Franklin uk smaller companies fund  citywire event sept '13 final
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Franklin uk smaller companies fund citywire event sept '13 final

on

  • 446 views

 

Statistics

Views

Total Views
446
Views on SlideShare
402
Embed Views
44

Actions

Likes
0
Downloads
5
Comments
0

3 Embeds 44

http://www.citywire.co.uk 18
http://citywire.co.uk 16
http://shakespeare 10

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Franklin uk smaller companies fund citywire event sept '13 final Presentation Transcript

  • 1. For Professional Investor Use Only. Not for Distribution to Retail Investors. Opportunities in UK Small Caps Richard Bullas Co-Fund Manager, Franklin UK Smaller Companies Fund Franklin Templeton Funds September 2013
  • 2. 1 Agenda • The Opportunity in UK Smaller Companies • Investment Strategy & Process • Portfolio Positioning • Appendix FRANKLIN UK SMALLER COMPANIES FUND For Professional Investor Use Only. Not for Distribution to Retail Investors.
  • 3. For Professional Investors Only. Not for Distribution to Retail Investors. The Opportunity in UK Smaller Companies
  • 4. For Professional Investor Use Only. Not for Distribution to Retail Investors. Small Cap Out-Performance Over the Last 10 Years Source: Morningstar Direct®. © 2013 Morningstar UK. All rights reserved as at 31/07/13, total return in GBP over 10 years. PerformanceinGBP(rebasedto100) 100 150 200 250 300 350 400 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 NCSX Ex Investment Trusts TR Index FTSE 100 TR Index 3 +248% +148% FRANKLIN UK SMALLER COMPANIES FUND
  • 5. For Professional Investor Use Only. Not for Distribution to Retail Investors. Superior Performance 4 IMA Asset Class Performance – 10 Years Source: Franklin Templeton Investments as at 31/07/13. CumulativeReturnGBP FRANKLIN UK SMALLER COMPANIES FUND 0 50 100 150 200 250 300
  • 6. For Professional Investor Use Only. Not for Distribution to Retail Investors. Under-Owned Shrinking Asset Class 5 UK Smaller Companies FUM Source: IMA and Franklin Templeton Investments as at 30/06/13. FundsUnderManagementintheIMAUK SmallerCompaniesSector(£bn) MarketpriceoftheNumisIndex FRANKLIN UK SMALLER COMPANIES FUND 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 0 2 4 6 8 10 12 14 16 FUM £'s Numis index
  • 7. For Professional Investor Use Only. Not for Distribution to Retail Investors. 6 De-equitisation in Small Caps 1255 1271 1263 1085 1024 945 858 731 662 583 506 509 495 448 430 422 389 811 155 100 -100 100 300 500 700 900 1100 1300 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Start year Start year constituents Cumulative loss: deaths less IPOs Cumulative loss: net transfers to AIM Cumulative gain: change in cutoff Source: Numis as at 16/01/13. Number of constituents in the Numis Smaller Companies Index FRANKLIN UK SMALLER COMPANIES FUND
  • 8. For Professional Investor Use Only. Not for Distribution to Retail Investors. 7 Small Caps are Not Expensive Source: Bloomberg as at 30/06/13. Market P/Es by Market Cap Band FRANKLIN UK SMALLER COMPANIES FUND FTSE 100 FTSE 250 FTSE Small Cap 0 2 4 6 8 10 12 14 16 18
  • 9. For Professional Investor Use Only. Not for Distribution to Retail Investors. 8 Small Caps are Under Researched Source: Bloomberg as at 30/06/13. Average Analyst Coverage 29 24 18 11 7 5 3 2 0 5 10 15 20 25 30 35 £10bn+ £5bn-£10bn £1bn-£5bn £500m-£1bn £250m-£500m £100m-£250m £50m-£100m £25m-£50m Number of Analysts FRANKLIN UK SMALLER COMPANIES FUND
  • 10. For Professional Investors Only. Not for Distribution to Retail Investors. Investment Strategy and Process
  • 11. 10 Investment Strategy For Professional Investor Use Only. Not for Distribution to Retail Investors. FRANKLIN UK SMALLER COMPANIES FUND To create a high conviction portfolio of undervalued companies by primarily investing in the constituents of the Numis Smaller Companies Index (NSCI) • To have a portfolio of 40/50 investments over the longer term 40-50 Stocks • Minimum size investment c.1.5% and a maximum position of c.5% of the funds AUM 1.5%-5% Weightings • Concentrate on investments with a market cap of between £100m & £1bn £100m-£1bn Focus
  • 12. 11 Investment Process For Professional Investor Use Only. Not for Distribution to Retail Investors. FRANKLIN UK SMALLER COMPANIES FUND Business Risk Balance Sheet Risk Management Risk Valuation Risk A broad top-down perspective on the outlook for economies and financial markets provides the framework for our bottom-up stock picking selection process A fundamental research approach focussed on established quality smaller companies
  • 13. For Professional Investors Only. Not for Distribution to Retail Investors. Portfolio Positioning
