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    Jo hambro capital management Jo hambro capital management Presentation Transcript

    • Citywire Wealth Manager Conference 2013JOHCM UK Dynamic Fund4 - 5 March 2013
    • JOHCM UK Dynamic FundOpening remarks• An experienced team Performance and risk stats since inception**• Successful first four years since launch Fund return 68.00% Benchmark return 31.19% • JOHCM UK Dynamic ranked 1st decile and 11/246 in the IMA UK All Companies sector, Relative return 28.06% since inception* Tracking error 5.05• Liquid all-cap portfolio Information ratio 1.15 Annualised Fund return 11.86% • 60% FTSE 100, 40% non-FTSE 100 Annualised benchmark return 6.04%• Returns weighted to stock selection Annualised relative return*** 5.49%• Augmented by pragmatic allocationSource: JOHCM/FTSE Group/Bloomberg. *Source: Lipper Hindsight. Performance ranking based upon IMA UK All Companies Sector to 31 January 2013. **NAV of share class B inGBP, net income reinvested, as at 31 January 2013. ***Calculated on a geometric basis. All performance is shown against the FTSE All-Share TR Index. Performance of other shareclasses may vary and is available upon request. Inception date: 16 June 2008. Note: Performance data for the period 16 June 2008 to 22 October 2009 is for Ryder Court UKDynamic Fund. From 23 October 2009 onwards, the Fund converted to JOHCM UK Dynamic Fund. 2
    • JOHCM UK Dynamic snapshot A blended strategy 2.5 Growth 2.0 1.5 1.0 • Capital growth tilt with dividend support 0.5 Value • Recovery and unrecognised growth 0.0 -2.5 -1.5 -0.5 0.5 1.5 2.5 -0.5 • Balance sheet and cash flow focus -1.0 UKEI -1.5 • Concentrated, high conviction positions UKO UKD -2.0 • 40-50 holdings -2.5 • Strict portfolio constructionPerformance vs. Peer funds since inception* Return (%) Name Since inception 3 years 1 year Value Position Quartile Decile Value Position Quartile Decile Value Position Quartile Decile Schroder Recovery A Inc 72.98 9 1 1 44.75 53 1 2 30.14 11 1 1 JOHCM UK Dynamic Ret Acc 68.00 11 1 1 47.12 42 1 2 26.79 21 1 1 Investec UK Special Situations A GBP Acc Net 64.63 13 1 1 37.55 106 2 4 20.43 77 2 3 Artemis UK Special Situations R Acc 37.67e 56 1 3 38.78e 88 2 4 19.46e 83 2 3 Fidelity Special Situations Acc 40.53 46 1 2 35.84 135 3 6 30.63 9 1 1 M&G Recovery A Inc 29.54 94 2 4 26.61 236 4 9 7.24 272 4 10 FTSE All-Share TR 31.24 82 2 4 36.96 116 2 5 16.30 138 2 5 BlackRock UK Dynamic Inc -0.82 242 4 10 17.23 259 4 10 10.99 253 4 10 AVERAGE 42.97 35.61 20.25Source: Style Research™ for the period 30 June 2008 to 31 January 2013. Plot points show average values based on value metrics (Book/Price, Dividend Yield, Earnings Yield,Cash Flow Yield, Sales/Price, EBITDA/Price) vs. growth metrics (ROE, Earnings Growth, Income/Sales, Sales Growth, IBES 12mth Growth and IBES 1 year reversion). *Source: 3Lipper Hindsight. Performance ranking based upon IMA UK All Companies Sector to 31 January 2013.
