Lazard asset management


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Lazard asset management

  1. 1. The Case for De-Risking rYour Emerging M Markets Allocation Octobe 2012 er J Ja Jai Jacob Managing Director, Port rtfolio Manager/Analyst For Professional Investors Only l
  2. 2. ContentsC t tA. The Case For Emerging Markets Multi-St gy Investment g g trategyB. Company LifecycleC. Lazard Emerging Market Allocation Fund d 1 Lazard Asset Management
  3. 3. TAB AB A
  4. 4. TAB AB A
  5. 5. The Case for Emerging Marke Multi-Strategy Investment etsDrawdown Comparison 0%-10% -26% -39%-20% 39 months th -41% 41%-30%-40% 28 months -62% 62% 22 months -56%-50% 77 months-60% Return3 Volatility3  Emerging Markets Equity¹ 7.8% 24.8%  Emerging Markets Equity and Debt² 9.7% 14.4% Ongoing for 54-70% months 1995 1996 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201 A balanced approach can reduce entr point risk by curtailing drawdowns ry1 MSCI Emerging Markets Index g g As of 28 March 20122 50% MSCI Emerging Markets Index, 25% J.P. Morgan ELMI+ Index, 25% J.P. Morgan EMBI Global Source: Lazard, J.P. Morgan, MSCI Diversified Index The information in the charts above is for illustrative purposes3 Annualized over the period from 2/8/1995 to 03/28/2012 only and does not represent any product offered by Lazard. 2 Lazard Asset Management
  6. 6. Evolution f Emerging M k t StylesE l ti of E i Market St l ts2004 2011Rolling 4-quarter Holdings-based Equity Style Map Rolling 4-quarter Holdings-based Equity Style Mapfor 5 Years Ended 31 December 2004 for 5 Years Ended 30 June 2011Mega MegaLarge Large EM Core EM Growth EM Relative Value EM Core Mid EM Relative Value EM Growth Mid EM Deep Value EM GARPSmall EM Deep Value EM GARP SmallMicro Micro Value Core Growth Value Core Growth By 2011 distinct style groups had emergedThe information in the chart above is for illustrative purposes only and does not represent any product offered by Lazard.Source: Lazard, Callan Associates 3 Lazard Asset Management
  7. 7. TAB AB A
  8. 8. TAB AB A
  9. 9. Company Lif C Lifecycle l What are The Key Metrics and Appropriate Valuat pp p tion Methodology to Identify Winners in each Stage? g g Capital structure, growth, and cash flow are key determinants when assessing w life cycle phase Incubate Grow MatureSmall Cap Stock Growth Stock k Value Stock For illustrative purposes only. 4 Lazard Asset Management
  10. 10. Small Cap StocksS ll C St k Focus on financial productivity and valuation oc s o a c a p od ct v ty a d va at o Seeking increasing or high growth in sales and ea arnings per share Metrics: • Earnings • Price to Earnings/Sales • EPS Growth Activities? Resources: • On-site company visit p y • Company financials Small Cap specific risks • Lower liquidity • Less information flow • Subject to swings in risk aversion j g 5 Lazard Asset Management
  11. 11. Growth StockG th St k Focus on growth of revenue, EBITDA and Net Income t Valuing high or improving returns on invested c capital Metrics: • EPS Growth • PEG • Returns on Invested Capital (RoIC) • EV/ Invested Capital • EV/ EBITDA • FCFF Activities/Resources: • On-site company visit On site • Off-site meeting with management • Company financials • Sell-side research Risks • Sustainability of growth 6 Lazard Asset Management
  12. 12. Value StockV l St k Focus on financial productivity and valuation oc s o a c a p od ct v ty a d va at o Identifying high improving or sustainable return on equity and dividends ns Metrics: • Returns on Equity (ROE) • EV/ EBITDA • Price to Book • Dividend Yield • FCFE Activities/Resources: • On-site company visit • Off sit m tin with management Off-site meeting ith m n m nt • Company financials • Sell-side research Risks • Value trap 7 Lazard Asset Management
  13. 13. Company LifC Lifecycle lPacific Rubiales Energy is a company that is moving through the three phases gy p y ng g p Incubate Grow MatureFor illustrative purposes only.This information should not be considered a recommendation or solicitation to purchase or sell any security. 8 Lazard Asset Management
  14. 14. 2000 1947 1800 1600 1400 1200 1096 1000 954 921 800 600 404 400 281 268 276 219 200 144 83 57 87 47 18 34 0 2008 2009 2010 2011 CAPEX (MM$) Gross Field Production (Mboe/d) Net After Royalties Production (Mboe/d) EBITDA (MM$)Source: Pacific Rubiales Investor Presentation, October 2012Mboe/d= Million barrels of oil equivalent / day 9 Lazard Asset ManagementThis information should not be considered a recommendation or solicitation to purchase or sell any security.
