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© All rights reserved. Lombard Odier Investment Managers
LO Funds – Emerging Consumer
September 2013
FOR PROFESSIONAL INVE...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
1 2 3 4
Key investment belie...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Contents
 The case for Emer...
Lombard Odier Investment Managers
The case for Emerging Consumer equities
4
Lombard Odier Investment ManagersPlease see important information at the end of the document.
We believe China and India (...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
How to invest in emerging ma...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Current situation
7
Source: ...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
 EM investors are extremely...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Please see slide 31 for more...
Lombard Odier Investment Managers
Strategy highlight
10
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Overview
11
INVESTMENT UNIVE...
Lombard Odier Investment Managers
Investment process and Team
12
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Team: entrepreneurial, exper...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Definition of the investable...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Investment Process: Overview...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
1. Bottom-up stock selection...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
2. Macro: key input from bot...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
EXAMPLE 1: BATA (INDIA)
 Le...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
3. Portfolio Construction
19...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
3. Portfolio Construction – ...
Lombard Odier Investment Managers
Risk Management
21
Lombard Odier Investment ManagersPlease see important information at the end of the document.
THE TEAM MANAGES THE RISK ON...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
1. Currency
23
 Currency-ri...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
OPTIONS
 The options are pa...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
2. Market tail risk/Drawdown...
Lombard Odier Investment Managers
Portfolio Characteristics
26
Lombard Odier Investment ManagersPlease see important information at the end of the document.
CURRENT NUMBER OF EQUITY HOL...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
EM CONSUMER ASSET BREAKDOWN ...
Lombard Odier Investment Managers
Performance & Attribution
29
Lombard Odier Investment ManagersPlease see important information at the end of the document.
OUR FUND IS NOT BENCHMARK-DR...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Performance (1/2)
LOF EMERGI...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
LOF EMERGING CONSUMER – EXCE...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
STOCK PICKING IS THE KEY CON...
Lombard Odier Investment Managers
Why invest in this Fund?
34
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Why invest in this Fund
35
A...
Lombard Odier Investment Managers
Appendix
36
Lombard Odier Investment Managers
Key figures
37
Lombard Odier Investment ManagersPlease see important information at the end of the document.
HIGH CONVICTION, HYBRID LONG...
Lombard Odier Investment Managers
Stocks – some examples
39
Lombard Odier Investment ManagersPlease see important information at the end of the document.
The share price of leading U...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
AMBEV PRICE CHART
Nigerian B...
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Jubilant: leading fast food ...
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AN EXCELLENT WAY OF PLAYING ...
Lombard Odier Investment Managers
Macro Analysis – some examples
44
Lombard Odier Investment ManagersPlease see important information at the end of the document.
India
45
 US rates increase...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Peru and Colombia
46
 Popul...
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Nigeria, super regional powe...
Lombard Odier Investment Managers
Biographies of the team
48
Lombard Odier Investment ManagersPlease see important information at the end of the document.
ODILE LANGE-BROUSSY, SENIOR ...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Glossary (1)
 Hybrid: long-...
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Glossary (2)
 Pegged curren...
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Risk Profile
 Prices of the...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
LOF – Emerging Consumer
53
L...
Lombard Odier Investment ManagersPlease see important information at the end of the document.
Disclaimer
54
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  1. 1. © All rights reserved. Lombard Odier Investment Managers LO Funds – Emerging Consumer September 2013 FOR PROFESSIONAL INVESTORS USE ONLY
  2. 2. Lombard Odier Investment ManagersPlease see important information at the end of the document. 1 2 3 4 Key investment beliefs We expect that the consumer goods and retail sectors in the emerging markets will benefit from a super cycle of growth, driven by a population boom, increased wealth, and industry consolidation We have identified c. 300 high quality domestic or international companies servicing EM consumers, with strong brands, market share and retail franchise We think such opportunities are best captured in a concentrated but well diversified portfolio, invested in equities (70 to 80 stocks with 20-25 core positions generally representing 50% of portfolio) Emerging markets carry higher liquidity, volatility, political, currency risks than developed markets, which call for disciplined portfolio construction rules and stringent risk control 2
  3. 3. Lombard Odier Investment ManagersPlease see important information at the end of the document. Contents  The case for Emerging Consumer equities  Strategy highlight  Investment Process and Team  Risk Management  Portfolio Characteristics  Performance & Attribution  Why invest in this Fund?  Appendix 3
  4. 4. Lombard Odier Investment Managers The case for Emerging Consumer equities 4
  5. 5. Lombard Odier Investment ManagersPlease see important information at the end of the document. We believe China and India (40% of emerging markets population) will drive the largest expansion of the middle class in history.  Rapid middle-class expansion: the number of people with annual income exceeding USD 6,000 should double over the next decade, to 3.8 bn by end of 2020 Why invest in emerging markets? 5  The average yearly salary in China has increased by almost five times since 1999 Source: Goldman Sachs Sustain, Equity Research, July 14, 2011 ; Deutsche Bank. EMERGING MARKETS POPULATION BY INCOME BAND YEARLY SALARY IN CHINA [USD] 1980 1990 2000 2010 2020 2030 2040 2050 0 1 2 3 4 5 6 7 8 9 10 Other (not forecast) Over USD30K USD6–30K Under USD6K BILLIONSOFPEOPLE 0 1,000 2,000 3,000 4,000 5,000 6,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
  6. 6. Lombard Odier Investment ManagersPlease see important information at the end of the document. How to invest in emerging markets?  We believe that the traditional EM Index does not fully capture the real dynamics of Emerging Markets because: 6 CAPITAL ALLOCATION BY COUNTRY OF MSCI EM South Korea and Taiwan are still considered as emerging markets but are they? Source: LOIM, as of July 2013.  They may target lower returns for investors than private companies because they target governments best interests not shareholders.  They represent 35% of the constituents but 70% of the earnings/market cap generated by the MSCI EM index.  Investing in emerging markets brings hidden political, currency and corporate governance risks that passive investment in ETF cannot neutralize. These risks can only be assessed by an active manager. Country allocation of MSCI EM Index is mainly invested in four countries State governed companies are mainly represented in MSCI EM Index21
  7. 7. Lombard Odier Investment ManagersPlease see important information at the end of the document. Current situation 7 Source: State Street Global Markets GLOBAL EQUITY ETF FLOWS EMERGING MARKETS EQUITIES TRADE AT 37% DISCOUNT TO THE USPOSITIONING IS AT 2008 TYPE MSCI EM VS S&P 500 SHARE PRICE PERFORMANCE Asian crisis, EM down 30% Russian crisis, EM down 40% EM down 55% Source: Bloomberg DECREASING FLOWS IN ETF, LOW VALUATIONS AND WIDENING OF THE SPREAD BETWEEN DEVELOPED AND EMERGING MARKETS STOCKS Past performance is not a guarantee for future results. Source: J.P. Morgan, Bloomberg. Source: State Street Global Marekts.