    • UK Dynamic philosophyFour key tenets• Profit from extremes• Companies are dynamic not static• Employ strict investment disciplines• Build margin of safety A consistent, replicable investment approach 4
    • Profit from extremes Looking for three distinct types of opportunity A: Self help / restructuringShare price • Strategic mistakes • Returns peak • Declining returns • Specific internal / external issues • Balance sheet uncertainty C B: Self help / recovery • Strategic mistakes • Declining returns • Balance sheet security B C: Undervalued growth • Strategic mistakes • Heavy investment • Returns trough • Growing pains • Outlook uncertain A • Point of maximum bearishness • Change required 0 Time 5
    • Companies are dynamic not static• Anticipate change• Uncertainty creates opportunity• Engage with management teams constructively• Benefit from management change and/or strategic shifts• Identify affirmative positive actions • Asset recycling • Cash flow improvement measures • Growth investment• Supply side changes 6
    • Employ strict investment disciplines• Cherry pick the best opportunities• Avoid potential value traps • The most structurally challenged • Avoid micro-caps, ‘fad’ stocks and excessive leverage• Only buy businesses with specific characteristics • Well developed brands and market position • Businesses managed for value, with improving ROIC • Strong cash generators• Maintain strict portfolio construction disciplines • Sector, dividend and market cap controls • Employ a strict selling discipline • Proprietary risk screening model (see appendix) 7
    • Build margin of safety• The importance of cash• Buy dividend payers only• Looking for unrecognised sources of cash flow • Working capital • Operating and balance sheet efficiencies • Loss making divisions • Hidden revenue growth opportunities• Supports strong portfolio dividend characteristics Divdiend history 2009 2010 2011 2012 Retail (acc) dps 0.65 3.48 3.67 5.60 Yield 0.56% 2.56% 2.96% 3.56%Source: JOHCM/Bloomberg. Reflects yield of share class B accumulation units as at 31 December 2012 in each discrete year. 8
    • A portfolio of similar opportunities Restructuring Recovery Growth High market shares Improving quality of earnings Strengthening balance sheets Managed for change Increasing cash conversion Paying dividendsSource: JOHCM as at 31 January 2013. 9
    • Self-help / restructuring 3i relative to FTSE All-Share Index 20• Structural cost drags being eliminated 10 • Operational / balance sheet efficiencies Cumulative geometric relative 0 • Growing cash fees and income -10 performance (%) -20• Transformational private equity model -30 • Refocus on core skills and geographies -40 -50 • Active management and recycling -60• Quality growth assets materially understated -70 -80 • Recent sales at premium prices Feb 08 May 09 Aug 10 Nov 11 Jan 13• Sustainably higher returns to shareholders Operating cost drag reducing Gross debt 40 3000 20 2500 0 2000 -20 £m £m -40 1500 -60 1000 -80 500 -100 -120 0 2009 2010 2011 2012 2013e 2008 2009 2010 2011 2012 2013e 10Source: *JOHCM estimates. 3i and Bloomberg as at 26 February 2013.
    • Self-help / recovery QinetiQ relative to FTSE All-Share Index 40• Five years of falling returns 30 Cumulative geometric relative 20 10 performance (%)• Shareholder pressure forces change 0 -10• Balance sheet has been revolutionised -20 -30• Returns are rapidly improving -40 -50 -60• Multiple upside opportunities Feb 08 May 09 Aug 10 Nov 11 Jan 13 Net debt EV/EBITDA 600 14.0 500 12.0 EV/EBITDA multiple 400 10.0 300 8.0 200 £m 6.0 100 4.0 0 -100 2.0 -200 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 (a) (a) (a) (a) (a) (a) (a) (e) (e) (a) (a) (a) (a) (a) (a) (a) (e) (e) 11Source: *JOHCM estimates. QinetiQ and Bloomberg as at 8 February 2013.