  15. 15. TAB AB A
  16. 16. TAB AB A
  17. 17. Lazard EL d Emerging M k t All cation F d i Market Allo ti Fund Objective: Capitalise on Emergin Markets growth with lower risk ng Dynamic asset allocation Specialist Emerging Markets investment teams Alpha generation via security selection and asset allocation t Fund: Eme erging Markets Allocation Fund Benchmark: MSC Emerging Markets Index CI Objective Over Market Cycle: Equ uity-like returns with considerably lower volatility Volatility: ¾ t volatility of the benchmark the1 Target returns do not represent a promise or guarantee of future results.2 Implementation can be customised for clients investing $100+ million.The information above is being shown for illustrative purposes only. 10 Lazard Asset Management
  18. 18. Historical Performance ReviewRisk/Return Scatter Chart (ARi k/R S Ch (Annuali d) alised)Annualised Return (%)2018 S&P 500 Index161412 FTSE All Share Index S S Lazard EM Multi-Strategy (Equity + Debt)10 MSCI EM Index 8 BarCap US Agg Index MSCI Europe Index 6 BarCap Euro Agg Index 4 JP Morgan ELMI + Ind dex 2 0 0 5 10 15 20 25 30 Annualised Standard Deviation of Return (%)Source: Lazard, MSCI, JPMorgan, BloombergOver the period from 1 July 2009 to 30 June 2012.Performance is preliminary and presented gross of fees and was derived from a portfolio that represents the prop posed investment for a fully discretionary account for the Lazard MultiStrategy - Emerging Markets (Equity Only) and Lazard Multi Strategy - Emerging Markets (Equity+Debt) strategi ies, which include the allocation to the discounted assets strategy.Please refer to the disclosure sections for additional performance information, including net-of-fees results and a description of the composite. The performance quoted representspast performance. Past performance is not a reliable indicator of future results. 11 Lazard Asset Management
  19. 19. Composite Performance Sum mmaryLazard M l i SL d Multi Strategy – E Emerging M k i g Markets (E i + D b ) (Equity Debt) Annualised Since Inception 3 Months 1 Year 3 Years 01 Jul 2009 Lazard Multi Strategy - Emerging Markets (Equity + Debt t) 5.01 13.46 6.72 11.50 MSCI Emerging Markets Index E i M k t I d 7.74 7 74 16.93 16 93 5.63 5 63 11.52 11 52 Excess Return (bps) -273 -347 +109 -2 JP Morgan GBI-EM Global Diversified Index 4.80 12.66 9.43 11.48 Excess Return (bps) +21 +80 -271 +2 YTD 30 Sep 12 2011 2010 Lazard Multi Strategy - Emerging Markets (Equity + Debt t) 9.90 -11.95 17.23 MSCI Emerging Markets Index 11.98 -18.42 18.88 Excess Return (bps) -208 +647 -165 JP Morgan GBI-EM Global Diversified Index 12.12 -1.75 15.67 Excess Return (bps) -222 -1020 +156As of 30 September 2012All data in US Dollars. The strategy inception date is 1 July 2009.The Lazard Multi Strategy - Emerging Markets ( q y gy g g (Equity+Debt) strategy includes an allocation to the emerging mar ) gy g g rkets discounted assets strategy and offers q gy quarterly liquidity. y q yPerformance is preliminary and presented gross of fees. Please refer to the attached disclosures for performance presented on a net of fee basis and for a description of this ecomposite. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. fSource: Lazard Asset Management 12 Lazard Asset Management
  20. 20. Lazard’s Gl b l EL d’ Global Emerging Market Strategies i Ma k t St t i Emerging Markets Equity g g q y Developing M p g Markets Equity q y Emerging Markets Discounted Assets g g James Donald Rohit Chopra Kevin O’Hare Peter Gillespie Kun Deng Ming Zhong Donald Floyd Erik McKee Myla Cruz Georg Benes Lee Ann Alexandrakis David Bliss Monika Shrestha Ben Wulfsohn Robert Horton Mark Lien Mostafa Hassan Edward Keating Emerging Income Emerging M Markets Debt Multi Strategy – Emerging Markets Ardra Belitz Ganesh Ramachandran Denise S. Simon Arif T. Joshi Jai Jacob Steven Marra Aristotel Kondili Steven Nelson George Varino Chris Milonopoulos Michael Per Giuseppe Ricotta Andrew Raab Emerging Markets Small Cap Emerging Markets Core Equity Alex Ingham Erik McKee Stephen Russell Thomas C. Boyle Nicolas Rodriguez Rahwa Senay Paul H. Rogers John Mariano Celine Woo Global Sector Analysts Emerging Markets Support Analysts Risk Man nagement Operations Compliance Settlements Accounting CommmitteeAs of 10 October 2011 13 Lazard Asset Management