  8. 8. Lombard Odier Investment ManagersPlease see important information at the end of the document.  EM investors are extremely bearish  Flows are very negative for EM bonds, equities and currencies  EM market positioning is 2008 type  EM macro has been/is deteriorating everywhere with higher inflation, slower growth and sharp imbalances (current account and budget deficits)  2013 is not 1991 (Indian worst crisis ever), 1997 (Thailand, Malaysia, South Korea bankruptcies) or 1998 (Russian collapse)  Valuations have come down a long way  China is now clearly recovering (last PMI above 50 for 2 months in a row and consumption bouncing back rapidly)  Russia’s growth should accelerate in 2014, cushioned by solid oil prices, low unemployment and high real wage growth  Brazil, Colombia, Peru and Mexico are all stabilizing and GDP growth is expected to accelerate in the last quarter of the year  FX will now be a huge boost for Brazilian, South African and Indian exports as long as Europe and US are holding up. Russia’s economy is in good shape and consumption growth is now accelerating  All Sub-Saharan African countries with the exception of South Africa are keeping a very high GDP growth rate (7%+). Except from Argentina and Venezuela, no countries are on the verge of collapse  Even for India, the situation is better than in 1991 Why invest now? HOWEVER, THERE ARE SIGNS OF RECOVERY 8 MACRO HAS DETERIORATED RAPIDLY IN THE EMERGING MARKETS
  9. 9. Lombard Odier Investment ManagersPlease see important information at the end of the document. Please see slide 31 for more details on performance figures. Past performance is not a guarantee for future results. PERFORMANCE CHART SINCE LAUNCH (31 OCTOBER 2011)1 LOF – Emerging Consumer 9 Source: LOIM, 1 Dividend accumulated private client share class, net performance in USD 90 100 110 120 130 140 31/10/2011 03/02/2012 08/05/2012 11/08/2012 14/11/2012 17/02/2013 23/05/2013 26/08/2013 LOF Emerging Consumer MSCI World MSCI Emerging Markets
  10. 10. Lombard Odier Investment Managers Strategy highlight 10
  11. 11. Lombard Odier Investment ManagersPlease see important information at the end of the document. Overview 11 INVESTMENT UNIVERSE  Emerging and Developed Equities within the Consumer and Retail sectors excluding financials, consumer finance, telecom, media, auto OBJECTIVE  The portfolio aims to beat the MSCI World index over the long term and not to track the index over the short term  For performance analysis, we use a blended benchmark which better represents our universe. It is composed of 55% MSCI EM Consumer Staples, 15% MSCI EM Consumer Discretionary, 25% MSCI World Consumer Staples and 5% MSCI World Consumer Discretionary INVESTMENT APPROACH  Deep experience: team members have covered the global consumer space for 20-25 years (developed and emerging)  Research-intensive approach: team invests in companies with leading market shares, high return on capital employed, strong balance sheet, a long and verifiable track-record and quality corporate governance. Focus on constant dialogue with companies in the portfolio  Differentiated view on macro: bottom-up input  Portfolio construction: the maximum weighting for individual positions is systematically determined in order to meet the volatility target (10%) and liquidity target. Rules include geographic diversification, balanced sector weighting, strategy weighting (Growth/Value/Event) and position sizing capped according to stock’s liquidity, volatility and correlation with rest of the portfolio  Highly disciplined risk control: 1) Currency risk: active hedging of local currencies in the Emerging Markets, typically 75-80% of the invested portfolio; 2) Tail risk/drawdown risk: managed via options (put spreads on highly liquid ETFs) and active monitoring of cash exposure PERFORMANCE SINCE INCEPTION (31.10.2011 to 30.08.2013)1  Performance (net): +26.9% cumulative, +13.9% annualized  Volatility of 7.9% (Blended benchmark: 13.4%)  Sharpe ratio of 1.7 (Blended benchmark: 0.6)  The Fund generated 5.12% of annualized alpha since inception compared to our blended benchmark 1 Source: LOIM, Dividend accumulated private client share class, net performance in USD Please see slide 31 for more details on performance figures. Past performance is not a guarantee for future results. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk.
  12. 12. Lombard Odier Investment Managers Investment process and Team 12
  13. 13. Lombard Odier Investment ManagersPlease see important information at the end of the document. Team: entrepreneurial, experienced and dedicated EDOUARD DE COURNON PRODUCT SPECIALIST 21 years experience PANY SOUKALOUN RESEARCH ANALYST & PRODUCT SPECIALIST 3 years experience DIDIER RABATTU PORTFOLIO MANAGER 26 years of experience THUY-MAI HOANG EQUITY ANALYST 1 year experience LAJLA AGANOVIC, EQUITY ANALYST 5 years experience ODILE LANGE-BROUSSY SENIOR EQUITY ANALYST 20 years experience Coverage: Asia, Global Players and Risk Management Coverage: Asia and Eastern Europe Coverage: Latin America, Africa and Middle East 13
  14. 14. Lombard Odier Investment ManagersPlease see important information at the end of the document. Definition of the investable universe  440 Consumer stocks and 560 Retail stocks  Sectors include: Food & Beverage manufacturing, HPC, supermarkets, food service/restaurants, clothing retail, specialty retail, luxury goods, tobacco  Companies with a significant amount of business in emerging markets (*) 14 Thematic universe Investable Universe Total universe ~1000 stocks (tot. market cap. USD 8trn) Analysed universe ~300 stocks (tot. market cap. C. USD 2trn) (*) Either listed in an Emerging country or listed in a Developed Country but with >50% of revenues/profits /in EM. Exceptions can only account for max. 10% of portfolio overall For illustrative purposes only. Allocations are subject to change. Tobacco 10 Beverages 40 Food Manufacturing 65 Food Drug Retail 55 Health & Personal Care 35 Restaurants 10 Specialty Retail 25 Apparel Clothing 10 Department stores 20 Luxury 15 Others 15 Strict rules:  Number 1 or 2 brands / strategic market share in Consumer Staples  Highly profitable  No debt in retail  Clean corporate governance
  15. 15. Lombard Odier Investment ManagersPlease see important information at the end of the document. Investment Process: Overview 15  Currency: Hedge min. 50% of the currency exposure to local currencies  Tail risk/Drawdown risk: Cash (actively monitored) and options (hedge the portfolio with liquid instruments) 2. Macro: key input from bottom-up trends  Insights into bottom-up trends are a key differentiating input  Classic top down inputs  Macro view feeds into portfolio construction 3. Portfolio Construction  Geographic diversification  Sector weighting (Staples vs Discretionary)  Blended approach: balanced weight for each of the three strategies (Growth/Value/Event)  Position sizing 1. Bottom-up stock selection  The team has in-depth understanding of Global Consumer and Retail Space  Focus on constant dialogue with companies’ top management  Highly disciplined, number-based approach  Strong read-across capabilities from datapoints on 300+ peer companies  Additional corporate governance checks EMERGING CONSUMER PORTFOLIO RISK MANAGEMENT
  16. 16. Lombard Odier Investment ManagersPlease see important information at the end of the document. 1. Bottom-up stock selection 16  Two team-members have covered global consumer stocks (developed and emerging) for the last 20-25 years  Long-standing knowledge of relationships with the management, board members and shareholders of most of the 300 companies in our investable universe In-depth understanding of the global consumer and retail space  Around 400 meetings or one-on-one conference calls per year with companies in the portfolio Focus on constant dialogue with companies’ top management  Rigorous decision-making, based on detailed models and independent forecasts  Proprietary adjustments made to ROCE (e.g. to reflect real estate value of retailers) and to enterprise value (e.g. to reflect outstanding commitments on lease payments or pensions)  Detailed sector peer comparisons across countries (cost structure, growth, capex intensity, balance sheet structure, ROCE)  Valuation is based on multiples (EV/EBITDA, EV/Sales, P/E) and ROCE, which are cross-checked across sector/country/regional peers Highly disciplined, running the numbers approach Strong read-across capabilities given wide universe analysed  Current trends are monitored via data-points (quarterly sales, costs, margings) for 300+ companies in 10 sub-sectors for 25 countries Additional corporate governance checks  Board composition, relative Board independence, involvement with sister companies, management share ownership, off-balance sheet items 2. Macro: key input from bottom-up trends 3. Portfolio Construction 1. Bottom-up stock selection EMERGING CONSUMER PORTFOLIO
