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Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
Ignis arc madrid oct13
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Ignis arc madrid oct13

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  • 1. Ignis Absolute Return Credit Fund Chris Bowie Head of Credit Portfolio Management and Portfolio Manager October 2013 0
  • 2. 2013: high credit volatility October 13 1 Ignis Absolute Return Credit Fund -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Performance year-to-date Markit iBoxx Euro Corporates TR Source: Lipper, from 31/12/2012 to 30/08/2013
  • 3. -3% -2% -1% 0% 1% 2% 3% Jan08 Mar08 May08 Jul08 Sep08 Nov08 Jan09 Mar09 May09 Jul09 Sep09 Nov09 Jan10 Mar10 May10 Jul10 Sep10 Nov10 Jan11 Mar11 May11 Jul11 Sep11 Nov11 Jan12 Mar12 May12 Jul12 Sep12 Nov12 Jan13 Mar13 May13 Jul13 Monthly returns of iBoxx Euro Non-Sovereign Index (Total Return) Credit is not a low risk asset class October 13 2 Ignis Absolute Return Credit Fund Source: Bloomberg, from 31/12/2007 to 30/08/2013
  • 4. Volatility not just caused by sovereign yield exposure October 13 3 Ignis Absolute Return Credit Fund -4% -3% -2% -1% 0% 1% 2% 3% Jan08 Mar08 May08 Jul08 Sep08 Nov08 Jan09 Mar09 May09 Jul09 Sep09 Nov09 Jan10 Mar10 May10 Jul10 Sep10 Nov10 Jan11 Mar11 May11 Jul11 Sep11 Nov11 Jan12 Mar12 May12 Jul12 Sep12 Nov12 Jan13 Mar13 May13 Jul13 Monthly capital returns from spread moves Source: Bloomberg/Ignis based on spread change (iBoxx EUR Non-Sovereign Index) x duration = spread return. Data from 31/12/2007 to 30/08/2013
  • 5. Absolute return strategies can counter this volatility October 13 4 Ignis Absolute Return Credit Fund -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Performance year-to-date Markit iBoxx Euro Corporates TR Ignis Absolute Return Credit I EUR Source: Lipper, based on the Ignis Absolute Return Credit Fund EUR I share class net of fees from 31/12/2012 to 30/08/2013 Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested.
  • 6. Absolute return strategies can enhance risk/return profile October 13 5 Ignis Absolute Return Credit Fund Source: Ignis, assumptions based on combination of historic/forecast performance of assets. All data for illustrative purposes only 3% 4% 5% 6% 1.5% 2.0% 2.5% 3.0% %ExpectedAnnualisedReturns % Expected Annualised Volatility Expected Return/Volatility Absolute return credit Investment grade credit - EUR Efficient frontier 10% allocation to absolute return credit 30% allocation to absolute return credit
  • 7. Growth in the developed world is recovering Unusually accommodative monetary policy expected to end - Fed tapering to reflect self-sustaining US recovery - QE in UK to end - Eurozone has stopped its decline Yields still at historic lows, a move back to where they should be at this stage of the capital cycle will lead to losses October 13 6 Ignis Absolute Return Credit Fund Outlook: challenging conditions for credit to continue
  • 8. Traditionally, the flow of new issuance and secondary trading has been supported by investment banks’ risk appetite and risk capital Banks’ capital reserves have shrunk post-crisis due to regulatory constraints/risk aversion While new credit issuance still being absorbed, liquidity within the secondary market has been severely constrained This restricts the long-only manager’s ability to trade corporate bonds both cheaply and in size Credit derivatives offer far more liquidity October 13 7 Ignis Absolute Return Credit Fund Liquidity has also become an issue New issuance Secondary trading Liquidity
  • 9.  Pure alpha  Market neutrality  Positive performance in all market conditions  Zero duration risk Absolute Return Credit October 13 8 Ignis Absolute Return Credit Fund Designed to deliver:  High conviction research ideas  Global opportunities  Investment grade to high yield credit  Liquid CDS as part of pair trading strategy Investing in:  Low volatility (6% ceiling)  Low correlation with traditional asset classes  High information ratio Targeting:
  • 10. Ignis Credit: multi-specialist team managing €16.8bn Analysts Years in industry Sector Background David Meade 28 Corporates Fidelity, Morgan Stanley, S&P Michael Ewing 24 Banks Epic, UBS Rosalie Pinkney 16 Financial Institutions BGI, Fitch Janaka Nanayakkara 13 CMBS, ABS Chalkhill, M&G, Investec Scott Duggal 10 ABS Fitch, Shell AM Nadia El Alaoui 9 TMT, industrials BNY Mellon, Lehman Albane Poulin 7 Fixed rate ABS, utilities Insight Matt Creamer 5 Money market research KPMG Faiz Boustany 1 Insurance Joined Ignis from university October 13 Ignis Absolute Return Credit Fund 9 Portfolio managers Years in industry Fund type Background Chris Bowie 21 3rd party, fixed rate ABS AEGON, Murray Johnstone Phil Heaney 23 Financials Minet, Trade Indemnity, WestLB Adam Walker 15 3rd party, non- financials, Europe Barclays Matt Guzzo 15 Floating rate ABS Hypo Real Estate Gordon Shannon 6 Fixed rate ABS Towers Watson Source: Ignis at 31/08/2013
