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Kames

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    Kames Kames Presentation Transcript

    • Kames Absolute Return Bond FundDecember 2011Colin Finlayson – Investment Manager Fixed income Manager,Stephen Snowden – Investment Manager, Fixed Income
    • Key p y personnelDavid Roberts Philip Milburn Euan McNeil Melanie Mitchell Colin Finlayson Iain Buckle Stephen Snowden• Ou Our fixed income range of funds are all rated by OBSR: ed co e a ge o u ds a e a ated O S – Investment Grade Bond Fund – AA – Sterling Corporate Bond Fund – AA – Investment Grade Global Bond Fund – A – Strategic Bond Fund – AA – High Yield Bond Fund – AA – Strategic Global Bond Fund – A – High Yield Global Bond Fund – AA – Ethical Corporate Bond Fund – A• Awards include: – Investment Week Fund Manager of the Year Awards 2011, Sterling High Yield Bond category – UK Lipper Fund Awards 2011, Best High Yield Bond Fund (GBP) – Kames High Yield Bond Fund, highly commended at the Portfolio Adviser Awards 2011 – Citywire Team All Stars, Asset Group Winner (Bonds) 2007 and 2008 – Citywire Team All Stars 2007 Sector Winner (UK Corporate Bonds) 2007, 2
    • Market outlook 3
    • Kames Absolute Return Bond Fund• Fund aims to generate capital returns whilst limiting downside volatility and preserving capital – Performance target: 3 month GBP LIBOR + 2%-3% net of fees – No alpha derived from currency risk – Offers investors low risk NOT no risk 4 4
    • Three key components y p Carry module Credit Rates module module d l Kames Absolute Return Bond 5
    • Three key components – Carry module y p y• Minimum weighting of +20% within the overall fund• Diversified range of investment grade quality bonds• Bonds of maximum 2 years maturity only• Examples of positions – RBS (Senior) 5.25% 15/05/2013 – yield = 5.3%¹ – MM02 7.625% 25/01/2012 = 3.8%² – Gazprom 6.58% 31/10/2013 = 5.5%³¹Yield on purchase date of 30 September 2011. ²Yield on purchase date of 7 November 2011. ³Yield on purchase date of 30 September 2011. 6 6
    • Three key components – Credit module y p• Primary alpha focus on credit neutral relative value positions• Exposure limited to +/-50% within the overall fund• Examples of positions: – ANZ 6.54% 2012/49 – 8.0% Yield-to-call in June 2012¹ – Sprint 8.375% 15/03/2012 = 8.2%² – Cable & Wireless 8.75% 06/08/2012 = 6.5%³¹Yield on purchase date of 30 September 2011. ²Yield on purchase date of 4 October 2011. ³Yield on purchase date of 1 November 2011. 7 7
    • Three key components – Rates module y p• Primary alpha focus is on duration neutral relative value positions• Duration range: -2.5 to +2.5 years – neutral position of 0 years duration• Examples of positions – Long UK Government 2041 Bonds Short 30yr US bond futures – Long New Zealand Government 2015 Bonds Short 3yr Australian bond futures – Long Canadian Government 2021 Bonds Short 10yr German bond futuresFor illustrative purposes only 8 8
    • Know what fund you are not buying y y g• What Kames Absolute Return is… • And what it is not… – Fund offering returns in line with risk budget – Offering unrealistic returns given the risk limits – Targeting a positive total return for investors T ti iti t t l t f i t – Guaranteeing a given return for investors G t i i t f i t – Making use of six sources of alpha – Focusing on a single asset class – Sticking to what we know and are good at – Taking currency risk to generate performance 9 9
    • Absolute Return Bond Fund vs. Strategic Bond Fund g Absolute Return Bond Strategic BondPerformance Source Alpha + Beta Beta + AlphaManagement Focus Absolute returns Total returnsReturn Measurement Actual return Peer group relativeDefault Duration Zero PositiveCredit Risk Limited UnlimitedHigh Yield Limit Max 20% Up to 100% 10
    • Why invest in Kames Absolute Return Bond? y• Award winning fixed income team• Proven fixed income investment process• Three module investment approach• A core investment, targeting cash plus returns 11 11
    • Kames Absolute Return Bond FundLaunch date 30 September 2011Fund manager Stephen Snowden and Colin FinlaysonFund structure Irish domiciled VCIC under UCITS IIIInvestment policies Invest in diversified portfolio of fixed interest investmentsPerformance target Performance target 3 month GBP LIBOR + 2%-3% net of feesExpected volatility < 5% VaR – (99% 1 month VaR) Government -75%-95% Investment Grade Credit -50%-95%Asset allocation ranges g High Yield Credit g -20%-20% Emerging Market Credit -20%-20% Cash >5% Carry Module: > 20%; Minimum BBB- & <2yrs maturity Credit Module: +/-50%;; HY+EM = +/-20%FundF nd Restrictions Rates Module: +/-75%; Duration range -2.5 to +2.5yrs Cash: > 5%Base Currency UK SterlingHedged share classes Sterling, Euro, USD 12 12
    • Appendices pp 13
