Schroder GAIAUCITS Hedge Fund PlatformRitchie OriolProduct Specialist, CQSNovember 2011 | For professional investors and a...
Schroder GAIAIntroduction    GAIA stands for Global Alternative Investor Access    Schroder GAIA is a Luxembourg UCITS SIC...
Schroder GAIA CQS CreditProspective investors should consult with their independent financial advisor with respect to thei...
CQS    Founded in 1999, CQS is a USD10.2bn1 global multi strategy asset manager    Strategies managed in asset backed secu...
What is Schroder GAIA CQS Credit?     An absolute return focused credit long short UCITS fund that invests in corporate bo...
Schroder GAIA CQS CreditPerformance Since Launch (%)1NAV108106104102100 98  Apr 11                   May 11               ...
CQS Credit Long Short (CLS) FundPerformance Since Launch (%)1USD Compounded ReturnNAV12301180113010801030 980   Mar-09    ...
Schroder GAIA CQS CreditPerformance vs. Offshore Fund110                                                                  ...
Schroder GAIA CQS CreditPerformance vs. Peer Group                                                                        ...
Historic Volatility & Correlation                                                                                         ...
How to allocate to UCITS alternative investments?Complementary when combined with long only credit strategiesAnnualised Re...
Schroder GAIA CQS CreditKey FeaturesInvestment focus                   Credit long short portfolio principally investing t...
Portfolio Management Team                                                                             Michael Hintze      ...
Investment Process      Macro Themes             Position Selection     Position Construction                             ...
Recent Portfolio Themes               Theme                                                       Drivers                 ...
CQS Credit Long Short Fund Scenario Analysis1                                              Credit                 Credit  ...
Snapshot of Exposure: Schroder GAIA CQS Credit1Sector                                                   Rating*           ...
Appendix
Schroder GAIA                                               Regulated by the CSSF Luxembourg                              ...
Schroder GAIAGeneral Flow Chart      SIMLUX                                               Pre-trade compliance by each man...
UCITS Hedge Fund vs Offshore Hedge Fund                           UCITS hedge fund                                   Offsh...
Important InformationSchroders and CQS have expressed their own views and opinions in this presentation and these may chan...
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938451 1 schroder gaia platform_cqs november berlin 2011 final

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938451 1 schroder gaia platform_cqs november berlin 2011 final

  1. 1. Schroder GAIAUCITS Hedge Fund PlatformRitchie OriolProduct Specialist, CQSNovember 2011 | For professional investors and advisers only
  2. 2. Schroder GAIAIntroduction GAIA stands for Global Alternative Investor Access Schroder GAIA is a Luxembourg UCITS SICAV Currently 3 funds available on the platform (see below) looking to add 6 additional funds in 2012 AUM Fund Strategy Manager Launch date As at 31/10/11 Schroder GAIA Egerton European equity long/ John Armitage, 25 November 2009 USD 640m European Equity short Egerton Capital Schroder GAIA Sloane Richard Chenevix-Trench Emerging market equity Robinson Emerging and Christopher Morrell, 30 June 2010 USD 219m long/ short Markets Sloane Robinson Schroder GAIA CQS Simon Finch, CQS Asset Credit Credit long short 13 April 2011 USD 193m Management LimitedSource: Schroders as at 31 October 2011Schroder GAIA CQS Credit 1
  3. 3. Schroder GAIA CQS CreditProspective investors should consult with their independent financial advisor with respect to their specificinvestment objectives, financial situation or particular needs to determine the suitability of investment.