  • 11. Investment process: simplicity and pragmatism Positions sized to historic volatility and stop loss set Most profitable opportunities selected and appropriate hedge determined Idea generation from detailed research Trade propositions debated and filtered Generate Challenge DecideImplement Profits taken/stop loss activated/positions closed Monitor October 13 Ignis Absolute Return Credit Fund 10
  • 12.  Research agenda set by Head of Credit Research  Filtered universe of circa 270 global issuers divided into two groups: - Tier 1: complex, volatile issuers that present the greatest opportunity and risk - Tier 2: stable, well-known issuers presenting fewer opportunities and risks  Additional capacity to research adhoc issuance  Database identifies anomalous credits by sector, ratings band, currency and on an individual basis Credit universe filtered to ensure focused research *Source: Ignis at 31/05/2013; **Source: Ignis at 31/03/2013 Credit sector exposure* ABS Banks Cash Consumers Covered Financial Services Gilts Industrials Insurance-Wrapped Insurance Overseas Governments Sovs/Supras TMT Utilities Credit opportunities exposure** Tier 1 Tier 2 October 13 Ignis Absolute Return Credit Fund 11
  • 13. Superior proprietary technology:  Enables all pricing dislocations to be isolated and analysed  Contains daily spread data back to 2003  Cross-references market and stock news to price moves Identifying relative value opportunities October 13 Ignis Absolute Return Credit Fund 12 Spread of bond versus sector regression Ratings’ spread history Snapshot of bonds filtered by criteria Credit yield curve ChallengeGenerate /
  • 14. Ideas reviewed and tested by heads of portfolio management and credit research • Most profitable opportunities selected • Suitable position size set • Exit strategy determined • Existing holdings reviewed Analysts put forward investment rationale: • performance drivers/catalyst • suitable hedge instrument (to eliminate market risk) • price target/time-horizon • downside case/stop-loss • expected pay-off Regular meetings and ongoing debate to ensure optimal portfolio positioning Identify best ideas October 13 13 Ignis Absolute Return Credit Fund Proposition DecideChallenge Idea to be refined Portfolio construction stage DecideChallenge /
  • 15. Sizing trades 0 50 100 150 200 250 300 350 400 450 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 RBOS CDS EUR SR 5Y|BP HSBC BK CDS EUR SR 5Y|SP Implement Credit 1 Credit 2 Analyse two credits at latest spreads (1:1) 0 50 100 150 200 250 300 350 400 450 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 RBOS CDS EUR SR 5Y|BP HSBC BK CDS EUR SR 5Y|SPCredit 1 Credit 2 (adjusted spreads) Establish ratio to equalise spread (1:2.1) Ratio calculated at latest spread Source: Ignis. All data for illustrative purposes only. October 13 Ignis Absolute Return Credit Fund 14
  • 16. -150 -100 -50 0 50 100 150 200 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Historic difference between the equalised credits plotted Standard deviation band calculated Trade sized to ensure downside risk limited to single standard deviation move October 13 15 Ignis Absolute Return Credit Fund Sizing trades Source: Ignis. All data for illustrative purposes only. Implement Historic difference of equalised credits (with standard deviation band) Example position size calculation Historic standard deviation of pair 180 bps Spread duration value 500 bps Maximum position size (of fund) 5.55% +1 STD -1 STD Average
  • 17. October 13 16 Ignis Absolute Return Credit Fund Portfolio construction and risk management Existing holdings constantly monitored, rationale challenged Liquidity risk - CDS quotes from two or more counterparties - spread “margin of safety” in low liquidity markets Volatility risk - volatility ceiling of 6% Hedge ratio contribution monitored and adjusted if volatility between the pair changes from inception Stop-loss* - checks undertaken at 25bps loss - initiate close of position at 50bp loss (assuming normal market conditions) Leverage - fund market exposures capped at 3x (currently 2x) Diversification - not for its own sake - diversification of trade types, by industry and sector Monitor gross sold protection Monitor *These are internal parameters which are not currently subject to independent review
  • 18. 200 250 300 350 400 May 13 Jun 13 Jul 13 Post NL Telecom ItaliaResearch insight: Post NL likely to be a more stable credit than Telecom Italia over near term Action taken: Long Post NL vs short Telecom Italia Isolating α in a bear market October 13 17 Ignis Absolute Return Credit Fund Entry point Exit point  Continued large funding requirements  More cyclical Telecom Italia  Improving credit following resolution of issues  Less cyclical Post NL Source: Ignis/Bloomberg based on trade from 31/05/2013 to 17/07/2013. All data for illustrative purposes only.
