The Big Picture Kenneth Warnock Co-Manager Alliance Trust UK Equity Income Fund October 2011
Economic Volatility will remain high
Stock Correlation will remain high
Stock-picking alone will not be enough to generate consistent outperformance
Successful Investors will be those with resources and experience to manage both macro and stock risk
Economic Volatility will remain high “ It was fun while it lasted” Dylan Grice, Global Strategist, SocGen Source: Reuters EcoWin/Alliance Trust
Stock Correlation will remain high “ The lesson that I have learned is that it isn’t reasonable to be agnostic about the big picture” David Einhorn, Founder, Greenlight Capital Source: BofAML/Alliance Trust
UK Equity Market – Source of Revenue “ Why are you looking at research on China?” Undisclosed! Source: Alliance Trust July 2010
9 out of 10 were macro trades Source: Ritholtz/IBT
Macro themes that won’t go away soon
Debt – Political path of least resistance is inflation?
Oil – Peak oil = The end of “cheap” oil?
China – Chinese banks are biggest “Ponzi scheme” in history?
Middle East – Social unrest is globalised?
Food – The next crisis?
UK Equity Team with over 60 years of portfolio construction experience
Four people/One strategy: The right ratio
Alliance Trust Investment Team covers all relevant disciplines: Four regional equity teams Global Equity Team Fixed Income Team Economic Research Team Strategy/Risk/Performance Analysis Team
Alliance Trust – Resourced to succeed
Alliance Trust UK Equity Income Fund Source: Financial Express Past performance is not a guide to future performance. Income can fall as well as rise as a result of market and currency fluctuations. Capital growth may be constrained or eroded with annual charges and any performance fee chargeable being deducted from capital.
Alliance Trust UK Equity Income Fund Monthly Portfolio Performance vs FTSE All-Share Index Source: Alliance Trust Past performance is not a guide to future performance. Income can fall as well as rise as a result of market and currency fluctuations. Capital growth may be constrained or eroded with annual charges and any performance fee chargeable being deducted from capital.
Alliance Trust Asset Management
New firm benefiting from 120 years of investment history
Opportunity to access the Trust’s extensive investment capabilities
Proven, established investment process
Open-ended funds and segregated client portfolios
Alliance Trust PLC
Diversified global investment company
Managing investments since 1888 - one of the UK’s oldest investment trusts
Largest generalist UK investment trust on the London Stock Exchange
Gross assets of £2.7 billion*
43 years of uninterrupted dividend growth
* As at 31/08/2011 Source: Alliance Trust PLC These figures are based on gross assets Alliance Trust is geared to a level of 9.5% of its gross assets
In-depth Global Investment Coverage North American Equities, Dundee Matthew Strachan Andrew Murray Iain Smith Tim Gibbens Colin Burchell Global Equities, London Ilario Di Bon Juergen Lanzer Sam Ford Laurie Don UK Equities, Edinburgh Neil Tong Stephen Porteous Kenneth Warnock Paul Weyers European Equities, Edinburgh Fiona MacRae Athole Skinner Tommy Bryson Asian Equities & Emerging Market Equities, Dundee Jonathan Bolton Kevin Craig John Ewart Justin Atkinson David Osfield Global Fixed Income, Edinburgh Rod Davidson Gareth Quantrill Stuart McMaster Stuart Steven Research Centre, Dundee Shona Dobbie Linsey Thomson Stefano Silvestrin Dugald Wallace Strategy, Performance Attribution & Risk, Dundee Andrew Killean George Renouf Ho Liang Duncan Smart Meridith Glasse-Davies Katherine Garrett-Cox Chief Executive
UK Equity Team
Over 60 years’ portfolio management experience
Focused on a limited number of core portfolios
Based in Edinburgh
Highly Experienced Team of Portfolio Managers UK Equity Team Name Position Sector Coverage Company Experience Industry Experience Neil Tong Head of Team Oil Majors & Services, Industrials, Utilities, Banks, Life Insurance 14 24 Stephen Porteous Investment Manager Oil E&P, Mining, Chemicals, Food & General Retail, Telecoms 6 23 Kenneth Warnock Investment Manager Consumer Goods, Pharma, Travel & Leisure, Media, General Financials, Real Estate 4 16 Paul Weyers Investment Analyst Banks, Insurance, Technology 3 3
UK Equity Team
Experienced, but Small Team
over 60 years’ portfolio management experience
ensures active and constructive debate
Fundamental, but Flexible Process
fundamental analysis combined with flexible & dynamic decision making
non-bureaucratic culture allows free flow of ideas between other AT Teams
Institutional Infrastructure, but Boutique Culture