  • 14. For Professional Investor Use Only. Not for Distribution to Retail Investors. 13 Three Investment Categories FRANKLIN UK SMALLER COMPANIES FUND High Quality Growth • Strong organic growth opportunities and growing end markets • Structural growth companies with a strong market position and a record of delivery Undervalued & Overlooked • Under-appreciated or overlooked companies • Valuation fails to reflect strength of company or profit potential Cyclical & Recovery • Good quality companies, well- managed during a challenging period • Well-placed to benefit from either self help or end market recovery A balanced and well-diversified portfolio with investments typically falling into one of three categories
  • 15. For Professional Investor Use Only. Not for Distribution to Retail Investors. 14 High Quality Growth FRANKLIN UK SMALLER COMPANIES FUND • Strong industry position in a structural growth market as global customers transition from analogue to digital printing • Rapid adoption of digital inkjet printing by Chinese ceramic manufacturers is driving strong earnings growth • Technological advantage over competition due to Research and Development investment • Strong financials, strong cash flow and net cash on the balance sheet • Valuation fails to reflect the strong sales and earnings outlook Other examples: RWS, Ted Baker, Cranswick Xaar is the global independent market leader in the manufacture of industrial digital inkjet printheads.
  • 16. For Professional Investor Use Only. Not for Distribution to Retail Investors. 15 Undervalued & Overlooked FRANKLIN UK SMALLER COMPANIES FUND • Defence and Dairy divisions are world class and market-leading • Investment in R&D has produced new products which are driving future demand • International growth opportunities for both divisions • Good visibility from 10-year sole source contract with US DoD • Dominant market position in Dairy with upside from the industrialisation of farming in China • The rating fails to reflect the quality of the business and its growth potential Other examples: Gooch & Housego, Entertainment One, Ricardo Avon is an innovative engineering group specialising in respiratory, defence and dairy markets.
  • 17. For Professional Investor Use Only. Not for Distribution to Retail Investors. 16 Cyclical & Recovery FRANKLIN UK SMALLER COMPANIES FUND • Well managed during a difficult market environment taking their market share to 27% • An increase in UK housing transactions will be a catalyst for increased tile demand • Well invested store base and high operational gearing will translate into strong earnings growth • Valuation fails to reflect this profit recovery potential. Other examples: Lavendon, LSL Property Services, Robert Walters The UK’s Leading independent tile retailer with over 320 stores nationwide.
  • 18. For Professional Investor Use Only. Not for Distribution to Retail Investors. Franklin UK Smaller Companies Fund Performance 3 Months 6 Months 11 Months (since restructure) 1 Year 3 Years 5 Years Franklin UK Smaller Companies Fund W(acc) 13.19% 23.75% 44.19% 46.46% 47.52% 34.38% Numis Smaller Companies Ex. Investment Trusts Index 8.95% 16.14% 35.13% 40.43% 72.06% 114.09% IMA UK Smaller Companies Sector Average 7.10% 12.49% 27.89% 31.74% 63.62% 80.37% Quartile 1 1 1 1 4 4 Past performance is not a guide to future performance. Highlighted data shows performance of the Fund since restructuring ended on 3 September 2012. Source: Franklin Templeton Investments and Morningstar as at 31/07/13. © 2013 Morningstar, Inc. All rights reserved. Performance details provided are in GBP, include the reinvested dividends net of basic rate UK tax and are net of management fees. The Franklin UK Smaller Companies Fund launched on 17 October 2011 to receive the assets of Rensburg UK Smaller Companies Trust, a unit trust. All fund performance data is based on the mid price of the Rensburg UK Smaller Companies Trust from its launch on 01/07/1991 to 30/09/2011 and the net asset value of the Franklin UK Smaller Companies Fund A(inc) shares thereafter. The Fund offers other share classes subject to different fees and expenses, which will affect their performance. Please see the prospectus for details. FRANKLIN UK SMALLER COMPANIES FUND 17
  • 19. For Professional Investors Only. Not for Distribution to Retail Investors. Appendix
  • 20. • UK equity specialists based in Leeds • Acquired by Franklin Templeton Investments in January 2011 19 About Franklin UK Equity Team FRANKLIN UK SMALLER COMPANIES FUND Source: Franklin Templeton Investments as at 31/07/13. The Franklin UK Equity Team was previously part of Rensburg Fund Management Limited. The company changed its name to Franklin Templeton Fund Management Limited on 17/10/11. For Professional Investor Use Only. Not for Distribution to Retail Investors. • Strong and stable team – Average investment experience: over 20 years – Cover the entire market with specific areas of expertise • Ben Russon joined in April 2013