    • Investment philosophy p p y• Our fixed income specialists are guided in their research and fund-management duties by a three-pronged philosophy – Markets M k t are inefficient. We exploit this through robust research and active management i ffi i t W l it thi th h b t h d ti t – It is vital to identify, analyse and manage risk – Investment strategies should be transparent and easily communicated 14
    • Strategy p gy process – top down into bottom up p p Analysis, challenge and Team focus Portfolio decision Top down Duration, yield curve andMACRO to MICRO blend strategy group Macro positioning asset allocation Credit rating and sector Whole team Top down credit strategy preferences o Credit specialists Issuer and issue selection Bottom up credit strategy p gyM 15
    • Kames Capital fixed income idea cycle p y Quadrant analysis Specialist Monitor Recommendation Fund manager Specialist, following Duration and specialist peer review Asset Curve PERFORMANCE Allocation Sector DRIVERS Ratings selection selection Stock Implementation selection Challenge Fund manager Team debate and specialist Strategic decision Team leaders and specialist 16
    • Kames Capital quadrant analysis approach p q y pp • Common research framework applied to: Fundamentals F d t l Valuations V l ti – Interest rate and credit markets I t t t d dit k t – Credit sectors and companies • Quadrant analysis – Fundamentals – Valuations Sentiment Technicals – Technicals – Sentiment • Each scored from -2 to +2 to give overall score • Template approach ensure p pp consistency, ease of use and record keeping 17
    • Use of derivatives – EPM and Risk Control• Credit risk management – CDS indices used to manage credit beta – Single Si l name CDS used t manage i di id l credit exposures d to individual dit• Currency risk management – Currency forwards used to manage exposure; 100% hedged is default position• Head of Portfolio Derivatives responsible for derivative usage oversight – Derivative Operations responsible for day to day valuation and collateral management – Specific derivative trading authorisation required, within overall risk control framework 18
    • Risk control framework – client protections pOn desk Philosophy Analytics • Identification, analysis and understanding of • On desk resource to aid idea generation, d risk is essential testing and sizing • Utilise multiple sources of alpha, none to dominate • UBS Delta quantitative risk analysis system • Fund manager responsibility with independent • Independent Risk Management Team oversight monitors risks taken • Review discipline • Daily VaR reporting Controls Governance • Portfolio limits set in thinkFolio front office system • Monthly meeting with CIO assessing performance • Trades require separate fund manager authorisation and risks • Centralised independent dealing team • Regular off-desk fund reviews with peer challenge Of desk • Independent Risk Control Team monitors positions • Investment Management Portfolio Risk & ff taken Control Committee 19
    • Important information pThis document is not intended for retail distribution and is directed only at investment professionals. It should not be distributed to, orrelied upon by, private investors. The information in this document is based on our understanding of the current and historicalpositions of the markets. The views expressed should not be interpreted as recommendations or advice. Past performance is not aguide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed.While the investment objective of absolute return funds is to achieve a positive return in all market conditions, this is not guaranteedin any way.Kames Capital Investment Company (Ireland) plc, is an umbrella type open-ended investment company with variable capitalregistered in the Republic of Ireland (no: 442106), registered office at 25-28 North Wall Quay, International Financial ServicesCentre, Dublin 1. Board of Directors: Andrew Bell (UK), Brian McDermott (Ireland), Mike Kirby (Ireland). Kames Capital InvestmentCompany (Ireland) plc is regulated by the Central Bank of Ireland.Kames Capital is an AEGON Asset Management company and includes Kames Capital plc (no: SC113505) and Kames CapitalManagement Ltd ( (no: SC212159). Both are registered in S SC2121 9) Scotland and have their registered office at 3 Lochside Avenue, Edinburgh ffPark, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the Financial Services Authority, (FSA reference no:144267). Kames Capital plc is the Investment Manager and Marketing Agent for Kames Capital Investment Company (Ireland) plc.Kames Capital Management Ltd is an appointed representative of Scottish Equitable plc, an AEGON company, whose registeredoffice is 1 Lochside Crescent Edinburgh Park Edinburgh EH12 9SE (FSA reference no: 165548) Crescent, Park, Edinburgh, 165548).AEGON Asset Management UK rebranded to Kames Capital on 1 September 2011.FP ID: 2011/12811 20