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Grr eur ppt citywire conference 11_13_05_2011(paper)_final_09052011
 

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    Grr eur ppt citywire conference 11_13_05_2011(paper)_final_09052011 Grr eur ppt citywire conference 11_13_05_2011(paper)_final_09052011 Presentation Transcript

    • Presentation on:Achieving perspective in an uncertain world – Newton’s solution - BNY Mellon Global Real Return Fund (EUR)
      Suzanne Hutchins – Investment Manager and lead fund manager for BNY Mellon Global Real Return Fund (USD) at Newton
      CitywireMontreaux - 11th -13th May 2011
    • Suzanne Hutchins
    • Newton’s appealBusiness focus
      Total assets under management
      • Performance culture – concentrates teamwork, communication and resources towards delivering outperformance
      • Global specialists – 70% of mandates are global including over €30 billion in global funds
      • Long-term incentive plan attracts and motivates staff. We operate as ‘owners’ of the business
      * ECU prior to Euro
      ** As at 31 March 2011
      Source: Newton
      Our culture is aligned with your objectives
    • 4
      Newton’s Real Return strategy for long-term growth
      Allowable assets
      Strategy type
      Absolute return
      Can invest in:
      Target
      EURIBOR +4% p.a. gross of feesover rolling 5 year periods
      • Equities
      • Government Bonds
      • Corporate Bonds
      • Cash
      • Derivatives
      • Other assets via tradeable securities e.g.
      • Real estate
      • Commodities
      • Currencies
      • ‘Alternative’ strategies
      • An unconstrained active multi-asset strategy with lower volatility
      • Emphasis on long term investing and capital preservation
      • Transparent, single portfolio of direct, liquid investments
      • Maximum flexibility at the portfolio construction level;
      • emphasis on traditional asset classes
      • no asset allocation constraints
      The power of perspective and flexibility
    • 5
      Newton's absolute return credentialsNewton Real Return Fund
      Risk versus return since inception1 April 2004 to 31 March 2011
      Unconstrained evolution of Newton's proven global multi-asset approach
      Compelling long-term return; not possible through market returns in broad asset classes
      Absolute return in every calendar year
      Achieved with absolute volatility closer to bonds than equities
      Low High
      Past performance is not a guide to the futureSource: Newton, weekly data, total return in sterling, gross of fees and income reinvested. Asset class statistics relate to the following measures: FTSE All Share, FTSE World, FTSE Brit. Gov't Fixed All Stocks, FTSE Brit. Gov't Index IL All Mats, JPM Global Gov't Bond, HFRI Fund of Funds (net), IPD All Properties, LIBOR 1 Month
    • 6
      Newton’s real return strategiesOverview as at 31 March 2011
      Please see important information at the end of this presentation.Source: Newton
    • 7
      Newton’s structure and multi-asset investment approachThe importance of perspective
      Rapid implementation of ideas
      Efficient idea generation
      Motivational
      Team based
      Highly interactive investment process
      Newton's structure of thinking globally from a single location allows us to utilise themes
      Themes provide valuable perspective
      Generalist multi-asset team supported by teams of specialists provide objective thinking and a powerful combination of perspectives;
      global cross comparison of asset types
      global cross comparison of securities within asset types
      Single ‘holistic’ portfolios enable global portfolio construction and enhanced risk awareness
      Assessing the world as one investment opportunity
    • 8
      Newton’s Real Return teamIdea generation and input
      Bond / FX Strategy Group
      Asset Class Strategy Group
      Macro Strategy Group
      Equity Strategy Group
      Strategy – 3
      Avg yrs’ experience: 16
      Avg yrs at Newton: 11
      Global equity – 14Avg yrs’ experience: 16
      Avg yrs at Newton: 13
      Real Return team
      Global equity research – 22
      Avg yrs’ experience: 14
      Avg yrs at Newton: 6
      Specialistregional equity – 18
      Avg yrs’ experience: 12
      Avg yrs at Newton: 7
      JamesHarries
      IainStewart
      MatthewBrown
      AronPataki
      SuzanneHutchins
      Fixed income – 8
      Avg yrs’ experience: 12
      Avg yrs at Newton: 5
      Other assets – 5
      Avg yrs’ experience: 9
      Avg yrs at Newton: 9
      Real Return Meeting
      Portfolio ideas come from everywhere – powerful combination of perspectives
      Source: Newton, March 2011
    • 9
      3
      2
      4
      1
      5
      Unconstrained multi-asset investingThe process
      Newton's starting point is the target…
      …which defines the portfolio structure…
      … and provides the building blocks…
      … and Newton's view of the world…
      … to construct a single, flexible portfolio
      Return(EURIBOR +%)
      • Security characteristics
      • Capital preservation
      • Asset allocation
      • Regional mix
      • Volatility
      • Currency
      Research
      Recommended
      Lists
      Real Return strategy
      Global Strategy
      Risk(Volatility%)
      Model Portfolios
      A BNY Mellon Financial CompanySM
      MEDIUM
      HIGH
      LOW
      Absolutely focused – flexibility is key
    • 10
      Idea generationHow themes influence investment selection
      Source: Newton, 28 February 2011
      Information is for illustrative purposes only and should not be construed as investment recommendations.