  17. 17. Lombard Odier Investment ManagersPlease see important information at the end of the document. 2. Macro: key input from bottom-up trends 17 Macro view feeds into portfolio construction Top-down economic backdrop analysis GDP growth, capital spending, inflation, interest rates, FX reserves, monitoring of government /central bank intervention, close monitoring of commodity prices Bottom-up monitoring of trends gives our macro analysis an edge Continuous discussion with consumer companies. First-hand feedback on staff cost inflation, rental cost trends, consumers’ readiness to trade up, price increase absorption by the consumer, etc. Early view on macro-economic indicators, and feeds into our conviction on each country Example 2: Positive on Philippines  Bottom-up feedback solid: restaurants and mall operators showing resilient Same- Store-Sales-Growth. Little staff and rental infllation  Top-down strong: 7.6% GDP growth in H1, steady rise in remittances, low CPI, new sin tax helping government’s finances Example 1: Prudent on Indonesia  Negative bottom-up feedback in Q1 and Q2 2013: consumer companies reported robust sales/volume growth; however EBIT growth has almost stopped (wage/fuel/electricity)  Top-down concerns: FX weakening, jump in CPI in July 2013/August 2013 2. Macro: key input from bottom-up trends 3. Portfolio Construction 1. Bottom-up stock selection EMERGING CONSUMER PORTFOLIO
  18. 18. Lombard Odier Investment ManagersPlease see important information at the end of the document. EXAMPLE 1: BATA (INDIA)  Leading player with deep reach in a growing market which is becoming more organized. Bata has 22% share of the organized market, which is only 40% of total shoe market. Have more than 1300 points of sales and are present in 500 cities.  Management aiming for EBITDA margin of c. 17-18% in 3Y (+15% in 2012), driven by mix and efficiency. Excellent past track record on top and bottom line.  Valuation attractive vs Indian retail peer group. We believe that Bata India will shortly be the largest country of the parent Company.  Nb 2 beer player in China with 15% market share. We think that the market size could at least double. Tsingtao beer could gain market share organically almost every quarter for more than 2 years.  Clear long term story (market share consolidation + margins moving up as EBIT/hl still low in China). Many examples in Emerging and developed markets of increasing local market share leading to higher margins (AmBev Brazil in last 10 years, Anheuser Busch in USA 1980-2008).  Valuation well-supported by recent M&A deals in China. EXAMPLE 2: TSINGTAO (CHINA) Examples of company investment cases 18
  19. 19. Lombard Odier Investment ManagersPlease see important information at the end of the document. 3. Portfolio Construction 19  Portfolio widely diversified in China (c. 20%), India (c. 15%), LatAm (c. 15%), Other Asia (c. 7%), Eastern Europe/Middle East (c. 7%) Frontier Africa (c. 5%), Developed markets (c. 20%)  Low correlation between different regions  Minimization of volatility Geographic diversification  Staples  Discretionary  Example: in China, currently slowly building discretionary part to reflect improving data points and low valuations Sector weighting  Fundamental Growth: high multiples supported by high growth and high returns  max 60% of the portfolio  Fundamental Value: FCF yield/dividend yield  max 40% of the portfolio  Corporate Events: expected disposals/acquisitions, corporate restructuring  max 20% of the portfolio Three-tiered strategy  Target: liquidate 30% of the book in 1 day, and close to 70% of the book in 5 days (based on the 6-month average daily volume and without representing more than 20% of daily volume and without any blocks). There is however 10% of the book which would need more than 20 days to liquidate.  Maximum weighting at position level according to its volatility, correlation to the rest of the book and liquidity Position sizing 2. Macro: key input from bottom-up trends 3. Portfolio Construction 1. Bottom-up stock selection EMERGING CONSUMER PORTFOLIO For illustrative purposes only. Allocations are subject to change.
  20. 20. Lombard Odier Investment ManagersPlease see important information at the end of the document. 3. Portfolio Construction – Position sizing 20 Maximum weighting at position level:  Contribution to portfolio’s volatility (**) – Position must not contribute more than 5% to portfolio’s volatility  Liquidity – Position must be liquidable in max. 20 days without representing more than 20% of daily volume (assuming no blocks). – Calculation is based on 6-month average for daily volumes.  Maximum weighting is the minimum between these two limits (*). Some Illustrations Intrinsic volatility Correlatio n factor Max weight to respect portfolio volatility constraint Daily volume in USD Max weight to respect portfolio liquidity constraint Max weight for total risk Current weight in Portfolio YUM! BRANDS 25% 4.0 6.0% 255.1 145.2% 6.0% 4.3% TSINGTAO BREWERY 25% 5.0 4.9% + 11.7 6.6% = 4.9% 2.5% VIET NAM DAIRY PRODUCTS 29% -0.4 N/A 1.6 0.9% 0.9% 0.3% NESTLE NIGERIA 33% 0.5 34.8% 1.4 0.8% 0.8% 0.8% Targets at book level:  Volatility target: 10%  Liquidity target: at least 30% of book within 1 day and close to 70% of book within 5 days 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 5 10 15 20 25 30 35 40 45 50 DAYS TO LIQUIDATE (*) 5% tolerance (**) Contribution of stock 𝑖 is the product of the following factors: Position’s weight 𝑤𝑖, stock’s intrinsic volatility 𝜎𝑖 and stock’s correlation with other holdings in the portfolio ∑𝑗𝑤𝑗𝜎𝑗 𝜌𝑖𝑗, where𝜌𝑖𝑗 is the correlation between stock 𝑖 and stock 𝑗. Allocations are subject to change. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk. 2. Macro: key input from bottom-up trends 3. Portfolio Construction 1. Bottom-up stock selection EMERGING CONSUMER PORTFOLIO BOOK’S LIQUIDITY
  21. 21. Lombard Odier Investment Managers Risk Management 21
  22. 22. Lombard Odier Investment ManagersPlease see important information at the end of the document. THE TEAM MANAGES THE RISK ON 2 LEVELS: Risk Management 22 1 2 Currency Tail risk/Drawdown Risk Hedge minimum 50% of the currency exposure to local currencies  Cash: actively monitored  Options: Hedge the portfolio with liquid instruments
  23. 23. Lombard Odier Investment ManagersPlease see important information at the end of the document. 1. Currency 23  Currency-risk hedging Due to the volatile environment which characterizes emerging markets (which constitute around 70-75% of the portfolio), we protect the portfolio by hedging minimum 50% of the currency exposure to local currencies  There are some exceptions: – Pegged currencies (HKD, SAR) or quasi pegged (TWD) – Currencies too expensive to hedge (NGN, KES, VND) because of interest rate too high – Strong currencies with favorable macro indicators (PEN, COP, SGD, MYR, THB) are only partially hedged (*)  Structurally weak currencies (ZAR, IDR, INR, BRL, RUB) are usually hedged above 70% (*)  Implicit exposures: very important, also taken into account. For example a stock like Carlsberg is quoted in DKK but operates the most in Russia. Carlsberg has most of its profits sensitive to RUB (implicit exposure). If the RUB depreciates, the Carslberg stock will follow. To limit this we hedge our positions with currency forwards  Dynamic currency hedging over time (market conditions/costs) (*) Final hedging level subject to judgment call. For illustrative purposes only. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk. 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% nov11 dec11 jan12 feb12 mar12 apr12 may12 jun12 jul12 aug12 sep12 oct12 nov12 dec12 jan13 feb13 mar13 apr13 may13 jun13 jul13 aug13 TOTAL EXPOSURE TO USD AND PEGGED CURRENCIES
  24. 24. Lombard Odier Investment ManagersPlease see important information at the end of the document. OPTIONS  The options are part of the portfolio’s hedging strategy (also including FX hedging and cash utilisation) – Options are used to hedge the tail risk, typically a 7-12% markets’ fall – It can help to reduce our volatility – The strategy is not directional but protective  Options strategy is implemented mainly through put spreads on extremely liquid ETFs and tries to mimic the portfolio’s geographical breakdown (EEM US, FXI US, SPY US, ILF US, EWZ US, XLP US, XRT US, SX3P, SXRP, etc.) – The strikes are generally out-of-the-money (3-5% below spot for the long leg and 10-12% for the short leg) – The maturity is generally 1 to 3 months  Option premia spent over a given calendar year can not exceed 2% of average NAV (in 2012, we only spent 0.20% of NAV, while we were hedged most of the time and markets have gone up)  We usually buy the options when volatility is getting low and when hedging is likely to be inexpensive  We are aware of our strategy’s bias: we are typically long consumer and retail stocks through the portfolio but short the general market through geographical indices options 2. Market tail risk/Drawdown risk strategy 24 For illustrative purposes only. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk.