    • Self-help / growth Xchanging relative to FTSE All-Share Index 60• Two years of restructuring nearing completion Cumulative geometric relative 40• Balance sheet, cash flow and returns all 20 performance (%) much improved 0 -20• Heavy investment in new products to drive -40 higher growth -60• Underlying markets growing between 5-20% -80 -100• Forecasts and valuations are based on Feb 08 May 09 Aug 10 Nov 11 Jan 13 c. 2% growth Adjusted net debt Invested capital/ROIC 60 300 30% Invested capital 40 ROIC 250 25% 20 200 20% 0 £m £m 150 15% -20 100 10% -40 -60 50 5% -80 0 0% 2007 2008 2009 2010 2011 2012a 2007 2008 2009 2010 2011 2012 12Source: *JOHCM estimates. Xchanging and Bloomberg as at 28 February 2013.
    • Current sector positioning 100% 75% Maximum overweight 50% 25% 0% -25% -50% Maximum -75% underweight -100% JOHCM UK Dynamic Weight FTSE All-Share TR Index Weight Overweight / underweightSource: JOHCM/FTSE/Bloomberg as at 23 January 2013. Benchmark is FTSE All-Share TR Index. Cash weight is 2.95% 13
    • Sector attributionPositive in every sector since inception Average weight %* Performance % Relative Sector Account Benchmark Account Benchmark Allocation % Selection % Performance %** Oil & Gas 11.06 18.04 39.98 14.63 1.83 3.85 5.68 Basic Materials 3.17 11.03 -15.18 -14.89 4.44 0.31 4.75 Industrials 12.29 7.51 176.21 65.01 1.86 11.88 13.73 Consumer Goods 5.08 12.17 269.44 106.88 -4.45 6.60 2.15 Health Care 10.82 7.82 68.44 74.54 2.35 -0.26 2.10 Consumer Services 12.72 9.67 98.28 45.41 1.36 6.44 7.80 Telecommunications 6.68 6.23 78.03 49.98 1.22 2.18 3.40 Utilities 3.34 3.97 62.62 48.20 -0.37 0.75 0.38 Financials 26.31 22.08 53.33 1.33 2.50 16.90 19.40 Technology 5.63 1.49 47.20 169.59 6.52 -4.69 1.83 Cash 2.89 0.00 - - 3.65 0.00 3.65 Total 100.00 100.00 96.08 31.21 20.91 43.96 64.87Source: JOHCM/FTSE Group/Bloomberg. Figures are at end of day and calculated on a gross basis in GBP. All performance is shown against the FTSE All-Share TR Index. Datafrom 16 June 2008 to 31 January 2013. *Mean weights are shown for the stated period for fund, benchmark and relative weights. **Total relative performance will not be identical tounit performance due to a timing difference in the underlying data and the impact of fees. 14
    • Current thoughts 10• The outlook for equities remains supportive 8 • Valuations are cheap and government policy supportive 6 • Corporates have access to record low funding costs 4 % • Could we have seen the worst of equity outflows? 2 IBOXX Euro BBB - Bond Yield Pan European Equities - Dividend YIeld 0• Huge opportunities for this type of strategy 1999 2001 2003 2005 2007 2009 2011 2013 • Market trends support a disciplined bottom-up approach • Macro obsession dissipating. Risk appetites improving 1200 • Valuation anomalies remain extreme 1000 800 600 US ($)bn• Current portfolio vintage 400 200 0 Vintage* 0-6m 6-12m 12-18m 18-24m 24m+ -200 5 -Year Rolling Annual Equity Net Inflows -400 5 -Year Rolling Annual Bond Net Inflows No. of companies 9 9 5 2 23 -600 Percentage of total 19% 19% 10% 4% 48% 1988 1992 1996 2000 2004 2008 2012Source: JOHCM and Citigroup as at 31 December 2012. *Measured using UKdfa, an internal screening evaluation tool as at 31 January 2013. 15
    • Summary• Invest for the long term• Focus clearly on change within companies• Which improves cash flow and returns• This provides valuation support• And re-rating opportunities• Ensure utmost portfolio discipline 16
    • Appendix 17