    • 11
      Idea generationStock selection
      Stock example: Roche
      Attractive valuation
      Strong fundamentals
      • P/E 9.0x 2012
      • EV/EBITDA 7.0x 2012
      • Dividend yield 5.3%
      • Market cap $150bn
      • Product pipeline innovation
      • Specialist product portfolio
      • Low patent expiry
      Identifying global winners
      As at April 2011
      Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations
    • 12
      Idea generationStock selection
      Stock example: Campofrio
      Attractive valuation
      Strong fundamentals
      • Senior paper
      • Leverage of 4.3x net debt / EBITDA
      • Running yield of 7.6%
      • Largest producer of processed meats in Europe
      • Market leading positions in both branded and private labels in its key markets
      • Company continues to delever and is targeting a range of 2.5-3.0x net debt / EBITDA
      • Good liquidity with no near term debt maturing
      Identifying global winners
      As at April 2011Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations
    • 13
      BNY Mellon Global Real Return Fund (EUR) Equity analysis – Top ten holdings at 31 March 2011
      Portfolio holdings are subject to change at any time without notice. This information should not be construed as a recommendation to purchase or sell any security.
      Source: Newton, as at 31 March 2011
    • 14
      Newton Real Return positioningConceptual representation
      Building an asymmetric multi-asset portfolio
      • Emphasis on traditional asset classes
      • A return seeking core with particular security characteristics
      • Risk offsetting positions for dampened volatility and downside protection
      • Not an asset allocation fund – flexibility to adjust risk hedging in addition to shifting asset allocation
      Seamless management of ‘risk’ and return
      Source: Newton, 31 December 2010
    • 15
      BNY Mellon Global Real Return Fund (Euro)Strategic positioning at 31 March 2011
      Other 4.2%
      Equities 57.4%
      Commodities 4.1%
      Derivatives 0.1%
      UK 11.1%
      Cash & equivalents 17.6%
      North America 14.1%
      Bonds 17.3%
      Corporate 10.7%
      Government bonds 4.7%
      Europe ex UK 19.4%
      Government index linked 2.3%
      Convertibles 3.0%
      Pacific Basin ex Japan 2.6%
      Emerging markets 8.3%
      Japan 2.0%
      Return enhancing assets
      Equities
      High yielding global equities
      Positions in unloved sectors (healthcare, telecoms) and emerging world growth
      Corporate debt
      Selective exposure at compelling yield
      Risk offsetting positions
      Derivatives
      Euro Stoxx optionsproviding downside protection if equity markets sell-off
      AUD put optionsrisk aversioncommodity cooling
      US Bond call optionsProviding protection if bond markets rally
      Euro put optionsrisk aversionincreasing peripheral Europe contagion risk
      Currency
      Approximately 40% exposure to overseas currenciesnot accounting for overseas earnings of domestic stocks
      Commodities
      Inflation hedge – gold via physical gold ETFhedge against any inflation from the scale of loose policy and QE
      Inflation hedge – soft commodities via agricultural ETFearth matters and developing economies support this
      Source: Newton
      Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.
    • 16
      BNY Mellon Global Real Return Fund (Euro)*Historical analysis of fund positioning
      The chart above illustrates changes in asset allocation for the € Real Return Fund over five years. For illustrative purposes, delta adjusted equity market option exposure is shown below the main body of the chart, to demonstrate the extent to which downside protection has been utilised over time. Similarly, synthetic bond positions (bond options) have been highlighted above the main body of the chart to illustrate clearly the different bond exposures -via options and physical positions. Importantly, the strategy does not borrow to implement derivative strategies and risk controls exist to prevent exposing the strategy to open-ended losses. * Pre July 2007, delta has been adjusted using end of day data sourced from the relevant exchanges. ** Data pre April 2010 relates to £ Newton Real Return Fund. Data post April 2010 relates to the € Newton real Return Fund
      Source: Newton, 31 March 2011
      Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.