  25. 25. Lombard Odier Investment ManagersPlease see important information at the end of the document. 2. Market tail risk/Drawdown risk strategy (cont.) 25  Cash – Cash exposure is actively monitored. Having cash is a discretionary decision of the portfolio manager – We usually have part of the portfolio in cash either if the volatility of the equity markets goes up a lot or if we feel that sector rotation is significant enough for us to hold cash for a certain period – Cash management helps to reduce the volatility of the overall portfolio VOLATILITY(*) TOTAL RETURN(**) Portfolio Excluding Cash &FX 9.9% 24.8% Portfolio Including Cash & FX 7.9% 26.92% (*) Volatility as of August 31, 2013. (**) All returns on a gross dividend basis. Returns calculated from 31 October 2011 to 31 August 2013. For illustrative purposes only. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk. 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% nov11 dec11 jan12 feb12 mar12 apr12 may12 jun12 jul12 aug12 sep12 oct12 nov12 dec12 jan13 feb13 mar13 apr13 may13 jun13 jul13 aug13 CASH EXPOSURE SINCE INCEPTION
  26. 26. Lombard Odier Investment Managers Portfolio Characteristics 26
  27. 27. Lombard Odier Investment ManagersPlease see important information at the end of the document. CURRENT NUMBER OF EQUITY HOLDINGS: 74 TURNOVER (LAST 12 MONTHS): 65% Top positions in emerging and developed markets 27 (31.08.2013) Source: LOIM. TOP 5 POSITIONS IN DEVELOPED MARKETS YUM BRANDS 4.4% CARLSBERG B 4.3% FAMILY MART 3.1% DANONE 2.5% SHISEIDO 2.4% TOP 15 POSITIONS IN EMERGING MARKETS TINGYI HOLDING (China) 3.3% TSINGTAO BREWERY (China) 2.7% FEMSA (LaTam) 2.3% SUN ART (China) 2.2% O'KEY GROUP (Russia) 2.0% NUTRESA (Colombie) 2.0% NESTLE INDIA (India) 1.9% CHINA RESOURCES (China) 1.9% CHEDRAUI (Mexico) 1.8% ARCOS DORADOS (LaTam) 1.7% CENCOSUD (LaTam) 1.7% BATA INDIA (India) 1.6% COCA-COLA HBC 1.6% ESPRIT HOLDINGS (China) 1.5% BRITANNIA INDUSTRIES (India) 1.4% The portfolio information provided in this document is for illustrative purposes only and does not purport to be recommendation of an investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment in, the referenced securities. They illustrate the investment process undertaken by the manager in respect of a certain type of investment, but may not be representative of the Fund's past or future portfolio of investments as a whole and it should be understood that they will not of themselves be sufficient to give a clear and balanced view of the investment process undertaken by the manager or of the composition of the investment portfolio of the Fund. As the case may be, further information regarding the calculation methodology and the contribution of each holding in the representative account to the overall account’s performance can be obtained by the Fund or the Management Company.
  28. 28. Lombard Odier Investment ManagersPlease see important information at the end of the document. EM CONSUMER ASSET BREAKDOWN EM CONSUMER SECTOR BREAKDOWN Portfolio breakdown: asset, sector, strategy and geography 28 EM CONSUMER GEOGRAPHICAL BREAKDOWN EM CONSUMER STRATEGY BREAKDOWN For illustrative purpose only. Holdings and/or allocations are subject to change. Source: LOIM. 1.2% 18.7% 6.0% 11.4% 13.8% 1.2%4.9% 5.1% 25.6% 12.1% Korea China Other Asia India LatAm Middle East Africa Eastern Europe Global Players Cash 87.9% 12.1% -0.8% Equities Cash and non equities Options 14.3% 2.9% 7.4% 5.6% 9.3% 20.9% 4.7% 11.1% 11.8% 12.1% Beer Spirits Tobacco Food Manufacturers Noodles Other Food Food Drug Retail HPC Restaurant Retail Disc Cash 26.6% 16.7% 56.7% Fundamental Value Event Driven Fundamental Growth (31.08.2013)
  29. 29. Lombard Odier Investment Managers Performance & Attribution 29
  30. 30. Lombard Odier Investment ManagersPlease see important information at the end of the document. OUR FUND IS NOT BENCHMARK-DRIVEN AND THE PORTFOLIO IS A REFLECTION OF OUR “BEST IDEAS”  Traditional existing benchmarks (MSCI World & MSCI Emerging Markets) are of limited relevance because: – In MSCI World, US accounts for 53% and Japan for 9% of the benchmark, rest is Europe (EM is 2%) – 39% of our fund’s current holdings belong to neither MSCI World nor MSCI EM universes – The opportunity cost against our official benchmark represents 2.5%, which is the cost of hedging the currency risk  The benchmark that best reflects our universe is a Blended Benchmark constructed by LOIM Risk: – 70% MSCI Emerging (15% EM Consumer Discretionary and 55% EM Consumer Staples) – 30% MSCI World (5% World Consumer Discretionary and 25% World Consumer Staples)  Since inception to 31.08.2013, the fund LOF – Emerging Consumer (+27%) would have outperformed the Blended Benchmark (+17%) by 10% (9% annualized) LOF EM Consumer – non replicable universe 30
  31. 31. Lombard Odier Investment ManagersPlease see important information at the end of the document. Performance (1/2) LOF EMERGING CONSUMER – FUND PERFORMANCE SINCE INCEPTION* 31 90 95 100 105 110 115 120 125 130 135 140 Oct-2011 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Apr-2013 Jul-2013 LOF Emerging Consumer MSCI World MSCI Emerging Markets Blended benchmark * Dividend accumulated private client share class, net performance in USD ** US accounts for 53% and Japan for 9% of the benchmark, rest is Europe (Emerging Markets account for 2%) *** Blended Benchmark constructed by LOIM Risk, in the process of being complianced, represents 70% MSCI Emerging (15% EM Consumer Discretionary and 55% EM Consumer Staples) and 30% MSCI World (5% World Consumer Discretionary and 25% World Consumer Staples). Past performance is not a guarantee of future results. The MSCI World ND is used as the primary index of the Fund while the MSCI Emerging Market ND index is used for comparison purposes as the Fund investment approach focuses on companies listed in an emerging country or with a significant business exposure (>50%) to emerging markets. SINCE INCEPTION AS OF 31.08.2013 ANNUALIZED RETURN VOLATILITY MONTHLY MAX DRAWDOWN CORRELATION TO LOF EM CON FUND LOF Emerging Consumer(*) 13.9% 7.9% -4.1% MSCI World(**) 14.8% 10.0% -6.6% 0.67 MSCI Emerging Markets -1.2% 13.6% -11.2% 0.68 Blended Benchmark (***) 8.8% 9.5% -8.7% 0.78 (31.08.2013)