    • JOHCM UK Dynamic Fund Performance since inception to 31 January 2013 Relative performance for share class B in GBP 70 60 UK Dynamic Fund (£)* FTSE All-Share TR Index (£) +68.0% 50 40 30 20 +31.2%% growth 10 0 -10 -20 -30 -40 -50 -60 -70 Jun 08 May 09 Apr 10 Mar 11 Feb 12 Jan 13 Source: JOHCM/FTSE/Bloomberg. NAV of share class B in GBP, net income reinvested, as at 31 January 2013. All performance is shown against the FTSE All-Share TR Index. Performance of other share classes may vary and is available upon request. Inception date: 16 June 2008. Note: performance data for the period 16 June 2008 to 22 October 2009 is for Ryder Court UK Dynamic Fund. From 23 October 2009 onwards, the Fund converted to the JOHCM UK Dynamic Fund. 18
    • JOHCM UK Dynamic Fund Performance since inception to 31 January 2013 Percentage growth, share class B in GBP Recent history relative – in GBP 50 JOHCM UK Dynamic Fund 38.4 1 3 6 12 3 Since FTSE All-Share TR Index mth mths mths mths yrs Inception 29.9 26.9 Fund 6.87 10.89 22.00 26.79 47.11 68.00 25 16.1 15.2 Benchmark 6.40 8.48 13.64 15.98 37.42 31.19 13.0 11.9 6.9 6.4 6.0% return 0 Fund size: £27.5m -4.4 -8.6 -25 -15.7 • 1st quartile since launch, and 1st quartile -23.7 over three years¹ -50 2008 2009 2010 2011 2012 YTD 2013 SI (p.a) • Ranking 11/246 funds since launch (ranked 42/267 funds over 3 years)¹ Source: JOHCM/FTSE/Bloomberg. NAV of share class B in GBP, net income reinvested, as at 31 January 2013. All performance is shown against the FTSE All-Share TR Index. Inception date: 16 June 2008. Performance of other share classes may vary and is available upon request. Note: performance data for the period 16 June 2008 to 22 October 2009 is for Ryder Court UK Dynamic Fund. From 23 October 2009 onwards, the Fund converted to the JOHCM UK Dynamic Fund. *Source: Lipper Hindsight, IMA UK All Companies Sector Rankings to 31 January 2013. 19
    • JOHCM UK Dynamic – active betsAs at 31 January 2013Top 10 active bets Bottom 10 active bets Portfolio Index Active Portfolio Index Active Sector Sector Weight (%) Weight (%) Weight (%) Weight (%) Weight (%) Weight (%) 3i 3.48 0.13 3.34 British American Tobacco 0.00 3.38 -3.38 QinetiQ 3.19 0.07 3.12 Royal Dutch Shell 5.09 7.66 -2.57 C&C 2.13 0.00 2.13 Diageo 0.00 2.51 -2.51 Centrica 3.03 0.96 2.08 Vodafone 2.01 4.50 -2.50 Micro Focus International 2.09 0.05 2.04 BHP Billiton 0.00 2.42 -2.42 Smith & Nephew 2.39 0.35 2.04 BG Group 0.00 2.00 -2.00 David S Smith 2.14 0.11 2.03 Standard Chartered Bank 0.00 1.76 -1.76 Royal & Sun Alliance 2.28 0.25 2.03 Unilever 0.00 1.64 -1.64 Xchanging 1.98 0.02 1.96 SABMiller 0.00 1.56 -1.56 Standard Life 2.24 0.43 1.81 Reckitt Benckiser 0.00 1.44 -1.44Source: JOHCM/FTSE Group/Bloomberg as at 31 January 2013. Benchmark: FTSE All-Share TR Index. 20
    • JOHCM UK Dynamic – contributorsSince inception to 31 January 2013Top 10 contributors Bottom 10 contributors Relative RelativeSecurity Sector Security Sector contribution (%) contribution (%)Rio Tinto 3.57 Basic Materials Southern Cross Healthcare -2.82 Health CareHamworthy 3.09 Industrials Man Group -2.15 FinancialsInternational Personal Finance 2.83 Financials British American Tobacco -1.82 Consumer GoodsKingfisher 2.53 Consumer Services Diageo -1.73 Consumer GoodsMoneysupermarket.com 2.46 Consumer Services SABMiller -1.73 Consumer GoodsLegal & General 2.29 Financials Carrefour -1.48 Consumer ServicesStandard Life 2.21 Financials Severfield-Rowen -1.11 IndustrialsGlobeOp Financial 2.20 Financials Nokia -1.02 TechnologyLamprell 2.16 Oil & Gas CPP -0.94 IndustrialsC & C Group 2.08 Consumer Goods ARM -0.86 TechnologySource: JOHCM/FTSE Group/Bloomberg. Figures are at end of day and calculated on a gross basis in GBP. All performance is shown against the FTSE All-Share TR Index. Datafrom 16 June 2008 to 31 January 2013. Stocks in red were not held. 21