  4. 4. CQS Founded in 1999, CQS is a USD10.2bn1 global multi strategy asset manager Strategies managed in asset backed security, convertible security, corporate credit, distressed debt, loan, multi-strategy and resource products Over 200 staff located globally of which 76 are specialist investment professionals Experienced portfolio management and trading teams located in key financial centres Strong risk adjusted performance track record underpinned by fundamental research and quantitative analysis Founding member of the Hedge Fund Standards Board1Source: CQS as at 30 September 2011.Schroder GAIA CQS Credit 3
  5. 5. What is Schroder GAIA CQS Credit? An absolute return focused credit long short UCITS fund that invests in corporate bonds and liquid credit protection (CDS) Investment Grade and High Yield corporate credits primarily in North America and Europe Aims to outperform LIBOR with a target excess net return of +4% to +8%1 Low correlation to other credit managers and negative correlation to risky asset indices2 Actively hedged to minimise interest rate exposure Portfolio of approximately 30 – 50 single names Based on an existing credit long short hedge fund managed by CQS since April 20093 – Since Inception annualised return: 6.92%; volatility: 3.78%41Target returns are targets only, are based over the long-term of the performance projections of the investment strategy and market conditions at the time of modelling andtherefore, subject to change. There is no guarantee that any target return can be achieved. Investors should not place any reliance on such target return in deciding whether toinvest in the Fund. Please refer to the Prospectus for full details.2 CQS Analysis3CQS Credit Long Short Fund launched April 1 20094As at 30 September 2011. Source: CQS Credit Long Short Fund USD B1 Series, Administrator Final NAVSchroder GAIA CQS Credit 4
  6. 6. Schroder GAIA CQS CreditPerformance Since Launch (%)1NAV108106104102100 98 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11Schroder GAIA CQS Credit Performance (%) Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec ITD 2011 (0.38) 0.79 2.09 1.27 1.78 2.11 (1.01) 6.80Source: Schroders, as at 31 October 2011. Schroder GAIA CQS Credit C Accumulation EUR NAV to NAV basis, net income reinvested.Past performance is no guarantee of future returns.1Fund inception: 13 April 2011.Schroder GAIA CQS Credit 5
  7. 7. CQS Credit Long Short (CLS) FundPerformance Since Launch (%)1USD Compounded ReturnNAV12301180113010801030 980 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11CLS Fund Performance(%) Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTD2011 0.74 (0.10) 0.22 (0.13) 0.63 1.63 1.66 1.34 1.65 7.882010 2.45 1.86 (0.28) 2.39 1.33 0.07 (0.62) 1.51 0.17 (0.46) 0.32 (0.56) 8.402009 - - - (0.85) 0.32 1.64 (1.47) 1.35 0.02 0.44 1.42 (1.75) 1.08¹Cumulative performance since inception to 30 September 2011, net of fees. USD Compounded Return is USD B1 SeriesPast performance is no guarantee of future returns. Please refer to the Fund’s Offering document for more detailed information.Investors should be aware that the performance of the UCITS fund and the flagship (non-UCITS) are not comparable.Schroder GAIA CQS Credit 6
  8. 8. Schroder GAIA CQS CreditPerformance vs. Offshore Fund110 4% 3%105 2% 1%100 0% -1% 95 -2% Apr-11 May-11 Jun-11 Jul-11 Aug-11 Oct-11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Schroder GAIA CQS Credit C Acc EUR Share Class Schroder GAIA CQS Credit C Acc EUR CQS Credit Long Short Feeder Fund Ltd- B1 EUR CQS Credit Long Short Feeder Fund Limited - B1 EUR Since Launch Performance Differential 58bpsSource: Schroders NewFinance Capital, as at 31 October 2011.Schroder GAIA CQS Credit 7