  32. 32. Lombard Odier Investment ManagersPlease see important information at the end of the document. LOF EMERGING CONSUMER – EXCESS RETURN** Performance (2/2) 32 Past performance is not a guarantee of future results *Inception date 31st Oct 2011. Only complete months included in the calculations (partial months excluded). ** Dividend accumulated institutional client share class, net performance in USD. Return compounded monthly. *** Blended Benchmark represents 70% MSCI Emerging (15% EM Consumer Discretionary and 55% EM Consumer Staples) and 30% MSCI World (5% World Consumer Discretionary and 25% World Consumer Staples). LOF EMERGING CONSUMER – HISTORICAL PERFORMANCE** 3.49% 0.23% 4.77% 5.12% 0% 1% 2% 3% 4% 5% 6% 2011 2012 2013 (YTD) ITD (Annualized) Excess Return Annualized ITD 1Y[Since Nov 2011]* Performance Statistics Fund Blended Bench Fund Blended Bench Return 13.89% 8.77% 12.69% 7.06% Volatility 7.90% 13.36% 7.92% 12.61% Sharpe Ratio 1.69 0.63 1.56 0.53 Alpha Statistics Excess Return 5.12% 5.64% Tracking Error 9.33% 7.60% Information Ratio 0.55 0.74 CLASS PA USD JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Fund Bench*** Excess Return 2011 0.69% 1.05% 1.74% -1.75% 3.49% 2012 1.56% 4.95% 2.67% 0.59% -4.09% 1.38% 1.37% 2.02% 2.45% 2.80% 2.39% 1.53% 21.19% 20.96% 0.23% 2013 2.59% -0.70% 1.82% 3.02% 1.48% -3.30% 1.56% -3.35% 2.93% -1.84% 4.77% Source: LOIM
  33. 33. Lombard Odier Investment ManagersPlease see important information at the end of the document. STOCK PICKING IS THE KEY CONTRIBUTOR TO PERFORMANCE  With a 24.8% absolute performance (including takeovers) and 8.2% relative performance compared to our universe (Blended Benchmark) Performance attribution 33 Source: LOIM * Source: LOIM, Dividend accumulated private client share class, net performance in USD. ** 70% MSCI Emerging (15% EM Consumer Discretionary and 55% EM Consumer Staples), 30% MSCI World (5% World Consumer Discretionary and 25% World Consumer Staples). Past performance is not a guarantee of future results. 24.8% -3.0% 5.1% 26.9% 0% 5% 10% 15% 20% 25% 30% Stocks Tail Risk/Drawdown management with cash FX Hedging Fund Performance Performance Attribution Since Inception (as of 31.08.2013)* BENCHMARK SINCE INCEPTION AS OF 31.08.2013 CUMULATIVE RETURN MSCI World 28.7% MSCI Emerging Markets -1.2% Blended Benchmark** 16.6%
  34. 34. Lombard Odier Investment Managers Why invest in this Fund? 34
  35. 35. Lombard Odier Investment ManagersPlease see important information at the end of the document. Why invest in this Fund 35 Access to the super-cycle of consumer growth in Emerging Markets, including poorly covered markets (eg. India, Indonesia, Columbia) and Frontier Markets (eg.Vietnam, Nigeria, Zimbabwe) Portfolio construction approach seeks to achieve low volatility and high liquidity, through maximum- weighting rules Management team’s experience covering global consumer names for 20-25 years Rigorous selection of stocks based on very frequent communication with company management, number-intensive approach, datapoints on around 300 companies, bottom- up insights into macro 1 2 3 4 Active risk control: dynamic FX hedging, management of market tail risk and drawdown risk 5
  36. 36. Lombard Odier Investment Managers Appendix 36
  37. 37. Lombard Odier Investment Managers Key figures 37
  38. 38. Lombard Odier Investment ManagersPlease see important information at the end of the document. HIGH CONVICTION, HYBRID LONG-ONLY, ACTIVELY MANAGED, RESEARCH-DRIVEN, RISK FOCUSED LOF Emerging Consumer – Key figures 38 AUM USD 681 million Potential capacity USD 1 billion Launch date 31.10.2011 Performance since inception (*) +26.9% Performance YTD (*) +2.9% Volatility ex-ante/ex-post 13%/7% Portfolio Beta (inc cash, ex options/FX) 0.6x Portfolio Beta EM Share (inc cash, ex options/FX) 0.45x Annualized Sharpe ratio >1x Maximum monthly drawdown (May 2012) 4% % of stocks close to 2 years low/high 25%/40% 2014 P/E, EV/EBITDA, Div yield 20x , 10x, 2.0% 2013 Book Earnings Growth (value/growth) 12%/18% (*) Dividend accumulated private client share class, net performance in USD Source: LOIM. Past performance is not a guarantee of future results. (31.08.2013)
  39. 39. Lombard Odier Investment Managers Stocks – some examples 39
  40. 40. Lombard Odier Investment ManagersPlease see important information at the end of the document. The share price of leading US breweries increased manifold over the last 30 years, despite constant beer per capita consumption, thanks to industry consolidation and retail price increases; the same trend is at is infancy in India and China.  Beer consumption per capita stagnated in the US between 1980 and 2010; it was 80l/capita in 1980 and 82l/capita in 2010  Market share of Anheuser Busch rose from 28% to 53% over the same period and its share price rose by 5,600%  Current beer consumption is 30l/capita in China; Tsingtao’s market share is 15% – the market is expected to consolidate  Current beer consumption is 1l/capita in India; United Breweries market share is 50% – the market is expected to grow United Breweries and Tsingtao vs Anheuser Busch 40 SHARE PRICE PERFORMANCE OF BREWERIES IN US, INDIA AND CHINA Source: LOIM. Past performance is not a guarantee of future results.Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
  41. 41. Lombard Odier Investment ManagersPlease see important information at the end of the document. AMBEV PRICE CHART Nigerian Breweries vs AmBev 41 NIGERIAN BREWERIES AMBEV (2000) AMBEV (2013) Country Nigeria Brazil (70% of EBITDA) Brazil (70% of EBITDA) Market share 60% 60% 70% Beer consumption per cap. (l/inhabitant)(*) 9 51 65 Population 167m 170m 194m Population growth rate +2.3% +1.3% +1.1% NIGERIAN BEER SECTOR IS 10/15 YEARS BEHIND BRAZIL Source: LOIM. (*) compared to an average of 14.6 for Africa, 78 for Europe and a global average of 22. Source: The Economist/ Industry sources Past performance is not a guarantee of future results.Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
  42. 42. Lombard Odier Investment ManagersPlease see important information at the end of the document. Jubilant: leading fast food chain in India  Family core shareholders, own the Domino Pizza franchise for all of India  575 stores, directly operated, opening at least 125 new stores per annum  High ROCE (41%): home delivery highly successful (high sales/store), side-orders growing, negative WC  Excellent multi-year track record of delivering store openings and maintaining margins  Fast-food chains under-developed in India: 250 Pizza Huts, 200 KFCs, < 200 McDonald’s  2012: awarded the franchise for Dunkin Donuts in India 42 NB: figures based on FY ended March 2013 (Jubilant), Dec 2012 (Domino’s UK), June 2012 (Domino’s Australia) Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document Jubilant Domino’s UK Domino’s Australia First store opened 1996 1985 1983 Current number of stores 576 727 559 ROCE 41% 44% 52% Net profit USD million 24 53 28 Mkt cap USD million (02.09.2013) 1’039 1’481 1’112 Country population (million) 1’300 56 22 Similar number of stores Very similar returns Similar market cap Growth potential in a different league : India is 20x bigger than the UK and 60x bigger than Australia! COMPARING DOMINO PIZZA FRANCHISEES IN INDIA, UK AND AUSTRALIA
