This document is solely for the use of professionals and is not for general public distributionEuro corporate bond funds:C...
Can we really grow our way out?                                                                                 Five year ...
Credit spreads are back on the riseAfter period of stability, spreads have broken sharply upwards                         ...
Credit yield enhancement is attractiveCorporate bonds at record multiple of underlying sovereign                          ...
Non-financial leverage and profit margins                                                                              Non...
Henderson Horizon EuropeanCorporate Bond FundHDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
Henderson Horizon Euro Corporate Bond FundFund profile                                                                    ...
Four key levers to drive performance                                                                                      ...
Four key levers to drive performanceHistorical performance by investment lever                                            ...
AssetCurrent Fund positioning                                                                                             ...
SectorCurrent Fund positioning                                                                                            ...
SecurityCurrent Fund positioning                                                                                          ...
Duration historyRemain close to benchmark given macro concerns                                                            ...
European Corporate Bond Fund performanceAbility to outperform in both up and down markets                                 ...
Competitor performanceAbsolute return relative to peer group     Fixed Income EUR Corp Bond Morningstar Index - Total retu...
Competitor performanceSuperior risk adjusted returns relative to peer group                    Total return versus Volatil...
SummaryWhy Henderson for European Credit?          Credit manager with significant European fixed income expertise        ...
Henderson Credit Alpha FundHDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
Credit Alpha                       Fund details                                          Strategies                      I...
Credit AlphaMulti strategy credit - the three strategiesLong time                                                         ...
Credit Alpha      Current structure of portfolio      Current net = -35%, current gross = 135%             Gross exposure ...
Credit Alpha collateral and cash exposureLimited counterparty and collateral risk  Type of collateral                     ...
0                                                                                                                         ...
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
Citywire france 2012 henderson global investors
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Citywire france 2012 henderson global investors

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Citywire france 2012 henderson global investors

  1. 1. This document is solely for the use of professionals and is not for general public distributionEuro corporate bond funds:Crisis? What’s wrong with a crisis?Citywire France 2012Stephen ThariyanHead of Credit February 2012HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  2. 2. Can we really grow our way out? Five year change in real GDP 10 -10 Growth 9 -9 Budget deficits (RHS) 8 -8 % Annualised growth Budget deficit % GDP 7 -7 6 -6 5 -5 4 -4 3 2 -3 1 -2 0 -1 States Turkey Russia Germany Japan France Canada United Kingdom United Brazil Mexico Indonesia India China Italy 0Source: IMF Forecasts, The Economist Intelligence Unit and Datastream, at 30 September 2011 1HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  3. 3. Credit spreads are back on the riseAfter period of stability, spreads have broken sharply upwards iBoxx Euro swap spread history (bp) and Corporate default rates bp 700 Financials 600 Non-Financials Global Corporate default rate (range 0% to max 6%) 500 400 300 200 100 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Bloomberg, as at 8 December 2011Note: Bar chart represents Moody’s trading 12 default rates for the Global Corporate Universe 2HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  4. 4. Credit yield enhancement is attractiveCorporate bonds at record multiple of underlying sovereign iBoxx Euro Corp vs German Bund Yield % 9 iBoxx Eur Corp Bond Yield 8 German Bond 5yr Yield 7 6 5 4 3 2 1 0 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11Source: Bloomberg, as at 8 December 2011 3HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  5. 