    • Risk management – ‘UKdfa’ – internal screening tool• Management• Earnings • Div yield visibility • DDM • Div cover • Credit default• Operational • EV/EBITDA • Earnings swap spread • % buy leverage • Gross momentum • Credit rating • Sub £1bn • 2 stage P/E• Cash • % sell liabilities to • (P/BV)/(ROE/ outlook market cap • Over £5bn • Analyst generation • % hold COE) • Net debt to forecasts• Competition • Adjusted EBITDA • DCF• Market share PEG• Long-term dynamics Balance sheet ContrarianOperating risk Rating risk Pension risk Size risk Upside risk risk 20% 15% 10% 7.5% 7.5% 5% 35% Weighted rating 22
    • UK Dynamic team – biographies Alex Savvides Senior Fund Manager 16 years industry experience, joined JOHCM in March 2003 Alex Savvides is Senior Fund Manager of the JOHCM UK Dynamic Fund and works alongside Mark Costar, Senior Fund Manager of the JOHCM UK Growth Fund. Prior to joining JOHCM, Alex spent seven years in sales, trading and research roles focusing on UK companies at various broking firms. Alex is a fellow of the Securities Institute and has a Securities Institute Diploma. He holds a BA (Hons) in Politics from the University of Nottingham. Mark Costar Senior Fund Manager 20 years industry experience, joined JOHCM in August 2001 Mark Costar is Senior Fund Manager of the JOHCM UK Growth Fund. Prior to joining JOHCM, Mark spent nine years at Clerical Medical Investment Group, where he was responsible for managing approximately £2 billion. He managed the Clerical Medical UK Growth Fund from July 1996. Mark holds a BSc (Hons) in Industrial Economics from the University of Warwick. Vishal Bhatia, CFA Fund Manager 8 years industry experience, joined JOHCM in August 2007 Vishal Bhatia is Fund Manager, assisting Mark Costar and Alex Savvides. Prior to joining JOHCM, Vishal worked at Merrill Lynch as a European telecommunications equipment analyst. Vishal is a CFA charterholder and holds a BSc in Accounting and Finance from the London School of Economics and Political Science.Source & copyright: Citywire. Alex Savvides is A rated by Citywire for his three year risk-adjusted performance for the period 31 January 2010 to 31 January 2013. 23
    • Investment professionals contributing to ideageneration within UK equity Alex Savvides Vishal Bhatia Mark Costar Senior Fund Manager, long only Fund Manager, long only Senior Fund Manager, long only JOHCM UK Dynamic JOHCM UK Growth JOHCM UK Growth JOHCM UK Growth JOHCM UK Dynamic 20 years experience 16 years experience 8 years experience Clive Beagles James Lowen Senior Fund Manager, long only Senior Fund Manager, long only JOHCM UK Equity Income JOHCM UK Equity Income 24 years experience 19 years experience John Wood Ben Leyland Rachel Reutter Senior Fund Manager, long only Fund Manager, long only UK Analyst, long only JOHCM UK Opportunities JOHCM UK Opportunities JOHCM UK Opportunities 23 years experience 11 years experience 6 years experience 24
    • Regulatory informationThis document is for professional investors only.J O Hambro Capital Management Limited . Registered in England No:2176004. Authorised & regulated by the Financial Services Authority. Registered office: Ground Floor, RyderCourt, 14 Ryder Street, London SW1Y 6QB.The registered mark J O Hambro® is owned by Wiltons Holdings Limited and is used under licence. JOHCM® is a registered trademark of J O Hambro Capital Management LimitedThe information in this document does not constitute, or form part of, any offer to sell or issue, or any solicitation of an offer to purchase or subscribe for Funds described in thisdocument; nor shall this document, or any part of it, or the fact of its distribution form the basis of, or be relied on, in connection with any contract.Recipients of this document who intend to subscribe to any of the Funds are reminded that any such purchase may only be made solely on