    • 17
      Newton’s Real Return Strategy Derivatives use since inception
      Source: Newton, March 2011
      Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations.
    • 18
      Real Return investing Controlling the risks
      Real Return strategy
      Portfolio objectives (1 month Euribor +4% target)
      Proprietary research
      Fundamentals
      Price
      Single portfolio approach
      Perspective
      A BNY Mellon Financial CompanySM
      Risk control
      (portfolio guidelines)
      Risk monitoring
      Ensuring risk is appropriate, consistent and intended
      * Based on long term volatility statistics
    • 19
      Newton Real Return Fund (GBP)Results analysis
      Contribution by asset class
      Results in differing equity markets since inception (to 31 March 2011)*
      Cumulative contribution month by month for 2008
      Cumulative contribution month by month for 2009
      Source: Newton* Monthly data, total return, gross of fees. Rising and falling periods defined using quarterly MSCI World NDR returns
    • 20
      BNY Mellon Global Real Return Fund (EUR)Results contribution by asset class
      Cumulative attribution month by month since inception to date
      Different investments take the strain in different environments
      Source: Newton as at 31 March 2011
      Past performance is not a guide to the future
      Please remember that the value of shares and the income from them can fall as well as rise and investors may not get back the full amount originally invested
    • Newton Real Return Fund (£) Long-term investment results
      1.9
      -5.5
      -2.0
      -1.6
      -1.8
      -3.3
      -11.5
      -30.9
      +123.74%
      +69.74%
      +65.83%
      -3.0
      -7.8
      Market downturnMarch 05 – April 05
      March 2004
      Market downturnApril 06 – May 06
      Market downturnJune 07 – July 07
      Market downturnDecember 07 – Feb 09
      Market downturnApril 10 – June 10
      Newton Real Return in market downturn
      MSCI World in market downturn
      Figures are based on sterling returns. Past performance is not a guide to the future
      Source: Newton, weekly data, total return, gross of management fees, gross income reinvested. 31 March 2011
    • 22
      Why
      BNY Mellon AM
      Specialist approach to fund management. Appointed Newton to manage the portfolio as their
      Global Thematic specialist with expertise in global mixed funds. Newton has €9.7 bn in multi-asset/real
      return strategies.
      Aims to beat
      cash returns
      1 month EURIBOR +4% over a 3- 5 year rolling periods
      Track record
      Based on the Newton Real Return Fund, managed by Newton since 2004, which has achieved this objective
      in this time frame and has AAA rating by Standard & Poor's, 5 stars Morningstar.
      Flexible approach
      Can invest in a variety of asset classes (equity, fixed income, cash instruments, REITS, commodities) with a
      global approach. Can also invest in simple derivatives to capture strong returns and preserve capital
      in all conditions.
      Resourceful
      Fund manager is supported by a team that generates ‘global themes’ and the macroeconomic strategy as
      well as by a team of 21 analysts responsible for the bottom-up input.
      Experienced
      Strategy Director has 23 years investment experience at Newton. Fund manager, has 15 years’ experience
      managing multi-asset class portfolios.
      Qualitative
      rating
      BNY Mellon Global Real ReturnFund (EUR)Conclusion
      The strategy was launched on 31 March 2004 (the Fund was previously called Newton Intrepid and followed a completely different strategy).
    • 23
      More informationFund Microsites – www.bnymellonam.com/grr/en
    • 24
      Appendices
    • 25
      Newton Real Return FundInvestment team
      Portfolio management team
      Iain Stewart
      Iain is investment leader of the global funds, a member of the Real Return team and a senior member of the strategy group, with particular responsibility for co-ordinating the development of Newton’s global investment themes. He joined Newton in 1985, and has specialised in the management of multi-asset and global equity mandates. Iain is also responsible for a significant portion of Newton’s pooled balanced portfolios.
      James Harries
      James is a member of the Real Return team, a global manager specialising in our global higher income and real return strategy. He joined Newton in 1995 and is a member of the global investment and global model groups. Additionally, he worked at Veritas Asset Management between 2004 and 2005, where he established and managed a global income fund.