  43. 43. Lombard Odier Investment ManagersPlease see important information at the end of the document. AN EXCELLENT WAY OF PLAYING EXPANSION OF DISCRETIONARY CONSUMPTION IN SAUDI ARABIA  Herfy is a leading fast food restaurant chain in Saudi Arabia. It operates in four different segments: fast food chain (80% of revenues – 200 restaurants as of June 2012), bakery (14% of revenues), rusk (Shaborah) (2% of revenues), and meats (4% of revenues)  The company plans to open 20-25 additional restaurants per year, on top of the 212 existing ones (end 2012)  Discretionary consumption is expected to benefit from the acceleration in the Saudi Arabian per-capita consumption trend  Some Metrics: – Revenues growth: 12% CAGR 2013-2017 (vs.17% CAGR 2006-2011) – EBIT margin of 21% – Dividend Yield of 3.5% – Net ROCE 2013E of 37%-40%  The company is valued at an EV/EBITDA 2013E of 12.6x and 2014E of 10.9x and an P/E 2013E of 15.9x and 2014E of 13.8x Herfy, fast food chain in Saudi Arabia 43 Source: LOIM estimates 12.6 12.4 12.1 12.3 12.7 13.5 15 17.4 20 21.222.5 25 29 32 35 38 42 47 324 375 466 518 580 709 874 987 1111 1242 1381 1530 0 200 400 600 800 1000 1200 1400 1600 1800 0 10 20 30 40 50 60 70 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E SARMillions SARThousands Saudi per-capita consumption Herfy revenues Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
  44. 44. Lombard Odier Investment Managers Macro Analysis – some examples 44
  45. 45. Lombard Odier Investment ManagersPlease see important information at the end of the document. India 45  US rates increase and ensuing outflows  Oil price increase (12% higher in July-Aug than in H1 13) offset the fuel price hikes passed by government in H1  No inflows triggered by the liberalization of FDI in retail and in aviation  Populist measures taken as general election is due in May 2014 (eg. Food Security Bill will decrease GDP growth by 30bp). Concern other such measures may follow.  Remaining risk: FII (foreign ownership) in equities remain high vs historical levels  200m Indians have no phone, TV or radio  Urbanization much lower than China’s: 30% of Indians live in cities  Share of food in rural wallets = 40% INDIAN RUPEE VS US DOLLAR  FX reserves Sept 2013 at 6-7 months of imports (vs 2 weeks prior to the 25% devaluation in 1991)  GDP growth expected by government in 2013 is > 5% (1.1% in 1991)  Good monsoon => summer crop should be up 9% yoy, bringing down inflation and boosting rural consumers’ income from October 2013.  Large government investment projects (in power, infrastructure) have been approved and money should begin to flow in Q4  India Inc’s salary inflation 2013 should be c. 11% (12-13% 2012)  Rural demand still strong (high food prices  higher income), but urban poor (hence discretionary items) suffering  Consumer stocks (defensive, good corporate governance) outperformed in 2012, are still expensive and have been hurt by sector rotation Discretionary suffering in the short term Source: LOIMPast performance is not a guarantee of future results. 30 40 50 60 70 Why we believe the situation is better than in 1991 Recent run on Rupee caused by external and internal factors Consumer story clear in the long term Source: Bloomberg
  46. 46. Lombard Odier Investment ManagersPlease see important information at the end of the document. Peru and Colombia 46  Population of 30Mn people with a GDP per capita (PPP adjusted) of 10’500 USD  Average unemployment rate in 2012 was at 7.2%  Government has been stable and pro-business for the last years  Consumption is mainly fuelled by the rapidly growing Peruvian middle class. It has doubled in the last 10 years and currently represents 56% of the urban population  As 75% of food retail sales (20 Bn USD) still occur within traditional/wet markets but modern retail expanding very fast  2 attractive assets: InRetail and Alicorp Source: Londoño and Navas (2011) and BBVA Research Peru Colombia  Population of 50Mn people with a GDP per capita (PPP adjusted) of 10’000 USD  Average unemployment rate in 2012 was at 10.5%  Government has managed to stabilize the political situation in the last years  Government has managed to integrate the country with North and South American neighbours in terms of Trade.  Middle class (B/C) increasing at a fast rate  Organized retail represents 50% of total retail and growing fast  3 attractive assets: Nutresa, Exito and Pricemart Only in supermarkets Mostly in supermarkets, followed by mini-marts Proportionally in local stores, markets, mini-marts and supermarkets Mostly in local stores Only in local stores 0,5% 5,5% 20% COLOMBIA CONSUMPTION IN USD/YEAR AND POPULATION PERCENTAGE
  47. 47. Lombard Odier Investment ManagersPlease see important information at the end of the document. Nigeria, super regional power? 47  Independent since 1960, Nigeria finally transitted from a military rule to a civilian government in 1999  The government is facing two major issues: – Reform a petroleum-based economy, highly corrupted and mismanaged – Manage longstanding ethnic (North-South) and religious (Muslim-Christian) tensions Source: Ecomomic data from Trading Economics, 2012 CIA WORLD FACTBOOK AND OTHER SOURCES, www.theodora.com  Nigerian population doubled in the last 30 years to reach 162Mn in 2012  Young population: 43% of Nigerians are below 15  GDP per capita (PPP) has been growing at an annual rate of 7%, reaching 2530 USD in 2012  Average unemployment rate of 14.6% (2006-2012 period)  Nigeria recorded a Government Debt to GDP of 18% in 2011, down from all time high of 88% in December 2001 Strong economical growth driven by oil Political situation stabilizing  Nigeria is today similar to Brazil twenty/thirty years ago, with a rapidly growing middle class. Modern retail (supermarkets/ hypermarkets) is nascent but expanding fast with infrastructure (roads/ motorways being built up)  EM Consumer invests in major food/beverage companies accross the country, mainly subsidiaries of Unilever (Unilever Nigeria), Nestle (Nestle Nigeria), Diageo (Guinness Nigeria) and Heineken (Nigerian Breweries), listed locally and with highly rated corporate governance Supportive consumption patterns Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document..