  9. 9. Schroder GAIA CQS CreditPerformance vs. Peer Group 2011 SinceRank InceptionYTD Peer Group Launch Date May Jun Jul Aug Sep YTD (13/04/2011) 1 Schroder GAIA CQS Credit A Acc EUR 13/04/2011 0.75 2.05 1.21 1.77 2.09 7.68 7.68 2 GAM Star Divers Mkt Netrl Credit EUR Acc 24/09/2010 0.32 0.19 0.18 0.53 0.19 2.17 1.47 3 Avoca Credit Abs Return Fd A EUR 28/04/2010 0.71 -1.34 0.28 -0.13 -0.69 1.22 -1.63 4 Threadneedle Credit Opp Inst EUR 08/09/2009 0.27 0.29 -0.34 -2.51 -1.19 -1.51 -3.37 5 Henderson Credit Alpha A Acc 01/03/2010 1.7 -3.89 2.82 -2.42 1.63 -1.73 -0.88 6 JPM Income Opportunity A (acc)-EUR (Hdg) 12/07/2007 -0.06 -0.3 -0.28 -1.74 -1.62 -2.19 -3.76 7 Absolute Insight Credit B1p EUR 31/10/2009 0.62 -0.72 0.02 -4.49 -6.86 -2.20 -11.5 8 Oyster Credit Opportunities EUR 2 23/07/2009 0.08 -0.55 -0.1 -3.28 -3.39 -5.28 -7.25 9 Pictet Total Return Kosmos P EUR 23/06/2011 N/A N/A 0.76 0.83 -0.12 N/A N/A Mean/Count 0.95 -0.64 0.61 -1.27 -0.29 -1.34 -1.49 Standard Deviation 0.93 1.6 0.91 1.99 3.31 2.26 5.66 Superior performance over peer group since inceptionSource : Morningstar as at 30 September 2011Schroder GAIA CQS Credit 8
  10. 10. Historic Volatility & Correlation Historic Volatility Correlation Schroder GAIA CQS Credit1 3.9% 1.00 S&P 500 16.5% (0.59) MSCI World 18.7% (0.64) Dow Jones Credit Suisse Hedge Fund Index 6.0% (0.51) IBOXX Liquid High Yield Index 10.3% (0.64) Barclays Global Aggregate Bond Index 2.2% 0.32 Since launch, the strategy has demonstrated low volatility and negative correlation to traditional risky assets1 CQS’s offshore Credit Long Short Fund from April 2009 through to end of April 2011 then chain linked to Schroder GAIA CQS Credit C Acc EUR. Performance data is providedfor information purposes only. Performance of Schroder GAIA CQS Credit may differ to that of CQS’ Credit Long Short Fund and therefore historic data should be interpretedaccordingly.Source: Schroders NewFinance Capital as at 30 September 2011.Schroder GAIA CQS Credit 9
  11. 11. How to allocate to UCITS alternative investments?Complementary when combined with long only credit strategiesAnnualised Returns 100:016% 80:2014% 60:40 CQS112% 40:60 Long Only Peer Group210% 8% 20:80 0:100 6% 2% 3% 4% 5% 6% 7% Annualised Volatility Portfolio AllocationAllocation to Schroder GAIA CQS Credit1 0% 20% 40% 60% 80% 100%Allocation to Credit long only Peer Group2 100% 80% 60% 40% 20% 0% ResultsAnnualised Return 16.06% 14.30% 12.53% 10.75% 8.95% 7.15%Annualised Volatility 7.02% 5.34% 3.83% 2.79% 2.80% 3.85%Sharpe Ratio 2.24 2.61 3.18 3.72 3.07 1.76Source: Schroders, data from April 2009 to 31 August 2011 in EUR.1 CQS’s offshore Credit Long Short Fund B1 EUR from April 2009 through to end of April 2011 then chain linked to Schroder GAIA CQS Credit C Acc EUR.2 Morningstar Peer Group Average (50%:GIF OS EUR High Yield Bond + 50%: GIF OS EUR Corporate Bond )Schroder GAIA CQS Credit 10
  12. 12. Schroder GAIA CQS CreditKey FeaturesInvestment focus Credit long short portfolio principally investing through corporate bonds and liquid CDSLaunch date 13 April 2011Dealing frequency Weekly (every Wednesday), and on the last business day of each monthDeal cut off 13.00 Luxembourg time three business days preceding a dealing daySettlement Three business days following a dealing dayNAV Publication Daily on t + 1Base Currency EURAvailable Share Classes EUR, GBP Hedged, USD HedgedFund Registration Fund will be registered in key European markets (where required, certain share classes will include UK reporting status, German and Austrian tax reporting) Share Classes A A1 C Minimum Initial Subscription/ €10,000 €50,000 €500,000 Minimum Holding Initial Charge Up to 3% Up to 2% Up to 3% Investment Management Fee 2.00% 2.00% 1.50% Distribution Fee None 0.50% None 20% of the outperformance over Performance Fee BBA Libor EUR 3 Month Act 360* subject to a High Water MarkInitial charge: Percentages are stated with reference to the total subscription amount, which represents A and C Shares 3.09% and A1 Shares 2.04% of the Net Asset Value perShare. Investment Management & Distribution Fee: Percentages are stated with reference to the Net Asset Value of the Fund or the Net Asset Value per Share, as may beappropriate.Source: Schroders 31 October 2011* USD Hedged shares - BBA Libor USD 3 Month Act 360 GBP Hedged shares - BBA Libor GBP 3 Month Act 365Schroder GAIA CQS Credit 11