5. Non-financial leverage and profit margins Non-financial leverage and profit margins 2.4 20 Net debt to EBITDA (x) RHS 2.2 EBITDA margin (%) 19 2.0 18 1.8 17 1.6 16 1.4 1.2 15 1.0 14 Jun-02 Jun-05 Jun-08 Jun-11 Mar-00 Dec-00 Sep-01 Mar-03 Dec-03 Sep-04 Mar-06 Dec-06 Sep-07 Mar-09 Dec-09 Sep-10Source: Citi 4HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  6. 6. Henderson Horizon EuropeanCorporate Bond FundHDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  7. 7. Henderson Horizon Euro Corporate Bond FundFund profile Investment parameters Product UCITS III (sophisticated) SICAV Parameter Indicative range Indicative 2% – 3%* Benchmark iBoxx Euro Corporates Index tracking error Typical number Performance target Benchmark + 1% (net of fees) 100 – 150 holdings of positions At least 80% in investment grade Investable universe Cash 0% – 20% bonds issued in Euro Off-Benchmark Non-EUR / High Yield up to max 20% Duration +/-2 years versus benchmark VaR Limit Maximum 2x benchmark VaR Ability to use credit derivatives Derivatives Net portfolio exposure limit 0% – 150% EUR, all non-EUR exposure hedged Base currency backed to base on daily basis No strict limits, typically within +/-50% Sector weighting of benchmark weighting Inception 18 December 2009 Issuer exposure AAA +/-10% Share classes internal limits EUR, GBP, CHF, and SEK AA +/-7% available A +/-5% Liquidity Daily BBB +/-3% Domicile Luxembourg BB and below +/-2% * Please note this is not guaranteed. 6HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  8. 8. Four key levers to drive performance Target contribution Core Stock Emphasis on sector themes Picking 50%+ Conviction views across issuer and security Ability to look across rating spectrum into high yield Off-benchmark Seek opportunities in USD/GBP corporate bonds 20% Credit Benefit from symmetry – maximise impact of negative views derivatives Provides an additional source of liquidity 20% Duration Active duration management 10% Strong track record within Henderson fixed incomeSource: Henderson Global Investors 7HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  9. 9. Four key levers to drive performanceHistorical performance by investment lever Actual contribution (bps) 2010 / 2011 Contribution to portfolio relative return (bp of fund) Core bp 318 / 94 200 Core Credit 150 Off Benchmark CDS Duration Off-BM 100 202 / 6 50 0 CDS -50 116 / 47-100-150 Duration Jun-10 Jul-10 Nov-10 Jun-11 Jul-11 Nov-11 Jan-10 May-10 Aug-10 Jan-11 May-11 Aug-11 Dec-09 Feb-10 Mar-10 Apr-10 Sep-10 Oct-10 Dec-10 Feb-11 Mar-11 Apr-11 Sep-11 Oct-11 Dec-11 -3 / 32Source: Henderson Global Investors, as at 31 December 2011Note: Horizon European Corporate Bond Fund. Total fund return is shown relative to the iBoxx € Corporates index. Performance based on mid-day pricing, A share class Euro returns net of fees. Past performance is not a guide to future performance. Inception date: 18 December 2009 8HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  10. 10. AssetCurrent Fund positioning allocationAsset allocation Metric Fund Index Top 10 Fund issuer exposure by country Market value (€mm) 145.5 1,262,701 2.00% UK 3.32% Yield 4.28% 4.60% 3.47% France Duration 3.75 3.82 3.67% 22.12% USA Average bond price 98.72 99.62 5.06% Germany Average bond rating A- A Netherlands Number bond holdings 191 1282 6.43% Sw itzerland CDS positions 39 - Number of issuers 160 301 Italy VaR 7.52% 6.82% Sw eden Volatility 3.48% 3.01% 9.38% 12.74% Spain Denmark 9.78% Rating exposure Maturity curve % 100 %100 50 82 Fund % 36 Fund % 80 40 Index % 50 27 26 29 Index % 60 30 34 34 40 18 18 18 19 27 20 20 15 7 4 7 4 0 1 0 2 0 10 0 5 5 AAA AA A BBB Inv HY Unrated Cash 0 Grade 0-3 yrs 3-5 yrs 5-7 yrs 7-10 yrs 10+ yrsSource: Henderson Global Investors, as at 31 December 2011Note: Totals may not equate to 100 due to derivatives exposure and rounding 9HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  11. 11. SectorCurrent Fund positioning selectionSector allocation Remain underweight financials given vulnerability to political and regulatory risk Underweight Basic Materials and Consumer sectors, negative earnings outlook Telecommunications and Packaging offer value, particularly in High Yield Sovereign allocation reflects investment in short-dated US and German bonds Relative weight by sector 12% 8% 4.6% 4% 1.1% 1.1% 0.3% 0.1% 0.0% 0% -4% -1.0% -1.3% -2.8% -2.9% -8% -5.2% -7.1% -12% Sov, Supra & Consumer Services Technology Industrials Telecommunications Index Health Care Oil & Gas Basic Materials Consumer Goods Utilities Financials AgencySource: Henderson Global Investors, as at 31 December 2011Note: Horizon European Corporate Bond Fund. Weights are shown relative to the iBoxx € Corporates index. 10HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  12. 12. SecurityCurrent Fund positioning selectionSecurity selection Top 10 overweight Ticker % relative Top 10 underweight Ticker % relative exposures exposures German Government DBR 1.84% Rabobank RABOBK -2.95% US Treasury UST 1.59% EDF EDF -1.43% Global Switch GSWITC 1.21% Metro AG METFNL -1.29% KFW KFW 1.20% LVMH MCFP -1.12% 3i Group IIILN 1.11% Allianz ALVGR -1.10% BG Group BGGRP 1.06% GDF GSZFP -1.04% Fonciere Lyonnaise FLYFP 1.04% Sanofi Aventis SANFP -0.95% Prologis International PEPR 1.02% Munich Re. MUNRE -0.87% Virgin Media VMED 0.97% Solvay SOLBBB -0.86% International Power IPRLN 0.96% Erste Bank ERSTBK -0.83%Source: Henderson Global Investors, as at 31 December 2011Note: Horizon European Corporate Bond Fund. Weights are shown relative to the iBoxx € Corporates index Focus on strong fundamental stories and Recession risks not priced into cyclical and consumer dependable cash flows companies Recent re-pricing an opportunity on a name- Underweight positioning on “core” names with high specific basis absolute debt levels Cash balance deployed into front end of German CDS used to accentuate negative company views and US Treasury sovereign curves 11HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  13. 13. Duration historyRemain close to benchmark given macro concerns Horizon European Corporate Bond Fund – duration history 0.5 4.5 0.2 4.3 0.3 0.1 0.0 0.0 4.1 Relative duration (yrs) Fund duration (yrs) 0.1 3.9 -0.1 3.7 -0.1 -0.1 -0.1 -0.1 0.0 -0.1 -0.3 -0.2 -0.2 3.5 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.5 3.3 -0.5 3.1 -0.7 Relative to index 2.9 -0.8 -0.8 -0.9 2.7 -0.9-0.9 Fund duration -1.1 2.5 Jun-10 Jul-10 Nov-10 Jun-11 Jul-11 Nov-11 Jan-10 May-10 Aug-10 Jan-11 May-11 Aug-11 Feb-10 Mar-10 Apr-10 Sep-10 Oct-10 Dec-10 Feb-11 Mar-11 Apr-11 Sep-11 Oct-11 Dec-11Source: Henderson Global Investors, as at 31 December 2011Note: Past performance is not a guide to future performance. 12HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  14. 14. European Corporate Bond Fund performanceAbility to outperform in both up and down markets Fund relative performance versus index 2.0% Credit spreads narrow (markets outperform) Credit spreads widen (markets underperform) 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% Jun-10 Jul-10 Nov-10 Jun-11 Jul-11 Nov-11 Jan-10 May-10 Aug-10 Jan-11 May-11 Aug-11 Dec-09 Feb-10 Mar-10 Apr-10 Sep-10 Oct-10 Dec-10 Feb-11 Mar-11 Apr-11 Sep-11 Oct-11 Dec-11Source: Henderson Global Investors, as at 31 December 2011Note: Horizon European Corporate Bond Fund. Returns relative to the index, net of management fees. Performance based on mid-day pricing A share class Euro returns . Past performance is not a guide to future performance. Inception date: 18 December 2009 13HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  15. 15. Competitor performanceAbsolute return relative to peer group Fixed Income EUR Corp Bond Morningstar Index - Total return since Fund inception (18 December 2009) % 16 Henderson Horizon European Corp Bond Fund (Class A Acc) 14 12 10 8 iBoxx Euro Corp Index 6 4 2 0 -2 -4Source: Morningstar Workstation, comparison with the Morningstar Fixed Income Euro-Corporate Universe, as at 31 December 2011Note: Since Fund inception performance showing % Total return (Net of AMC). Performance shown is for Euro denominated funds only (excludes USD denominated Euro-hedged share classes). Past performance is not a guide to future performance. 14HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  16. 16. Competitor performanceSuperior risk adjusted returns relative to peer group Total return versus Volatility relative to peers Total return versus Information Ratio relative to (since inception 18 December 2009) peers (since inception 18 December 2009) 16 16 Portfolio Portfolio 14 14 12 12 10 t rge Total return (%) Total return (%) 10 8 Ta 8 6 4 6 2 4 0 2 -2 0 -4 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 Standard deviation (%, weekly basis) Information ratio (weekly basis)Source: Morningstar Workstation, comparison with the Morningstar Fixed Income EUR-Corporate Universe, updated quarterly, as at 31 December 2011Note: Since Fund inception performance showing % Total return (Net of AMC). Performance based on mid-day pricing, A share class Euro returns net of fees. Past performance is not a guide to future performance. 15HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  17. 17. SummaryWhy Henderson for European Credit? Credit manager with significant European fixed income expertise Portfolio managers with history of success in managing European credit Consistent outperformance in different market environments Experienced team of credit analysts generating unconstrained ideas Collaboration across equity, credit, loans and structured specialists Risk control embedded throughout the investment process Evidence of strong sell disciplines 16HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  18. 18. Henderson Credit Alpha FundHDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  19. 19. Credit Alpha Fund details Strategies Instruments Pooled (UCITS III Product OEIC) Daily dealing, daily Credit Default Swaps Liquidity notice Thematic 3-month Libor +5% Credit Default Swap indices Performance target* (gross) Longs Typical Vol 3% - 6% Pair Trades Investment grade bonds Typical exposure +/- 0.5x / 2-3x (Net/Gross) Tactical High yield bonds Typical number of 70-100 positions Tactical AUM £515m Stephen Thariyan / Manager Tom Ross / Chris Pair Trades Credit Default Swaps Bullock Shorts Inception July 2007 Credit Default Swap indices Annual management Thematic fee: 1.5% Performance fee: 20% Fees of net performance over Libor (with high All FX and interest rate risk hedged water mark) Predominant instrument is CDS to enhance liquidity and Share classes Sterling, Euro, US available dollar reduce basis riskSource: Henderson Global Investors, as at 31 December 2011 Simplistic credit long short strategyNote: * This is a target return and is not guaranteed. 18HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  20. 20. Credit AlphaMulti strategy credit - the three strategiesLong time Gross exposure by strategy horizon ‘Pair trades’. Going long a credit that the fund favours versus short a credit it does not. Pair trades Typically pairs are either in the same or 0 200 similar sectors. Comprises both long and short positions Thematic Will also express ‘relative value’ between sectors 0 200 Short term positions in liquid securities that Tactical exploit technical imbalances in the market 0 200Short time horizonSource: Henderson Global Investors, as at 31 December 2011 19HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  21. 21. Credit Alpha Current structure of portfolio Current net = -35%, current gross = 135% Gross exposure by strategy Gross exposure by currency Gross exposure by investment type Corporate bonds Tactical 14% 16% USD 27% Thematic 65% CDS index 5% GBP 3%Pair Trades 56% EUR 105% CDS 108% Investment grade = 106% High yield = 29% Source: Henderson Global Investors, as at 31 December 2011 20 HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  22. 22. Credit Alpha collateral and cash exposureLimited counterparty and collateral risk Type of collateral Market value of collateral received (GBP) % of Fund UK Govt 5,062,000 1.0 Germany Govt 2,128,892 0.4 France Govt 1,508,493 0.3 Netherlands Govt 1,224,457 0.2 Belgium Govt 1,307,550 0.3 Cash - 0.0 Total 11,231,392 2.2Well diversified cash holdings across UK government bonds and cash instruments with limitedexposure to European banks Asset % of Fund CD Country of risk % of Fund Bonds 22.4 Abu Dhabi 1.0 Call account (Abbey) 9.1 Australia 2.9 Other cash accounts 4.0 Germany 2.0 Certificates of Deposit (CD) 24.5 Netherlands 4.5 Henderson Cash Fund 3.4 Singapore 7.9 Deutsche Bank Liquid Assets Fund 4.8 Sweden 2.7 Short dated Gilts and UK T-bills 29.6 UK 3.5 Market value of derivatives (CDS) 2.2 Total 100.0Source: Henderson Global Investors, as at 31 December 2011 21HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt
  23. 23. 0 1 2 3 4 5 6 7 8 Note: -500 > -475 -475 > -450 -450 > -425 -425 > -400 -400 > -375 -375 > -350 -350 > -325HDS.IntDataCSUK2012!PG12Citywire France 2012.ppt -325 > -300 -300 > -275 Credit Alpha -275 > -250 -250 > -225 -225 > -200 -200 > -175 -175 > -150 Source: Henderson Global Investors, as at 31 December 2011 Past performance is not a guide to future performance. -150 > -125 -125 > -100 Distribution of monthly returns -100 > -75 -75 > -50 -50 > -25 bp -25 > 0 0 > 25 50 25 > 50 50 > 75 75 > 100 100 > 125 125 > 150 Distribution of monthly returns 150 > 175 175 > 200 200 > 225 225 > 250 Figures are produced by the desk, from the P&L attribution before the deduction of Annual Management Charges (AMC). 250 > 275 275 > 300 300 > 325 325 > 350 350 > 375 375 > 400 400 > 425 425 > 450 450 > 475 475 > 500 mean 5.00% > 22

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