  48. 48. Lombard Odier Investment Managers Biographies of the team 48
  49. 49. Lombard Odier Investment ManagersPlease see important information at the end of the document. ODILE LANGE-BROUSSY, SENIOR EQUITY ANALYST – GENEVA EXPERIENCE 2011 to date Lombard Odier Investment Managers, senior equity analyst of LOF- Emerging Consumer and LOF – Vital Food. Coverage: Asia and Eastern Europe 2010-2011 Amber Capital ARC fund, analyst covering agriculture, emerging markets consumer and retail stocks with focus on India 2006-2010 Merrill Lynch, analyst covering the Russian consumer sector 1998-2005 Deutsche Bank, analyst covering the European retail and luxury sectors 1993-1998 SG Warburg, Investment Banking – Mergers and Acquisitions QUALIFICATIONS Finance degree, HEC (Ecole des Hautes Etudes Commerciales), Paris (1993) Team: entrepreneurial, experienced and dedicated 49 DIDIER RABATTU, HEAD OF GLOBAL EQUITIES – GENEVA EXPERIENCE 2011 to date Lombard Odier Investment Managers, head portfolio manager of LOF – Emerging Consumer and LOF – Vital Food 2010-2011 Amber Capital, portfolio manager of ARC Fund 2008-2010 Talaris Capital, partner in charge of consumer and retail 2006-2007 Deutsche Bank, global co-head of consumer and research in the investment banking division 2005 BGAM, hedge fund manager – global consumer and retail stocks 1995-2005 Deutsche Bank, retail and consumer, global head of research 1987-1995 SG Warburg, research analyst – consumer and retail stocks QUALIFICATIONS Member of the Société Française des Analystes Financiers (SFAF) – Adjusted title 26.2.13 EDOUARD DE COURNON, PRODUCT SPECIALIST – GENEVA EXPERIENCE 2012 to date Lombard Odier Investment Managers, product specialist for LOIM – Global Equities funds 2009-2011 Lombard Odier Investment Managers, Head of Fund Sales Switzerland, marketing LOIM Funds to Lombard Odier Private Bank 2007-2009 Lombard Odier & Cie, Co-Head of the Open Architecture Team 2001-2009 HSBC Private Bank, Head of the fund selection team 1999-2001 CCF Holding, Marketing and communication 1992-1999 BNP Paribas (Suisse) SA, Marketing development for international private banking 1992 BNP Paribas, Marketing and communication team QUALIFICATIONS Berkeley (CA, USA), Tokyo (Japan) and Beijing (China) in 1990 Master’s degree in business, Institut Supérieur de Gestion (International Cycle) THUY-MAI HOANG, EQUITY ANALYST – GENEVA EXPERIENCE 2012 to date Lombard Odier Investment Managers, equity analyst of LOF- Emerging Consumer and LOF – Vital Food. Coverage: Asia, Global Players and Risk Management QUALIFICATIONS Master degree in Quantitative Finance, joint program of ETHZ and University of Zurich, (2011) Bachelor degree in Mathematics, EPFL Lausanne (2010) LAJLA AGANOVIC, EQUITY ANALYST – GENEVA EXPERIENCE 2008 to date Lombard Odier Investment Managers, equity analyst of LOF- Emerging Consumer and LOF – Vital Food. Coverage: Latin America, Africa and Middle East QUALIFICATIONS Master’s degree in telecom engineering, EPFL (2008) Holds a minor in entrepreneurship PANY SOUKALOUN, RESEARCH ANALYST & PRODUCT SPECIALIST – GENEVA EXPERIENCE 2013 to date Lombard Odier Investment Managers, research analyst of LOF- Emerging Consumer and LOF – Vital Food. Product Specialist of LOF – Emerging Consumer 2009 – 2012 BNP Paribas Wealth Management, Portfolio Analyst – Singapore QUALIFICATIONS Bachelor’s degree in Finance, ISC Paris (2010) Academic exchange program in International Relations, International University, Geneva
  50. 50. Lombard Odier Investment ManagersPlease see important information at the end of the document. Glossary (1)  Hybrid: long-only fund using cash and options  Volatility ex-ante: annualized standard deviation of fund’s historical daily movements in % since inception  Volatility ex-post: squared root of weigted sum of each position’s correlation factor times their intrisic volatility  Portfolio Beta (inc cash, ex option/ FX): weighted sum of each position’s beta with respect to the MSCI World  Annualized Sharpe ratio: difference between annualized fund’s return and riskfree rate divided by the fund’s volatility ex-post  Maximum monthly drawdown: highest historical drop in % over 1 calendar month  Realized volatility: Volatility ex-post  Tracking error: annualized standard deviation of the time series of difference between fund’s and benchmark’s daily movements in %  Information ratio: difference between annualized fund’s and benchmark’s returns divided by the fund’s volatility ex-post  FCF yield: free cash flow per share divided by current market price per share  Dividend yield: dividend per share divided by current market price per share  Covariance: mean average of both stocks’ time series multiplied of differences between daily movements in % and mean average of daily movements in %  Correlation: covariance divided by both stocks’ volatilities  Tail risk: risk of portfolio moving down more than 3 times its standard deviation  Put spreads: strategy consisting of buying a put option and short selling another put option of the same underlying, same maturity but different strikes (long leg’s strike is higher than short leg’s)  Strikes: price level at which the option can be exercised 50
  51. 51. Lombard Odier Investment ManagersPlease see important information at the end of the document. Glossary (2)  Pegged currencies: currencies for which the exchange rate is fixed against USD  Forward EV/Sales: current entreprise value divided by estimated sales of next year  Forward EV/EBITDA: current entreprise value divded by estimated EBITDA of next year  EBITDA: earnings before interest, tax, depreciation and amortization  ROCE: return on capital employed  PPP: purchasing power parity  GDP: gross domestic product  CDS: credit default swap  SSSG: same stores sales growth  CPI Inflation: consumer price index inflation 51
  52. 52. Lombard Odier Investment ManagersPlease see important information at the end of the document. Risk Profile  Prices of the underlying assets in the Fund determine the price of the Fund’s units. These may fluctuate on a daily basis and therefore unit price may at any time fall below the purchase price at which the customer acquired the unit in the fund  Performance of financial products depends on the development of the capital markets. Capital markets react to actual general conditions as well as irrational factors (emotions, opinions and rumours)  The Fund invests in equities which exposes the shareholder to market, sector as well as company specific risk.  The Fund may make investments in derivative instruments including financial futures, swaps, contract for difference, options and other derivative instruments. The associated risks include the risk that a small movement in the market to result in a disproportionately large movement, unfavourable or favourable, in the price of the derivative instrument and risks of default by a counterparty. The Fund will typically use leverage.  The Fund invests in emerging markets which are considered to carry higher risks than more developed markets (above average volatility, political risks, currency risks, etc.)  The fund reduces its currency exposure to non-USD currencies by implementing a currency hedging strategy that is aimed at protecting the portfolio from non-USD currency fluctuation. As a result, the fund is mainly exposed to USD  Please refer to the prospectus and the KiiD documents for an in depth description of eventual risk exposure 52