best-in-class information systems and back-office support
fully resourced geographic and economic research teams
A Boutique Culture within an Institutional Infrastructure
Our objective is to:
outperform the benchmark and peers through:
a proven investment process that combines macroeconomic, industry and
a concentrated portfolio of market leading companies, operating in structurally growing industries (currently 32 holdings)
be top quartile in peer group over rolling 3 year periods
Source: Financial Express All Fund performance figures are to 31.08.2011 and are net of total expenses. Alliance Trust UK Equity Income Fund Performance since inception (February 2009) Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed. You may not get back the amount you invested. % 3 months 1 year 2 years Since Inception UK Equity Income Fund (A Class Acc Shares) -10.2 8.8 19.5 30.8 Sector IMA UK Equity Income FTSE All-Share Index -9.8 -9.4 7.1 7.3 15.9 18.6 35.6 42.1 Quartile 3 2 2 3
Kenneth Warnock - Investment Manager - UK Equities Kenneth Warnock is an Investment Manager in the UK Equities Team at Alliance Trust and is also Co-Fund Manager of the Alliance Trust UK Equity Income Fund. Kenneth joined Alliance Trust in October 2007, initially as an analyst on the Trust’s UK Mid Cap Equity portfolio. Kenneth started his career in 1994 at Johnson Fry, where he managed UK and Global Equity Funds, before joining Jupiter Asset Management in 2000 to manage retail and institutional portfolios investing in UK equities. Prior to joining Alliance Trust, Kenneth was an Investment Manager at Premier Asset Management. Kenneth has a BSc (Hons) in Mathematics for Business Analysis from Glasgow Caledonian University
Investment Process – “Key Investment Developments & Catalysts”
Bespoke Template focusing of key variables for Reward and Risk
Detailed Balance Sheet and Income forecasts
Archived centrally for cross-department access
Source: Alliance Trust PLC, FactSet, Bloomberg
Investment Process – Research Centre
In-house Economics Team
Stimulates debate on macro strategy
Daily analytics as economic data is released
Periodic & Bespoke Research
Fund Risk/Return Characteristics as at 31 st August 2011 Source: Style Research, FactSet 31 August 2011 Source: FactSet, Financial Times Characteristics Index Benchmark FTSE All-Share Index Constituents 625 Historic Yield 3.51% Targets Fund Total return Dividend Yield Benchmark +2% 110% of Benchmark Portfolio holdings 30-45 Max Stock Over/Under Weight +/-5% Tracking Error target 3-5% Derivative capability EPM only Characteristics Current Fund Size Fund Holdings £43.9m 32 Historic Yield 3.2% Fund Beta 0.98 Tracking Error 2.9% Derivatives None
Portfolio Style Analysis as at 31 st August 2011 Source: Style Research
High Return on Equity (ROE)
Portfolio Style Skyline Style Distribution
Sector active weightings as at 31 st August 2011 Source: Alliance Trust PLC
Stock active weightings as at 31 st August 2011 Source: Alliance Trust PLC
This presentation is intended for investment professionals only. It must not be distributed to, or relied upon by, retail investors.
Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed. You may not get back the amount invested.
Some of the funds have underlying holdings which are denominated in currencies other than sterling and therefore may be affected by movements in exchange rates. Consequently, the value of these investments may rise or fall in line with exchange rates.
Where a fund invests in a single country or a narrow range of securities, there is an increased risk of volatility which may result in frequent rises and falls in the fund’s share price.
Where annual management charges or performance fees are taken from capital, this may have the effect of constraining capital growth and may lead to capital erosion. Investors may be subject to tax on distributions.
Whilst care has been taken in compiling the content of this presentation, no representation or warranty, express or implied, is made by Alliance Trust Asset Management Limited as to its accuracy or completeness. Some slides have been compiled from external sources. Whilst these sources are believed to be reliable, the information has not been independently verified and therefore no representation is made as to its accuracy or completeness.
Nothing said or covered by this presentation should be construed as being an invitation or inducement to engage in investment activity. No advice is given by Alliance Trust Asset Management Limited.
Alliance Trust Asset Management Limited is authorised and regulated by the Financial Services Authority and is entered on their register under number 479764 (www.fsa.gov.uk).