.1% 0.4% 1.0% 0.7% 0.4% 0.2% 0.3% 0.3% 0.5% 0.1% 5.8% 0.7% 3.3% 0.2% 5.7% 0.6% 0.9% 3.3% 2.4% Country % of CEMBI Macau Morocco Namibia Oman Pakistan Panama Qatar Romania Saudi Arabia Senegal Serbia Singapore Slovak Republic Sri Lanka Taiwan Tanzania Thailand Trinidad & Tobago UAE Uruguay Venezuela Vietnam Zambia 0.7% TOTAL % of EMBI 37% 0.6% 0.2% 0.3% 0.4% 2.6% 4.6% 1.2% 1.1% 0.2% 1.3% 4.5% 0.5% 1.4% 1.0% 0.2% 3.5% 0.5% 5.1% 2.0% 3.9% 0.6% 0.2% 28% Source: JP Morgan, as at 31.08.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 14
  • 15. EM corporate vs EM sovereign comparison Optically similar but with marked differences CEMBI AND EMBI SPREADS CEMBI vs EMBI COMPARISON No. of common No. of unique countries countries in CEMBI in EMBI % of CEMBI Asia 39% 18% 6 6 3 Europe 14% 34% 7 1 9 Latam +25bps % of EMBI 27% 36% 11 1 9 MEA 20% 12% 3 7 12 27 15 33 Total Source: JP Morgan, as at 30.09.2013 Source: JP Morgan, as at 31.08.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 15
  • 16. Emerging Corporate Bonds team and investment resources Investment team with extensive experience Based in London and Singapore Dedicated EM credit traders in London and Singapore Dedicated resources in risk management Alain-Nsiona Defise (London) Head of Emerging Corporate Vincent Ferraton (Singapore) Head of Asian Credit Research Teck Hoon Low (Singapore) Senior Credit Analyst, Asia Other investment teams: • Emerging Debt • Emerging Equities • Credit Long/Short • Global Bonds • Investment Grade • High Yield Rosemary Fu (Singapore) Senior Credit Analyst, Asia 2 Economists Anya Kopyleva (London) Senior Credit Analyst, EMEA Quantitative Analysis Ivan Fernandez (London) Senior Credit Analyst, LatAm Pictet Asset Management Strategy Unit Karen Lam (London) Client Portfolio Manager INVESTMENT TEAM Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt Input 16
  • 17. Q5. A country’s currency has depreciated by 17% YTD. Would you: A. Avoid all corporates in that country B. Do nothing because it has no impact C. Believe it’s a great opportunity for security selection Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 17
  • 18. EM macro provides credit-picking opportunities Depreciating FX not necessarily negative for credit metrics YEAR-TO-DATE FX PERFORMANCE FOR TOP 20 CEMBI COUNTRIES EFFECT OF FX DEPRECIATION ON CREDIT METRICS (BRAZIL EXAMPLE) 10% Better Worse Effective currency of income statement and balance sheet components Revenues USD USD BRL Costs BRL USD BRL Debt USD USD USD 5% 0% BRL USD USD Effects upon BRL depreciation Margins -5% Credit metrics -10% -15% South Africa Indonesia India Turkey Peru Brazil Colombia Malaysia Russia Philippines Chile Singapore Thailand Mexico Korea Hong Kong UAE Qatar China Israel -20% Source: JP Morgan, Bloomberg, as at 30.09.2013 Improved No effect Only initially worsened Only initially worsened Broadly categorized sectors Mining Pulp / Paper Sugar / Protein Infrastructure Petrochemicals Steel (Post 12mo) Drill ships Oil & Gas (except Petrobras) No effect Worsened Leverage Leverage worsened; cost of worsened; cost of debt increased debt increased Consumer/Retail Telecom/Media Petrobras Steel (First 12mo) Source: Barclays Capital, as at 19.06.2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 18
  • 19. Media offline
  • 20. Summary- Key elements for EM corporates US tapering discussions have induced a significant discounting of the EM corporate asset class − Effectively retracing the last 18 months of gains − Carry has provided a sizeable buffer to rising yields The asset class continues to offer material value and robust mitigants to near-term market concerns − Spread buffer remains significant − Increased differentiation has led to greater credit-picking opportunities Know your names − Bottom-up credit research comes first − Local knowledge is key Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 20