      Matthew Brown
      Matthew is a global funds manager and a member of the Real Return team. He is also a member of both the multi asset and European equities groups. Since joining the Newton multi asset team in 2000, Matthew has acquired varied experience in a range of mandates including multi asset, global equity and absolute return portfolios. He is a chartered financial analyst (CFA).
      Aron Pataki
      Aron is a risk strategist for the Real Return strategy, with a particular focus on the use of derivatives and hedging. He joined Newton in 2006 as a member of the portfolio analytics team, where he was responsible for risk analysis and portfolio construction across Newton’s institutional and retail portfolios. Previously, he worked as a quantitative analyst at Lacima Group.
      Suzanne Hutchins
      Suzanne Hutchins rejoined Newton in 2010 as global investment manager and member of the Real Return team. She moved to Capital International in 2005 as Investment Specialist for global equity, income and absolute return based strategies. She had additional client facing responsibility for ESG (Environmental, Social and Governance) issues. Suzanne joined Newton in 1991 as a research analyst after completing a BA (Hons) at University College London. During her 14 years with Newton, she worked closely with Stewart Newton before becoming lead on the UK and Intrepid team. She managed multi-asset, global equity mandates and RPI+ based strategies for institutional and retail clients.
    • 26
      Investment team Overview at April 2011
      Paul Brain
      Paul Stephany
      Howard Cunningham1
      Robert Shelton
      Helena MorrisseyChief executive officer
      Jeff MunroeChief investment officer
      Simon PrykeHead of private clients & charities
      Andrew DownsChief operating officer
      Matt DuncanHead of business strategy
      Roger WilkinsonInvestment leader, global research
      Campbell WattersonDeputy chief investment officer
      Chris RexworthyChief risk and compliance officer
      Tineke Frikkee
      Jonathan Day
      Trevor Holder
      Carl Shepherd
      Simon Nichols
      Uzo Ekwue
      Scott Freedman
      Ben Russon
      Parmeshwar Chadha1
      Europe
      Richard Wilmot
      Martin Chambers
      Rajesh Shant
      Thomas Beevers
      Caroline Tye + Onshore
      Roger Wilkinson
      Rosie Bichard
      Duncan Bulgin
      Robert Canepa-Anson
      Tracey Dominick
      Charles French
      Robert Gullett
      Paul Schenk
      Christopher Smith
      David Stephenson
      Jeremy StuberCharles Whall
      Ian Burger2
      Amanda Young2
      Elly Irving2
      Gemma Kingsley
      Tim Lucas
      Jonathan McMullan
      Fatemah Naraghi
      Michael Plotkowiak
      Russell Pointon
      Stephen Rowntree
      Fred Moore
      Naomi Waistell
      Caroline Mair + International
      Asia Pacific
      Jason Pidcock
      Mike Connor + Edinburgh
      USSimon Laing
      Emily Fletcher
      Zoe Kan
      Caroline Keen
      Aidan Butler + Leeds
      Strategy
      Tim Wilson1Peter HensmanDouglas Reed
      Credit
      Howard Cunningham1
      Parmeshwar Chadha1
      Scott Freedman
      Martin Chambers
      Specialists
      Paul Flood5
      Aron Pataki5
      Sophia Whitbread4
      Yuko Takano4
      Paul Markham
      Ian Enslin
      Gemma Woodward
      Jon Bell
      Terry Coles
      James Korner
      Alan Goodwin
      Robert Hay
      Wilfred Frost
      Oliver Larminie
      Charlotte Ryland
      Peter Henderson
      Matthew Brown
      Rob Marshall-Lee3
      Nick Moss
      Robert Stewart
      Hilary Meades
      James Harries
      Nick Clay
      Christopher Metcalfe
      Suzanne Hutchins
      Jeff Munroe
      Iain Stewart
      Notes
      Chart illustrates primary responsibilities. Regional fund management teams combine portfolio management with regional research responsibilities.