  21. 21. Emerging Market Multi Strategy TeamManages AllM Allocation using F i i Four U d l i A Underlying Approaches h Emerging Markets Equity g g q y James Donald Rohit Chopra Donald Floyd Erik McKee Monika Shrestha Ben Wulfsohn Multi St t M lti Strategy – E Emerging M k t i Markets Developing Markets Equity Joined Years in Kevin O’Hare Peter Gillespie Lazard Industry eam Myla Cruz Georg Benes Jai Jacob ti-Strategy Oversight Te Robert Horton Mark Lien 1998 14 Portfolio Manager/Analyst Emerging Markets Debt Tom McManus 2010 32 Portfolio Manager/Analyst O Denise S Simon S. Arif T Joshi T. George Varino Chris Milonopoulos Michael Per 1997 15 Quantitative Research Analyst Emerging Markets Small Cap Stephen Marra, CFA 1999 13 Mult Portfolio Manager/Analyst Alex Ingham Erik McKee Giuseppe Ricotta, CFA Nicolas Rodriguez Rahwa Senay 2007 8 Portfolio Analyst Emerging Income Ardra Belitz Ganesh Ramachandran Aristotel Kondili Steven Nelson Andrew RaabTeam membership is current as of the date of this document. 14 Lazard Asset Management
  22. 22. Investment ResourcesMulti-Strategy EM liS Emerging M k s i MarketsThe Multi-Strategy team has access to Lazard’s extensive resources which includes 56 Investment Professionals e Equity Fixed Income Multi Strategy Years in Years in Years in Years in Industry Industry Industry IndustryLee Ann Alexandrakis 16 Mark Lien 22 Alessandra Alecci 14 Jai Jacob 14Dmitri Batsev 10 Xiaomeng (Michelle) Katerina Alexandraki 17 Tom McManus 32 6Georg Benes 11 Liu Ardra Belitz 18 Michael Per 15David Bliss 30 John Mariano 14 Arif Joshi 14 Stephen Marra 13Thomas Boyle 13 Erik McKee 16 Aristotel Kondili 11 Giuseppe Ricotta 8Rhett Brown 16 Andrei Morosanu 13 Christian Milonopolous 12Rohit Chopra 16 Jonathan Morris 23 Steven Nelson 13Elizabeth Chung 18 Kevin OHare 21 Andrew Raab 8Bertrand CliquetB t d Cli t 13 David Pizzimenti 25 Ganesh R G h Ramachandran h d 15Myla Cruz 4 Nicolas Rodriguez- Denise Simon 26 12 BrizuelaKun Deng 18 Sergio Valderrama Paul Rogers 27 13James Donald 27 Ramirez Stephen Russell 14 George Varino g 16Lada Emelianova 14Donald Floyd Rahwa Senay 14 YuiGai Zu 1 17Peter Gillespie 20 Monika Shrestha 15Mostafa Hassan 17 Jeremy Taylor 16Robert Horton 17 Christopher Whitney 14Peter HunsbergerP t H b 23 Sookyum Woo 8Alex Ingham 16 Ben Wulfsohn 21Edward Keating 11 Ming Zhong 8“Years” are calculated as of year-end 2011; YTD 2012 experience/tenure is not reflected 15 Lazard Asset Management
  23. 23. Lazard M lti St tL d Multi-Strategy S Summa ary Leverages strength of Lazard s Emerging M Lazard’s Markets Platform - 20+ years of Emerging Markets investing, 8 dedicated teams, 40+ i investment professionals P id a comprehensive Emerging Marke asset allocation solution Provides h i E i M kets ll i l i Sources alpha from both fundamental security selection and top-down asset allocation p y p Uses proprietary macroeconomic framewor to drive dynamic allocation process rk Targets Emerging Markets Equity returns a 25% lower volatility at 16 Lazard Asset Management
  24. 24. GIPS Composite InformationLazard M l i SL d Multi-Strategy – E Emerging M k i g Markets (E i D b ) (Equity+Debt)Benchmark: MSCI Emerging Markets IndexReporting D tR ti Date: 30 J June 2012Composite Inception Date: 01 July 2009Reporting Currency: U.S. DollarComposite DescriptionThe composite returns represent the total returns of all fully discretionary, fee-paying portfolios with a Lazard Multi Strateg - Emerging Markets (Equity + Debt) investment mandate. Through dynamic allocations to Lazards Emerging Markets gyequity and debt strategies, the strategy seeks to overweight allocations that it feels are best positioned for the prevailing mar rket conditions. Lazards Emerging Markets Multi Strategy (Equity + Debt) blend seeks to generate annualized returns thatwill consistently outperform the MSCI Emerging Markets Index while providing lower volatility This strategy continually makes use of short duration Emerging Markets derivative instruments by material use of currency forwards to gain volatility.exposure to local money market performance. Additionally, this strategy makes use of leverage for Emerging Markets curre ency long and short positions. Also, this strategy makes use of emerging markets debt investments denominated in hard andlocal currencies and of swaps, forwards, structured notes and loans of portfolio securities.Calculation of Performance ReturnsLazards account inclusion policy is the first full month or the end of the month in which the account is fully invested. The r returns of the individual portfolios within the composite are time-weighted, use trade date accounting, are based uponmonthly portfolio valuations, and include the reinvestment of all earnings