  • 21. For Professional Investor Use Only. Not for Distribution to Retail Investors. Richard Bullas Richard Bullas, Research Analyst and Fund Manager is Joint Manager of the Franklin UK Smaller Companies Fund and is also Joint Manager of the Franklin UK Managers’ Focus Fund. Richard joined Franklin Templeton Investments when it acquired Rensburg Fund Management in January 2011, having previously worked at Rensburg Fund Management for over 11 years since joining the team in January 2000. Prior to joining Rensburg, Richard worked at AVIVA as a Market Analyst in the life and pensions team. Richard holds a B.Sc (Hons) degree in business and management studies from Bradford University School of Management. He holds the IMC (Investment Management Certificate) and is a Chartered MCSI (Chartered Institute for Securities and Investment) Research Analyst, Fund Manager Franklin Templeton Fund Management Limited Location: Leeds, UK 20FRANKLIN UK SMALLER COMPANIES FUND
  • 22. For Professional Investor Use Only. Not for Distribution to Retail Investors. Paul Spencer Mr Spencer is Joint Manager of the Franklin UK Smaller Companies Fund and Lead Manager of the Franklin UK Mid Cap Fund. A member of the Franklin UK Equity Team, he specialises in UK mid-cap equity analysis and investment. Paul joined Franklin Templeton Investments when it acquired Rensburg Fund Management in January 2011. Paul started his investment career in 1987, when he joined BWD Rensburg. Within the next eight years, Paul progressed through the ranks becoming Head of Research. In 1991, he assumed responsibility for the BWD UK Smaller Companies Trust leaving in 1995 to join Granville Davies Limited as a Director and Small and Mid Cap analyst. In 1999, Paul joined TD Waterhouse where he was Head of Research, specialising in small and mid- cap investment analysis. He returned to Rensburg in 2006 to manage the Rensburg UK Mid Cap Growth Trust, now called the Franklin UK Mid Cap Fund. During his tenure as Fund Manager of this Fund, he has received a number of awards for investment excellence including the Moneywise Best UK All Companies Fund in 2008, 2009, 2010, an award from Money Observer for the Best UK Small/Mid Cap Fund 2009 and Best UK All Companies Fund over three years from Lipper in 2009. Paul holds a BA (Hons) Economics from Nottingham University. He is a Fellow of the Securities Institute (FSI). Vice President, Fund Manager Franklin Templeton Fund Management Limited Location: Leeds, UK 21FRANKLIN UK SMALLER COMPANIES FUND
  • 23. For Professional Investor Use Only. Not for Distribution to Retail Investors. 22 Portfolio Repositioned by September 2012 FRANKLIN UK SMALLER COMPANIES FUND • Paul Spencer & Richard Bullas appointed co-portfolio managers on 25 June 2012 • Initiated a complete review of the portfolio and each holding • New investment process, strategy & style implemented • Sold 33/59 stocks, c.40% AUM, including; • Mining and oil & gas stocks (24% AUM, mostly gold, pre-production, high risk) • <1% weightings (14 stocks, low conviction) • <£100m mkt cap (30% AUM, illiquid, unprofitable) • Overseas listed (12% AUM, esoteric, high risk) • Reduced AIM exposure (42%, high risk) • Bought/Added; • To positions that met our investment criteria • Invested in c.15 new companies • Restructuring complete from 1st September 2012
  • 24. For Professional Investor Use Only. Not for Distribution to Retail Investors. 23 Portfolio Positioning Top 10 OverweightsTop 10 Sectors As at 31 July 2013 FRANKLIN UK SMALLER COMPANIES FUND Source: Franklin Templeton Investments as at 31/07/13. Weightings as percent of equity. Percentage may not equal 100% due to rounding. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. The Ten Largest Holdings represent the ten largest holdings of the fund as of the date indicated. These securities do not represent all of the securities purchased, sold or recommended for advisory clients, and the reader should not assume that investment in the securities listed was or will be profitable. All portfolio holdings are subject to change. Holdings of the same issuer have been combined. Weightings as a percentage of total. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in a top 10 holdings list. Sector Fund Weighting Relative to NSCI Support Services 16.9% +1.1% Software & Comp. Services 7.1% +4.5% Household Goods 7.1% +4.5% General Retailers 6.2% -2.4% Elect. & Electrical Equip. 6.2% +3.7% Real Estate 5.5% +1.1% Aerospace & Defence 5.4% +2.9% Real Estate Investment Trusts 4.7% +1.8% Industrial Engineering 4.5% +2.7% Financial Services 4.5% -3.2% Stock Fund O/Weight Topps Tiles PLC 3.9% Xaar PLC 3.3% RWS Holdings PLC 2.9% Avon Rubber PLC 2.9% LSL Property Services PLC 2.7% Polar Capital Holdings PLC 2.6% Gooch & Housego PLC 2.5% Ted Baker PLC 2.5% Lavendon Group PLC 2.4% Telford Homes PLC 2.4%