      1 Combined Global Research/Investment Management roles. 2 Corporate Governance / SRI. 3 Combined Investment Management / Specialist Research. 4 Specialist Research. 5 Derivatives
    • 27
      Newton Real Return FundPerformance contribution by asset class
      5 years to 31 December 2009
      Annualised performance
      Different investments take the strain in different environments
      Source: Newton, gross of fees
    • 28
      Newton Real Return Fund (£)Longer term results
      Key
      Return less risk free rate (LIBOR 1 month) divided by standard deviation
      Standard deviation
      Value at risk: worst case of 95% confidence (normal distribution assumed)
      Ex Post
      Ex Ante
      ‘Equity like’ performance with lower volatility
      Source: Newton, as at 31 March 2011, total return, gross of management fees, gross income reinvested Figures are based on sterling returns. Past performance is not a guide to the future Please remember that the value of shares and the income from them can fall as well as rise and investors may not get back the full amount originally invested. †Restyle date
    • 29
      Newton Real Return FundCalendar year results (since inception)
      * 31 March 2004 to 31 December 2004
      Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. The value of overseas securities will be influenced by fluctuations in exchange rates.
      Source: Newton, as at 28 February 2011, gross of fees, COB prices
    • 30
      BNY Mellon Global Real Return Fund (EUR)Positioning
      Corporate bond positioning
      Credit rating (% of credit exposure)
      Bond Sector breakdown (% of credit exposure)
      Source: Newton as at 31 March 2011
      Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations
      30
    • 31
      Newton Real Return FundDistribution of weekly returns as at 31 March 2011
      Newton Real Return
      MSCI World NDR index
      Weekly returns (%)
      Narrower, less volatile return profile than global equities
      Source: Newton, weekly data, total return, gross of management fees, gross income reinvested, since inception (1 April 2004 )
    • 32
      Newton Real Return Fund (£)Relaunch (1 April 2004) to 31 March 2011
      Investment results
      Figures are based on sterling returns. Past performance is not a guide to the future.
      Please remember that the value of shares and the income from them can fall as well as rise and investors may not get back the full amount originally invested
      Source: Newton, weekly data, total return, gross of management fees, gross income reinvested
    • 33
      The benefits of appointing Newton
      Managing money is Newton's sole business
      Global specialists since Newton's inception
      Integrated single portfolio management a key strength for global target return mandates
      An investment process that has been in place for 30 years
      Rapid implementation of ideas
      Efficient idea generation
      Motivational
      Team based
      “The first rule is not to lose money. The second rule is not to forget the first rule” – Warren Buffett
    • 34
      Idea generationHow themes influence investment selection
      Source: Newton 28 February 2011Information is for illustrative purposes only and should not be construed as investment recommendations.
    • 35
      Portfolio positioning
      In a lower growth world, with more volatility, investors should prize both growth and stability. At the current time large capitalisation, diversified and relatively defensive equities are selling at attractive valuations.
      Focus on healthcare, telecoms, selected technology areas and staples.
      Developing world continue to have attractions in terms of growth and fiscal positions. Low western interest rates will continue to encourage capital flows into these economies.
      Selected developing economy exposure
      The effort to reflate western economies with QE type policies will continue to underpin demand for ‘real assets’. Longer term demand fundamentals and real supply challenges in various resources will continue to present opportunities.
      Energy, commodities and basic industries and their infrastructure
      Extremely selective in financials. Avoid those challenged by government interference.
      The “all change” world will continue to pressure financials. Divergent performances likely to yield stock selection opportunities.
      Source: Newton, January 2011
    • 36
      Idea generationStock selection
      Stock example: MTN
      • Very strong, under levered balance sheet and free cash flow positive
      • Revenue growth of 9% expected for 2011
      • Pure play Mobile telecoms operator in Latin America, Africa & Asia.
      • Current low level of Mobile and Fixed telephony penetration in Africa & Asia gives great growth potential for many years to come.
      • Strong strategy which focuses on brand and offering “Value” to customer is well suited to current tough economic environment.
      • Strong management & balance sheet means will be a survivor
      Identifying global winners
      Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations
      Source: Newton as at April 2011
    • 37
      Idea generationStock selection
      Stock example: INEOS
      Attractive valuation
      Strong fundamentals
      • Senior secured paper
      • Senior leverage of 2.7x net debt / EBITDA
      • Running yield 8.5%
      • One of the largest integrated chemical companies
      • Broadly diverse operations including O&P, refining and chemical intermediaries
      • Strong cash flow generation
      • Committed to deleveraging
      Identifying global winners
      As at April 2011Portfolio holdings are subject to change at any time without notice and should not be construed as investment recommendations
    • 38
      Important information
    • 39
      Important information
      CP6646-28-04-2011 (3M)