as of the payment date. The composite returns are asset-weighted based upon beginning period market values. Additional information regarding policies for valuing eportfolios, calculating performance, and preparing compliant presentations are available upon request. The percentage of co omposite non fee paying accounts for each annual period end are as follows: 2011 - 2009, 100%. In the current period,100% of this composite comprises non fee paying accounts. For these accounts, net of fee performance has been calculated using the standard fee schedule for the Multi Strategy Emerging Markets - Equity + Debt strategy. Composite returns areshown before taxes and the deduction of custody fees (except for mutual funds which includes all fees). The composite and benchmark returns are reported net of foreign withholding taxes on dividends interest and capital gains. The composite fees) dividends, gainsreturns presented represent past performance and is not a reliable indicator of future results, which may vary.Fee ScheduleLazards standard fee schedule for Multi-Strategy - Emerging Markets (Equity + Debt) accounts is 125bps on the first $100 million and 100 bps on the balance of the account. (This fee schedule may be presented in non-U.S. local currencyequivalents based on prevailing exchange rates.) Actual account fees, inclusive of performance-based fees (if applicable) ar used in the construction of composite net of fee performance unless otherwise noted. A complete list and description of reall Lazard composites is available upon request.Benchmark InformationThe MSCI Emerging Markets Index is a free float-adjusted market capitalization index calculated total return and net of for float adjusted reign withholding taxes that is designed to measure equity market performance in the global emerging markets markets.GIPS Compliance and Verification StatusLazard Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepare and presented this report in compliance with the GIPS standards. Lazard Asset Management has been independently edverified for the period of January 1, 1993 through December 31, 2011. The verification reports are available upon request. V Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPSstandards on a firm-wide basis and (2) the firms policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.Lazard Asset Management is the "Firm" to which the GIPS Standards apply (Frankfurt office included in Firm definition as of January 1, 2003). GIPS is a registered trademark of CFA Institute. CFA Institute has not been involved in the spreparation or review of this presentation. The composite creation date is January 2010. Calendar Annualised A Jul 09 - Since QTD YTD 2011 2010 1 YR 3 YR Dec 09 InceptionLazard Rate of Return (%; Gross of Fees) -6.27 4.56 -11.95 17.23 25.59 -9.25 10.67 10.67Lazard Rate of Return (%; Net of Fees) -6.56 3.90 -13.05 15.76 24.80 -10.39 9.28 9.28Benchmark (%; Rate of Return) ( ; ) -8.89 3.93 -18.42 18.88 31.24 -15.95 9.77 9.77Composite Standard Deviation (3-yr. Ann.) 16.95 16.95 N/A N/A N/A 22.65 22.65 N/A N/A N/ABenchmark Standard Deviation (3-yr. Ann.)# of Portfolios 1 1 1 1 1 N/A N/A N/A N/A N/AComposite Dispersion (Asset Wtd. Std. Dev.)Composite AC i Assets (USD Millions) Milli ) 9.9 99 9.9 99 9.4 94 9.1 91 8.2 82Total Firm Assets (USD Billions) 132.2 132.2 124.4 140.6 116.5 17 Lazard Asset Management
  25. 25. Regulatory Di lR l t DisclosuresAll data contained herein is sourced by Lazard Asset Management as at 30 September 2012 unless ot therwise noted.This is a financial promotion and is not intended to be investment advice. In the UK this document, which is supplied for information only, is for distribution only to professional investors and ,advisers authorised to carry out business under the Financial Services and Markets Act 2000.References to Director and other titles of employees of Lazard Asset Management are internal titles and do not necessarily imply any legal status or responsibility.The Lazard Emerging Markets Allocation Fund is a sub-fund of Lazard Global Investment Funds pl an Irish-registered Open Ended Investment Company and recognised UCITS. Lazard Global lc,Investment Funds PLC is authorised by the Financial Services Authority under section 264 of the Fi inancial Services & Markets Act 2000 (“FSMA”) for the purposes of the marketing of the Companywithin the UK. The Central Bank of Ireland regulates all other aspects of the Companys operations. Subscriptions may only be based on the current prospectus. There