  53. 53. Lombard Odier Investment ManagersPlease see important information at the end of the document. LOF – Emerging Consumer 53 LOF EMERGING CONSUMER – PRODUCT DETAILS Inception Date 31.10.11 Legal Structure SICAV – UCITS Compliant Custodian Bank CACEIS Bank Luxembourg Central Administration CACEIS Bank Luxembourg Investment Terms Class I Class P Class M Management fee 0.75% 0.75% 0.75% Distribution fee - 0.75%% - Performance fee 10% (rel. High Water Mark vs MSCI World) 10% (rel. High Water Mark vs MSCI World) - Liquidity Weekly, Wednesday Weekly, Wednesday Weekly, Wednesday Non dealing NAV Daily Daily Daily Subs. & redemp. deadline T-1, 15:00 CET T-1, 15:00 CET T-1, 15:00 CET Subs. & redemp. payment date T+3 T+3 T+3 Redemption penalties - - - Minimum investment CHF 1'000'000 (or equivalent) EUR 3'000 (or equivalent) EUR 3'000 (or equivalent) Reference currency USD USD USD ISIN Accumulating Distributing Accumulating Distributing Accumulating Distributing USD share class LU0690088793 LU0690088876 LU0690088280 LU0690088363 LU0866417040 LU0866417123 EUR (hedged) share class LU0690087043 LU0690087126 LU0690086581 LU0690086664 CHF (hedged) share class LU0690087985 LU0690088017 LU0690087555 LU0690087639
  54. 54. Lombard Odier Investment ManagersPlease see important information at the end of the document. Disclaimer 54 This document is issued by Lombard Odier Asset Management (Europe) Limited, a private limited company incorporated in England and Wales with registered number 07099556, having its registered office at Queensberry House, 3 Old Burlington Street, London, United Kingdom, W1S 3AB, authorised and regulated by the Financial Conduct Authority (the “FCA”) and entered on the FCA register with registration number 515393. Lombard Odier Investment Managers (“LOIM”) is a trade name. The fund mentioned in this document (hereinafter the “Fund”) is a Luxembourg investment company with variable capital (SICAV). The Fund is authorised and regulated by the Luxembourg Supervisory Authority of the Financial Sector (CSSF) as a UCITS within the meaning of EU Directive 2009/65/EC, as amended. The management company of the Fund is Lombard Odier Funds (Europe) S.A. (hereinafter the “Management Company”), a Luxembourg based public limited company (SA), having its registered office at 5, Allée Scheffer, L-2520 Luxembourg, authorized and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended. The Fund is only registered for public offering in certain jurisdictions. This document is not a recommendation to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy the Fund’s shares nor shall there be any sale of the Fund’s shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. Consequently, the offering of the Fund’s shares may be restricted in certain jurisdictions. Prospective investors must inform themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on in connection with, any contract to purchase or subscription for the Fund’s shares. Any such acquisition may only be made on the basis of the official documents of the Fund each in their final form. The articles of association, the prospectus, the Key Investor Information Document, the subscription form and the most recent annual and semi-annual reports are the only official offering documents of the Fund’s shares (the “Offering Documents”). They are available on http//:funds.lombardodier.com or can be requested free of charge at the registered office of the Fund or of the Management Company, from the distributors of the Fund or from the local representatives as mentioned below. Austria. Supervisory Authority: Finanzmarktaufsicht (FMA), Representative: Erste Bank der österreichischen Sparkassen AG, Graben 21, A-1010 Wien - Belgium. Supervisory Authority: Autorité des services et marchés financiers (FSMA), Representative: CACEIS Belgium S.A.,Avenue du Port 86C, b320, 1000 Brussels - France. Supervisory Authority: Autorité des marchés financiers (AMF), Representative: CACEIS Bank, place Valhubert 1-3, F-75013 Paris - Germany. Supervisory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Representative: DekaBank Deutsche Girozentrale, Mainzer Landstraße 16, D-60325 Frankfurt am Main - Italy. Supervisory Authority: Banca d’Italia (BOI), Paying Agents: Société Générale Securities Services S.p.A., Via Benigno Crespi, 19/A - MAC 2, 20159 Milano, State Street Bank S.p.A. Via Ferrante Aporti, 10, 20125 Milano, Banca Sella Holding S.p.A., Piazza Gaudenzio Sella, 1, 13900 Biella, Allfunds Bank S.A., filiale italianaVia Santa Margherita 7, 20121 Milano, - Liechtenstein. Supervisory Authority: Finanzmarktaufsicht Liechtenstein (“FMA”), Representative: Verwaltungs- und Privat-Bank Aktiengesellschaft, Aeulestrasse 6, LI-9490 Vaduz - Netherlands. Supervisory Authority: Autoriteit Financiële Markten (AFM). Representative: Lombard Odier Darier Hentsch & Cie (Nederland) N.V., Weteringschans 109, 1017 SB Amsterdam (telephone: +31 20 522 0 522) - Spain. Supervisory Authority: Comisión Nacional del Mercado de Valores (CNMV). Representative: Allfunds Bank S.A. C/Nuria, 57 Madrid - Switzerland. Supervisory Authority: FINMA (Autorité fédérale de surveillance des marchés financiers), Representative: Lombard Odier Asset Management (Switzerland) SA, 6 av. des Morgines, 1213 Petit-Lancy; Paying agent: Lombard Odier Darier Hentsch & Cie, 11 rue de la Corraterie, CH-1204 Geneva. UK. Supervisory Authority: Financial Conduct Authority (FCA), Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London W1S3AB, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the FCA.NOTICE TO RESIDENTS OF THE UNITED KINGDOM The Fund is a Recognised Scheme in the United Kingdom under the Financial Services & Markets Act 2000. Potential investors in the United Kingdom are advised that none of the protections afforded by the United Kingdom regulatory system will apply to an investment in LO Funds and that compensation will not generally be available under the Financial Services Compensation Scheme. This document does not itself constitute an offer to provide discretionary or non-discretionary investment management or advisory services, otherwise than pursuant to an agreement in compliance with applicable laws, rules and regulations. Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London W1S3AB, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the Financial Conduct Authority. An investment in the Fund is not suitable for all investors. Making an investment in a Fund is speculative. There can be no assurance that the Fund's investment objective will be achieved or that there will be a return on capital. Past or estimated performance is not necessarily indicative of future results and no assurance can be made that profits will be achieved or that substantial losses will not be incurred. This document does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before making an investment in the Fund, an investor should read the entire Offering Documents, and in particular the risk factors pertaining to an investment in the Fund, consider carefully the suitability of such investment to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This document contains the opinions of LOIM, as at the date of issue. The information and analysis contained herein are based on sources believed to be reliable. However, LOIM does not guarantee the timeliness, accuracy, or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions as well as the prices indicated may change without notice. The contents of this document are intended for persons who are sophisticated investment professionals and who are either authorised or regulated to operate in the financial markets or persons who have been vetted by LOIM as having the expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has received an assurance that they are capable of making their own investment decisions and understanding the risks involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed as being appropriate recipients of this document. If you are not a person falling within the above categories you are kindly asked to either return this document to LOIM or to destroy it and are expressly warned that you must not rely upon its contents or have regard to any of the matters set out in this document in relation to investment matters and must not transmit this document to any other person. Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income. © 2013 Lombard Odier Investment Managers – all rights reserved
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