  • 21. Biographies Alain Nsiona Defise Vincent Ferraton Head of Emerging Corporate Fixed Income team Head of Asian Credit Research Fixed Income team Alain Nsiona Defise joined Pictet Asset Management in 2012 as Head of the Emerging Corporate team. Vincent Ferraton joined Pictet Asset Management’s Fixed Income team in 2007 and is Head of Asian Credit Research. Before assuming his current position in 2012, Vincent was a Senior Investment Manager for Investment Grade Credit portfolios, a role he took on in 2009 after having previously been Senior Investment Manager for Swiss Rates. Previously, Alain was working at JPMorgan in London where he was in charge of managing the Emerging Corporate franchise, worth over USD 2bn. Prior to JPMorgan, he worked for nine years at Fortis Investments where he started as a senior credit analyst focusing on the high yield market. He later moved to Emerging Markets Fixed Income as a senior portfolio manager building the emerging corporate business. He holds an Ingenieur Commercial (Masters) from Solvay Business School, Brussels and a Diploma in Financial Analysis from the European Federation of Financial Analysts Societies. Before joining Pictet, he worked for nine years at UBS Investment Bank in both Zurich and London. His last position at UBS was Head of the Swiss Fixed Income Credit Research team, with a focus on multinational and medium sized Swiss / European corporate credits. His earlier experience at UBS included Debt Capital Markets Origination and Credit Risk Management in London. Previously he worked for Moody’s Investors Services and for First National Bank of Chicago. Rosemary Fu Senior Credit Analyst Fixed Income team Rosemary Fu joined Pictet Asset Management in 2007 as a Senior Credit Analyst in the EM Credit Research team based in Singapore. After working as a tax specialist in the US, Rosemary joined the credit department of Goldman Sachs, initially in New York City, and then in Hong Kong. Between 1997 and 2002, she held several credit research positions with Merrill Lynch, the Equitlink Group and Standard Chartered Bank. Before joining Pictet, Rosemary worked for Axa IM in Singapore in charge of buyside credit research on Asian corporate bond issuers. Rosemary holds a BSc from Rider University and an MBA from the Leonard N. Stern School of Business – NYU. She is a CPA and is fluent in English and Mandarin, with some knowledge of Cantonese and Japanese. Vincent graduated with a BSc (Hons) in International Business and Modern Languages from Aston University, Birmingham. Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 21
  • 22. Biographies Photo TBC Teck Hoon Low Anya Kopyleva Senior Credit Analyst Fixed Income team Senior Credit Analyst Fixed Income team Teck Hoon Low joined Pictet Asset Management in 2012, as a Senior Credit Analyst in the EM Credit Research team based in Singapore. Anya Kopyleva joined Pictet Asset Management in 2013 as a Senior Credit Analyst in the EM Credit Research team and is based in London. Ivan Fernandez joined Pictet Asset Management in 2013 as a Senior Credit Analyst in the EM Credit Research team and is based in London. Prior to joining Pictet Asset Management, Teck worked for Macquarie Group as a desk analyst and RBS Bank in Singapore focusing on special situations for Asian corporates. Before joining RBS, Teck also worked for ABN Amro in fixed income credit research covering both High Yield and Investment grade credits. Earlier work experience included debt capital markets at Credit Agricole Indosuez and Price Waterhouse in both Singapore and China. Prior to joining Pictet Asset Management, Anya was a Vice President in Quantitative Investment Strategies at Goldman Sachs Asset Management in New York. In 2011 she moved to Goldman Sachs in London as an Emerging Markets Fixed Income Principal Investments Analyst and Trader. She followed closely 50 corporates and banks in Russia, CIS and CEE and took an active part in the investment process. Prior to joining Pictet Asset Management, Ivan spent three years at Barclays Capital in New York as a research analyst in the EM Corporate Credit Research