  • 19. 200 250 300 350 400 May 13 Jun 13 Jul 13 Post NL Telecom ItaliaResearch insight: Post NL likely to be a more stable credit than Telecom Italia over near term Action taken: Long Post NL vs short Telecom Italia Outcome: Long leg tightened and short leg widened Gap between them widened from +30 to +155: making money Gained €130,650 (long) Gained €109,881 (short) Overall profit €240,532 (34bps) Isolating α in a bear market October 13 18 Ignis Absolute Return Credit Fund Source: Ignis/Bloomberg based on trade from 31/05/2013 to 17/07/2013. All data for illustrative purposes only. Entry point Exit point 0 20 40 60 80 100 120 140 160 180 May 13 Jun 13 Jul 13 Bps Difference between the two credits
  • 20. 0.4% 0.9% 0.2% 0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 3 Months YTD Since launch Annualised Return Performance Ignis Absolute Return Credit I EUR Performance October 13 19 Ignis Absolute Return Credit Fund Source: Lipper, based on the Ignis Absolute Return Credit Fund EUR I share class net of fees from 31/07/2012 to 30/08/2013. *Source: Lipper/Ignis, ex post rolling 1 month volatility based on the Ignis Absolute Return Credit Fund EUR I share class from 31/07/2012 to 31/08/2013 Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested. 0% 50% 100% 150% 200% 250% 300% 0% 1% 2% 3% 4% 5% 6% 7% Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Volatility and leverage Ex Ante Volatility (LHS) Ex Post Volatility (LHS) Gross Leverage (RHS)
  • 21.  Lowly correlated to other risk assets Market neutrality October 13 20 Ignis Absolute Return Credit Fund Ignis Absolute Return Credit Fund MSCI World Index Citigroup World Gov’t Bond Index Citigroup European Gov’t Bond Index iBoxx Non Gilt GBP iBoxx Non Sovereign EUR Barclays Capital Global High Yield JP Morgan Emerging Market Bond Index USD Ignis Absolute Return Gov’t Bond Fund Ignis Absolute Return Credit Fund 1.00 MSCI World Index -0.11 1.00 Citigroup World Gov’t Bond Index -0.10 -0.12 1.00 Citigroup European Gov’t Bond Index -0.23 0.07 0.81 1.00 iBoxx Non Gilt GBP -0.06 -0.17 0.77 0.78 1.00 iBoxx Non Sovereign EUR -0.12 -0.04 0.74 0.81 0.83 1.00 Barclays Capital Global High Yield -0.25 0.58 0.20 0.30 0.15 0.21 1.00 JPM Emerging Market Bond Index USD -0.21 0.35 0.55 0.57 0.43 0.51 0.69 1.00 Ignis Absolute Return Gov’t Bond Fund -0.01 0.11 -0.31 -0.19 -0.34 -0.29 -0.12 -0.15 1.00 Correlation 1.00 0.80 0.60 0.40 0.20 0.0 -0.20 -0.40 -0.60 -0.80 -1.00 Source: Morningstar, based on the Ignis Absolute Return Credit Fund EUR I share class net of fees from 31/07/2012 to 30/08/2013. Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested.