  13. 13. Portfolio Management Team Michael Hintze CEO and SIO Credit Long Short Portfolio Management Team Simon Finch – CIO Credit Surojit Roy Choudhury Simon Buckingham Darren Toner Ritchie Oriol – Product Specialist CQS Fundamental Research Serge Ramin – Head of Research Dedicated Credit Research Team * Specialist Research Basic Consumer Materials, Cyclical Financials Energy Comms. Asia Real Estate ABS Distressed Industrials, & Non and Utilities Diversified Cyclical*Cross coverage of sectors by analysts. Total team size is 13, excluding ABS and Distressed teamsSchroder GAIA CQS Credit 12
  14. 14. Investment Process Macro Themes Position Selection Position Construction Bottom Up Position Sizing versus Hedging Fundamentals Portfolio of Fundamental Credit Spread Risk Long and Short Credit Research Catalysts Positions Jump Risk (Typically 30-50) Asymmetrical Risk / Reward Liquidity / Cost to Exit Technicals & News Flow Centralised Decision Active Trading: Investment Thesis of Each Position Challenged and Validated on an Ongoing BasisSchroder GAIA CQS Credit 13
  15. 15. Recent Portfolio Themes Theme Drivers Potential Strategies Credit / Equity Cycle: Slowing growth Short exposure to: Transfer of value from debt Margins under pressure – Food & Beverage holders to equity holders Longer term share price underperformance puts – Pharmaceuticals management under pressure to pursue value – Health Care enhancing programmes for equity holders, e.g., M&A, share buy-backs, re-leveraging Impact of austerity Reduced consumer discretionary spending Short exposure to: programmes in peripheral High debt levels – Telecommunications European corporates Potential for one-off or increased taxes and – Utilities regulatory changes Idiosyncratic opportunities in Attractive yields Long exposure to: financials Strong coverage – Insurance Subordinated Debt Potential for positive event risk in selected cases Cyclicals highly geared into Reduced consumer demand Specific short positions in : GDP growth Challenging operating environment – Paper High debt levels – Chemicals – Airlines – AdvertisingSource: CQS. These potential strategies are for illustrative purposes only and not indicative of future focus. There is no guarantee that the Fund will invest in these strategies or doso in the manner set forth in this presentationSchroder GAIA CQS Credit 14
  16. 16. CQS Credit Long Short Fund Scenario Analysis1 Credit Credit Rates Rates FX FX Strategy Type -20% +20% -100bp +100bp -10% +10% Corporate Debt Strategies2 0.97% (0.79%) 0.04% (0.05%) CDS Strategies (2.23%) 2.18% 0.05% (0.04%) Total (%NAV) (1.26%) 1.39% 0.08% (0.09%) (0.02%) 0.02% We believe the CLS fund is positioned to benefit from an environment where credit spreads widen. The fund is managed to achieve a low exposure to movements in interest and exchange rates1As at 30 September 2011.2Including relevant credit and interest rate hedges. Downside credit, rates and foreign exchange estimations reflect conservative modeling assumptions, but do not reflect worstcase scenarios. Estimates are based on the market conditions at the time of modeling are therefore, subject to changeSchroder GAIA CQS Credit 15
  17. 17. Snapshot of Exposure: Schroder GAIA CQS Credit1Sector Rating* Country United Government AAA KingdomTelecommunication Services AA Germany Financials A Luxembourg Materials BBB Netherlands Information Technology BB Ireland Consumer Discretionary B Italy Industrials CCC France Health Care United Consumer Staples NR States -30 -20 -10 0 10 20 -35 -25 -15 -5 5 15 25 -60 -50 -40 -30 -20 -10 0 10 Short Long1Analysis expressed as a percentage of Gross Bond Equivalent Exposure.Source: Schroders as at 30 September 2011Schroder GAIA CQS Credit 16
  18. 18. Appendix
  19. 19. Schroder GAIA Regulated by the CSSF Luxembourg Schroder Investment Management (Luxembourg) S.A. Schroder GAIA SICAV (UCITS) Third Party Managers Schroder Managed Schroder GAIA Schroder GAIA Schroder GAIA Additional Schroder GAIA Egerton European Sloane Robinson QEP Global Schroder CQS Credit Equity Emerging Markets Absolute Managers CQS Asset Egerton Capital Sloane Robinson Schroders Management Schroders Limited (Nov 09) LLP (Jun 10) (Aug 10) Limited (Apr 11) Offering access to quality hedge fund strategies in a regulated liquid formatSchroder GAIA CQS Credit 18