  • 25. For Professional Investor Use Only. Not for Distribution to Retail Investors. 24 Asset Allocation 0% 5% 10% 15% 20% 25% 30% 35% £1Bn+ £500m- £1Bn £250m- £500m £100m- £250m £50m- £100m %Fund Market Cap Bands FRANKLIN UK SMALLER COMPANIES FUND Portfolio Distribution & Asset Allocation as at 31 July 2013 Source: Franklin Templeton Investments as at 31/07/13. Information is historical and may not reflect current or future portfolio characteristics. All portfolio holdings are subject to change. Asset Allocation % Fund NSCI Index Weight FTSE 250 51.5% 77.7% FTSE SmallCap 21.5% 16.7% FTSE Fledgling 0.0% 1.2% AIM 20.1% 0.1% Other 6.9% 4.4% No. of stocks 45 379
  • 26. The Numis Smaller Companies Index 25 Source: Franklin Templeton Investments as of 30/06/13. • Formerly the Hoare Govett Smaller Companies Index • Bottom 10% of the main UK-listed market by value (rebalanced annually) • 80% FTSE 250, 15% FTSE Small Cap and 5% others • c.400 Companies (excluding investment trusts) • £1.5bn largest market cap (as at 31 December 2012 cut-off point) FRANKLIN UK SMALLER COMPANIES FUND For Professional Investor Use Only. Not for Distribution to Retail Investors.
  • 27. For Professional Investor Use Only. Not for Distribution to Retail Investors. Franklin UK Smaller Companies Fund Fund Details Management Paul Spencer, Richard Bullas Asset Category UK Equity Investment Style Blend IMA sector IMA UK Smaller Companies Benchmark Numis Smaller Companies Ex. Investment Trusts TR Index Launch Date 17/10/2011 Number of Positions 45 Portfolio Size £56.4 million FRANKLIN UK SMALLER COMPANIES FUND 26 Source: Franklin Templeton Investments, as at 31/07/13. The Franklin UK Smaller Companies Fund launched on 17 October 2011 to receive the assets of Rensburg UK Smaller Companies Trust, a unit trust. All fund performance data is based on the mid price of the Rensburg UK Smaller Companies Trust from its launch on 01/07/1991 to 30/09/2011 and the net asset value of the Franklin UK Smaller Companies Fund A(inc) shares thereafter. Holdings of the same issuer have been combined.
  • 28. For Professional Investor Use Only. Not for Distribution to Retail Investors. Important Information For professional investor use only, this document is not aimed at, nor intended for use by retail investors. Copyright © 2013 Franklin Templeton Investments. All rights reserved. This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of the UK-domiciled OEIC, Franklin Templeton Funds OEIC (“the Fund”). Nothing in this document should be construed as investment advice. Subscriptions to shares of the Fund can only be made on the basis of the current prospectus, the relevant Key Investor Information Document, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter, which can be found on our website or requested from the address below. An investment in the Fund entails risks which are described in the Fund’s prospectus and the relevant Key Investor Information Document. The value of shares in the Fund and income received from it can go down as well as up, and investors may not get back the full amount invested. Currency fluctuations may affect the value of overseas investment. An investment in the Fund entails risks which are described in the Fund’s prospectus and in the relevant Key Investor Information Document. The Fund invests in a specific sector or geographical area and the returns may be more volatile than a more diversified fund. No shares of the Fund may be directly or indirectly offered or sold to nationals or residents of the United States of America. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest. Opinions expressed are the author's at publication date and they are subject to change without prior notice. Performance details provided are in GBP, include the reinvested dividends net of basic rate UK tax and are net of management fees. The Franklin UK Smaller Companies Fund launched on 17/10/11 to receive the assets of Rensburg UK Smaller Companies Trust, a unit trust. Fund performance data is based on the mid price of the Rensburg UK Smaller Companies Trust from its launch on 01/07/1991 to 30/09/2011 and the net asset value of the Franklin UK Smaller Companies Fund A(inc) shares thereafter. Sales charges and other commissions, other taxes and relevant costs to be paid by an investor are not included in the calculations. Past performance is no guarantee of future performance. © 2013 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; an (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index is unmanaged and one cannot invest directly in an index. The performance of the index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton Group fund. For a free copy of the latest prospectus, and the relevant Key Investor Information Document , the annual report and semi-annual report, if published thereafter or for more information about any Franklin Templeton Investments’ fund, please contact: Franklin Templeton Investments, Telephone: 0800 305 306, Email: enquiries@franklintempleton.co.uk or write to us at the address below. Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: The Adelphi, 1-11 John Adam Street, London WC2N 6HT. FTIML is authorised and regulated by the Financial Conduct Authority. 27IMPORTANT INFORMATION