  • 22. What sets our absolute return strategy apart? October 13 21 Ignis Absolute Return Credit Fund  Future volatility for fixed income investors  Trajectory for yields is not only down  Our strategy can benefit from high volatility within credit markets  Bottom-up, unconstrained  High conviction global holdings  Risk management embedded within process; robust controls Why us? Why different? Why now?  Designed to deliver: - positive performance in all market conditions - market neutrality - zero interest rate risk
  • 23. *Source: Ignis at 31/08/2013. ^This is the rate that large banks use to borrow from, and lend to, one another on the overnight market. Other share classes are available.**Performance fee is net of fees, over compounded cash rates and subject to a high water mark.  Fund manager Chris Bowie  Fund launch 31 July 2012  Fund AuM* €85.6m  Structure UCITS IV SICAV  Domiciled Luxembourg  Benchmark EONIA^  Liquidity Daily dealing  Share classes available in EUR, CHF, GBP, USD, SEK  Minimum investment EUR A Class: €1,000 EUR I Class: €1,000,000  Annual management fee EUR A Class: 1% EUR I Class: 0.5%  Performance fee** Fund manager is entitled to 10% of performance generated above EONIA^ with a high water mark  Registered for sale: Luxembourg, UK, Spain, Germany, Austria, France, Italy, Sweden, Belgium, Finland and the Netherlands Fund profile October 13 22 Ignis Absolute Return Credit Fund
  • 24. Disclosure This information is intended for professional clients and investment professionals only and should not be relied upon by retail investors. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice. Distribution of this document and the offering of shares in certain jurisdictions may be restricted by law and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Further detailed information regarding the Fund, its Prospectus, its Key Investor Information Document (KIID), its latest annual reports and any subsequent half-yearly reports (including information on how to switch, buy and sell units of the Fund and other unit classes available), is available free of charge from Ignis Investment Services Ltd. You can also obtain these documents through our website www.ignisasset.com/international. Past performance is not a guide to future performance. The value of investments can fall as well as rise and is not guaranteed. The Absolute Return Credit Fund will primarily invest in CDS which carry additional risks to investing directly in cash bonds. The fund will be subject to the credit risk of the counterparty as well as that of the CDS reference asset. If a credit event takes place, the CDS will be subject to the legal terms and conditions of the contract. This means the fund’s performance is unlikely to track the performance of broader bond and equity markets. While this creates the opportunity for the fund to deliver positive returns in falling markets, it also means that the fund could deliver negative returns in rising markets. The value of investments and any income from them can fall as well as rise and is not guaranteed. Exchange rate movements may cause the value of investments to fluctuate. The use of independent ratings is not a recommendation to buy and is not a guide to future returns. The Ignis Absolute Return Credit Fund is a sub fund of Ignis Global Funds SICAV, an investment company organised under the laws of the Grand Duchy of Luxembourg as a Self Managed SICAV. The investment company has its registered office at Vertigo-Polaris, 2-4 Eugene Ruppert, L-2453 Luxembourg, and is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. The sub fund is a Recognised Scheme in the UK under Section 264 of the Financial Services & Markets Act 2000 and is promoted in the UK accordingly. The sub fund is currently registered for public distribution in the following countries: Luxembourg, UK, Spain, Germany, Austria, France, Netherlands, Belgium, Sweden, Finland and Italy. Copies of all relevant scheme documentation can be obtained free of charge from the locally appointed paying agents. Austrian Paying Agent: Unicredit Bank Austria, 8398 Global Securities Sales & Services, P.O. Box 35, A-1011 Vienna; Belgian Paying Agent: Fastnet Belgium SA, B-1000 Brussels, Avenue de Port 86C, b320; French Paying Agent: Société Générale SA, 29 Boulevard Haussmann, F-75009 Paris; German Information Agent: Société Générale SA, Neue MainzerStraße 46-50, D-60311 Frankfurt / Main; Italian Paying Agent: RBC Dexia, via Vittor Pisano 26, 20124 Milan; Luxembourg Paying Agent: Société Générale, 11 Avenue Emile Reuter, L-2420 Luxembourg; Netherlands Paying Agent: ING Bank NV, Van Heenvlietlaan 220, Location Code BV.06.01, NL-1083 CN Amsterdam; Spanish Paying Agent: RBC Dexia Investor Services España SA, calle Fernando El Santo no20, Madrid 28010; Swedish Paying Agent: SEB Merchant Banking, Sergels Torg 2, SE-106 40 Stockholm. This document has been issued by Ignis Investment Services. Ignis Investment Services is registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR. Authorised and regulated in the United Kingdom by the Financial Conduct Authority. 23 October 13 Ignis Absolute Return Credit Fund

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