  20. 20. Schroder GAIAGeneral Flow Chart SIMLUX Pre-trade compliance by each manager Schroder GAIA (Global Alternative Sloane NFC Investor Access) Egerton Investment Opus Multi Robinson CQS Credit European Advisor Management LUX. SICAV Equity Strategy Emerging (selection of Markets Company UCITS third party Services investment managers) Domiciliary Sub Agent proceeds (Appro) Manager Manager Principal BBH Manager Manager Sloane CQS Paying Custody Egerton NFC Robinson Agent Red proceeds (Expro) Pricing Trade Transaction Transaction Transaction sources confirmation NAV & Global portfolio Distributor Transaction Transaction Transaction reporting Sub / Red info BBH Transfer Counterparties Fund Agent Accounting BBH Worldview NAV validation by SIMLUX NAV & portfolio feed before official release Compliance Risk Feed Feed Daily NFC Compliance R Risk Monitoring Compliance Risk Post-trade B engine engine & Regulatory S Risk monitoring Compliance & Risks Risk Reports ReportsSchroder Investment Management (Luxembourg) S.A. (SIMLUX) Schroders NewFinance (NFC)Brown Brothers Harriman (BBH)Schroder GAIA CQS Credit 19
  21. 21. UCITS Hedge Fund vs Offshore Hedge Fund UCITS hedge fund Offshore hedge fund Prime broker Requirement to have an independent custodian so Prime broker typical prime broker arrangement is not possible Eligible Assets Prescribed includes by of way of example cash, Flexible transferable securities, derivatives, funds Commodities, Excludes commodity futures, limited to equities, Can also invest in derivatives on individual Property ETFs, and financial indices commodities, properties, and physical property / commodities Borrowing Limited to 10% on a temporary basis Can borrow e.g. up to 200% on a permanent basis Leverage 200% global exposure or prescribed VaR limit Flexible Short sales Short sales not permitted, can only seek short Short sales permitted exposure via derivatives Diversification 5/ 10/ 40 Flexible Minimum dealing / Twice monthly (typically weekly) Annually although most monthly valuation frequency or quarterlySchroder GAIA CQS Credit 20
  22. 22. Important InformationSchroders and CQS have expressed their own views and opinions in this presentation and these may change. Any viewsand opinions of CQS may not necessarily represent views expressed or reflected in other Schroders communications,strategies or funds.Important Information: This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for sharesof Schroder GAIA (the “Company”). Nothing in this presentation should be construed as advice and is therefore not a recommendationto buy or sell shares.Subscriptions for shares of the Company can only be made on the basis of its latest prospectus together with the latest audited annualreport (and subsequent unaudited semi-annual report, if published), copied of which can be obtained, free of charge, from SchroderInvestment Management (Luxembourg) S.A.An investment in the Company entails risks, which are fully described in the prospectus.Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well asrise and investors may not get back the amount originally invested.Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purposewithout the data providers consent. Third party data is provided without any warranties of any kind. The data provider and issuer of thedocument shall have no liability in connection with the third party data. The Prospectus and/or www.schroders.lu contains additionaldisclaimers which apply to the third party data. Schroders has expressed its own views and opinions in this presentation and thesemay change.This presentation is issued by Schroder Investment Management Limited, 31, Gresham Street, EC2V 7QA, who is authorised andregulated by the Financial Services Authority. Registration No 1893220, England. For your security, all telephone calls are recorded.Schroder GAIA CQS Credit 21

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