the basis of the information contained inthe final prospectus, which may be different from the information contained in this document. No reliance may be placed for any purpose whatsoever on the information contained inthis document or on the completeness, accuracy or fairness thereof.No representation or warranty, express or implied, is made or given by or on behalf of the Firm or its partners or any other person as to the accuracy, completeness or fairness of theinformation or opinions contained in this document, and no responsibility or liability is accepted for any such information or opinions (but so that nothing in this paragraph shall excludeliability for any representation or warranty made fraudulently).The distribution of this document in certain jurisdictions may be restricted by law; therefore, persons into whose possession this document comes should inform themselves about andobserve any such restrictions. Any such distribution could result in a violation of the law of such jurisdictions.The information contained in this presentation has been verified by the firm. It is possible that, from time to time, the fund manager may choose to vary self imposed guidelinescontained in this presentation in which case some statements may no longer remain valid. We recommend that prospective investors request confirmation of such changes prior toinvestment. Notwithstanding, all investment restrictions contained in specific fund documentation such as prospectuses, supplements or placement memoranda or addenda theretomay be relied upon.Investments fluctuate in value and may fall as well as rise and that investors may not get back the value of their original investment.Past performance is not necessarily a guide to future performance.Investors should note that there may be no recognised market for investments selected by the Investment Manager and it may, therefore, be difficult to deal in the investments or toobtain reliable information about their value or the extent of the risks to which they are exposed.The Investment Manager may undertake investments on behalf of the Fund in countries other than the investors’ own domicile. Investors should also note that changes in rates ofexchange may cause the value of investments to go up or down.Sources for all data: JOHCM/Bloomberg/Lipper/FTSE Group (unless otherwise stated).Industry Classification Benchmark (“ICB”) is a product of FTSE International Limited (“FTSE”) and all intellectual property rights in and to ICB vest in FTSE. J O Hambro CapitalManagement Limited has been licensed by FTSE to use ICB. “FTSE” is a trade mark of London Stock Exchange and The Financial Times Limited and is used by FTSE under license.FTSE and its licensors do not accept any liability to any person for any loss or damage arising out of any error or omission in ICB.The Citywire Selection is a multi-asset guide with up to 150 key investment ideas devised by Citywire. Source: Citywire 2012.Citywire’s Fund Manager Ratings identify the individual managers who have the best risk-adjusted personal performance track records over three years and highlights the funds theyare currently managing. The Citywire Manager Ratings are based on what is referred to as the Citywire Manager Ratio (equivalent of the Information Ratio). This takes into accountcareer moves, career breaks and switches in funds managed. The figure reflects how much added value in terms of outperformance against the benchmark the fund managerdelivers for each unit of risk assumed (where risk is defined as not mirroring the indexs return). Source & copyright: CITYWIRE. Alex Savvides is A rated by Citywire for his three yearrisk-adjusted performance for the period 31 January 2010 to 31 January 2013.5541 25