will be no right to cancel any .agreement under the FSA cancellation rules. Compensation under the Fi d h ll i l C i d h Financial S i C i l Services Compensati S h tion Scheme will not b available. C i of the Si lifi d Prospectus, Prospectus and Report & ill be il bl Copies f h Simplified P P dRAccounts in English and German are available on request from the address below or The subfund has obtained reporting status from HMRC from 1 April 2011. This isrelevant for UK tax payers.Past performance is not a reliable indicator of future results. Fluctuations in the rate of exchange bettween the currency in which shares are denominated and the currency of investment may have theeffect of causing the value of your investment to diminish or increase. Securities identified in this document should not be considered as a recommendation or solicitation to purchase, sell or holdthese securities. It should also not be assumed that any investment in these securities were, or will be profitable. Investments in emerging markets carry an above-average degree of risk due to the e,undeveloped nature of the securities markets in those countries. Investors should consider carefully w countries whether or not investment in emerging markets investments is suitable for them and, if so, how and sosubstantial a part of their portfolio such investments should be.Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds increases the risk of default on repayment and the risk to capital of the fund. High yielding assetsmay carry a greater risk of capital values falling or have limited prospects of capital growth or recove No investor should invest in high yield securities unless they are prepared to accept a high of risk to both income and capital.The Fund may invest in financial derivative instruments (“FDI’s”). While the use of FDI’s can be be eneficial, they also involve risks different from, and in certain cases, greater than, the risks presentedby more traditional investments. FDI’s may be subject to sudden, unexpected and substantial price m investments FDI s sudden movements that are not always predictable This can increase the volatility of the Fund s Net Asset predictable. Fund’sValue. FDI’s do not always perfectly or even highly track the value of the securities, rates or other in nvestments they are designed to track. The use of FDI’s to gain greater exposure to securities, ratesor other investments than by a direct investment, increases the possibility for profit but also increase the risk of loss. esInvesting in equities may lead towards higher returns in the long term. However considerable fluctua ations can apply to equity prices resulting in a greater risk that you may not get your money back.The Fund is able to gain market exposure in excess of its net asset value through utilizing FDI’s. Suc leverage increases the possibility for profit but also increases the risk of loss. chThe Fund is also subject to the risk of the insolvency or default of its counterparties to FDI investm ments. In such events the funds may have limited recourse against the counterparty and mayexperiences losses losses.More than 35% of the fund may be invested in fixed interest securities issued by a single governmen If they can’t repay the amount borrowed the value of your investment will fall. nt.The Fund may invest a significant amount of NAV in units or shares of other collective investment schemes. Such other schemes may themselves be subject to investment management and other feesand expenses.Potential investors should pay particular attention to the risk disclosures in the Prospectus.Investors are reminded that the value of investments and the income from them is not guaranteed an can fall as well as rise due to market and currency movements. When you sell your investment ndyou may get back less than you originally invested.Issued and approved by Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL La azard Asset Management Limited is incorporated in England and Wales with registered number525667. It is authorised and regulated by the Financial Services Authority.The contents of this document are confidential and should not be disclosed other than to the person or persons for whom it is intended n 18 Lazard Asset Management
  26. 26. Contact D t ilC t t DetailsCompany: Lazard Asset Managem Limited mentAddress: 50 Stratton Street London W1J 8LLBroker SupportDesk T l hD k Telephone: 0800 374810Fax: (020) 7659 5794E-Mail: mWebsite: lazardassetmanagemen 19 Lazard Asset Management