department, with responsibility for five industry sectors. Previously, he worked for two years as an equities analyst at Bassini & Co in New York, covering all sectors across Latin American countries. Prior to that, Ivan worked at JP Morgan in Debt Capital Markets Origination (in New York) and Investment Banking (in Sao Paulo). Teck holds a Bachelor of Accountancy from National University in Singapore. She is a CPA and is fluent in English and Mandarin. Anya holds a BS in Mathematics and in Management with a Finance concentration, and a minor in Economics from Massachusetts Institute of Technology. She is a CFA charterholder and is fluent in English and Russian and speaks conversational French. Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt Ivan Fernandez Senior Credit Analyst Fixed Income team Ivan holds an MBA from the Yale School of Management and a BSc in Electrical Engineering from the University of Sao Paulo. He is a CFA charterholder and is fluent in Portuguese and English, and proficient in Spanish. 22
  • 23. Biographies Karen Lam Client Portfolio Manager Fixed Income team Karen Lam joined Pictet Asset Management in 2013 as a Client Portfolio Manager in the Fixed Income Emerging Corporate team and is based in London. Prior to joining Pictet Asset Management, Karen was an Executive Director at J.P. Morgan Asset Management working as a global rates portfolio manager and later as a senior client portfolio manager covering fixed income total return strategies and emerging market debt funds. Previously, Karen was the lead manager research analyst at J.P. Morgan Private Bank covering fixed income and commodity funds. Karen started her career in the industry with Mercer Investment Consulting. Karen holds a BSc in Statistics from University College London and an MSc in Epidemiology from Imperial College London. She is fluent in English and Cantonese, with some knowledge of Mandarin and French. Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 23
  • 24. Fixed income at Pictet Asset Management S. Eisinger – Head of Fixed Income Money Market P. Billot J. Braun S. Mauron N. Eyholzer – Team Assistant Investment Grade Global Bond PM PM PM M. Benhaim1 A. Sanchez Balcazar D. Bopp T. Hansen L. Jaccard PM PM PM PM A Swiss Bond E. Marika M. Junge O. Hildbrand High Yield F. Salmon M. Magnin J. Vroman E. Assamoi A-M. Jenkins C. McPherson F. Nicolas R. Gaiser P. Agarwal A. Baskov M. Orschulik PM PM PM CA CA CA CA PM PM PM CA Total Return R. Sagayam K. Swiderski M. Hariri PM PM PM Emerging Corporate Emerging Debt A. Defise V. Ferraton R. Fu A. Kopyleva T. Low I. Fernandez S. Lue-Fong M-T. Barton G. Chamorro P. Petit W-M. Ting O. Yee S. Cundy C. Roberts E. Yeo S. Zou PM PM A Risk Management & Quantitative Analysis Client Portfolio Managers Economic Analysis C. Parisot (Gov.) S. Rüegg (Credit) S. Lee (Emerging) P. Zweifel A. Bélaz S. Khanniche N. Markov J-M. Manry P-E. Charlier J. Chavaillaz M. Gautschi P. Guesnet PM PM PM PM PM PM A A A A Fixed Income Trading2 E. Mendez A. Akadiri G. Cosson A. Junod N. Musolino PM CA CA CA CA CA R. Oeuvray K. Tasellari Hug M. Rigo E. Choi (Emerging) A. Grijns (Emerging) K. Lam (Emerging) S. Nejman J-P. Ruez A. Soucas S. Ho M. Job S. Smadja S. Toh PM: Portfolio Manager CA / A: Credit Analyst / Analyst 1 Deputy Head 2 Reporting to COO October 2013 Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 24
  • 25. For more information, please contact Pictet Asset Management www.pictet.com www.pictetfunds.com This marketing material is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semiannual reports may be relied upon as the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Funds (Europe) S.A., 15, avenue J. F. Kennedy L-1855 Luxembourg. The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments. Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document. Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document. Pictet Asset Management | For professional investors only | Niche no more: emerging corporate debt 25