Natixis Souverains EuroA way to transform euro-zone sovereign risk into credit opportunitiesCitywire Berlin Conference, 07...
Natixis Souverains Euro: a portfolio adapted to anew market environment. 2   30/10/2012
A New Market ConfigurationThe distinction between peripheral (where the credit risk prevails) and core(interest rate risk ...
Euro Sovereign DebtInvestment philosophy                      Core beliefs                            Investment principle...
Idea Generation                  Specialist Committees           Interest rates               Credit                      ...
Performance 6   30/10/2012
Performance of the Euro Fixed Income Government Bond Composite                                             Euro Fixed Inco...
Performance of the Euro Fixed Income Government BondComposite’s Most Representative Account                               ...
Information Ratio     • Moderate tracking error and rising alpha generation result in greater     information ratio     9 ...
The Increasing Weight of Country Selection as Alpha Driver  • Country selection has been essential in the Euro Fixed Incom...
Diversified Strategies with Country & Maturity Selection • Strong convictions per country and per maturity have multiplied...
Recent strategies12   30/10/2012
Global Duration Management• The range of modified duration decisions has narrowed in recent yearsreflecting more managemen...
Country Allocation : Spain• Different strategies for Spain with a majority of underweight positions, anda regular outperfo...
Country Allocation : Spain Curve Strategy• A steepening anticipation throughout the last few years, until very recently   ...
Country Allocation : Greek Strategies•A large exposure on short term Greece which matured last August, with astrong positi...
Outlook for Euro-Zone Sovereign Debt17   30/10/2012
G4 Interest Rates : Scoring and Conclusion On 10 Yr €Inputs :                  Impact                                     ...
Sovereign Debt Selection Conclusions• Outperformance of Belgium and Finland in the Core countries.• Our anticipations rece...
Opportunities         • Core country interest rates and ECB key policy rates should remain low in light of the mild       ...
Why allocate to Euro-zone government and notcredit or global bonds?21
Sovereign Rates versus Credit    • Credit spreads have narrowed strongly since the crisis of 2008                         ...
Allocating to Government bonds ex Euro?Correlations  • Correlation is very high and stable between Euro and G4 (US, UK, Ja...
Appendices24   30/10/2012
Fair Value Model : 10-Year € Yield Valuation • The market price and fair value have recently converged as a result of weak...
Sovereign Volatility versus Credit  • During crisis volatility rises and is currently higher on sovereigns :  (12m rolling...
27
Awards 2012Citywire Awards              • Olivier de Larouzière ranked 3 out of 27 in the 2012 Citywire ranking of the Bes...
Biography            Olivier de Larouzière            Head of Interest Rates, Senior Portfolio Manager            Olivier ...
Legal informationNatixis Asset ManagementRegistered Office: 21 quai d’Austerlitz – 75 634 Paris Cedex 13 – Tel. +33 1 78 4...
Additional NotesThis material has been provided for information purposes only to investment service providers or other Pro...
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Natixis global asset management

  1. 1. Natixis Souverains EuroA way to transform euro-zone sovereign risk into credit opportunitiesCitywire Berlin Conference, 07-09 November 2012Intended for professional clients only.This material may not be distributed, published, or reproduced, in part or in whole
  2. 2. Natixis Souverains Euro: a portfolio adapted to anew market environment. 2 30/10/2012
  3. 3. A New Market ConfigurationThe distinction between peripheral (where the credit risk prevails) and core(interest rate risk + liquidity premium) countries is no longer relevant in light ofthe widening spreads of the AAA-rated issuers during the second half of 2011.The overall market behaves like a credit market.Issuer segmentation has increased: • Most at risk AAA-rated countries • Creditworthy countries but difficult to tap the market • Insolvency 3 30/10/2012
  4. 4. Euro Sovereign DebtInvestment philosophy Core beliefs Investment principles Sovereign debts yields move according to Duration and curve strategies can deliver macroeconomics fundamentals but also to alpha globally but also at country level domestic issues Risk appetite impacts sovereign debts Our convictions are built qualitatively with valuations fundamental and technical inputs The granularity of the sovereign universe is Intra-country spreads and diversifications low increase the number of strategies Repeatable alpha must be associated with Strategy calibration includes all possible a rigourous risk framework market risks indicators 4 04/10/2012
  5. 5. Idea Generation Specialist Committees Interest rates Credit Objective: • Views on asset classes Optimal Inflation Emerging/Currency organization to define our views & rating Idea • A short Generation decision process Euro sovereign debt • A committee selection/ Agencies & Covered dedicated to supranationals country Cyclical Defensive Objective: allocation • Security selection (rating) since 2008 Financial ABS Sector Teams Provides inputs for Natixis Souverains Euro 5 30/10/2012
  6. 6. Performance 6 30/10/2012
  7. 7. Performance of the Euro Fixed Income Government Bond Composite Euro Fixed Income Government Bond Composite January 2009-September 2012 125 120 Basis 100 January 2009 115 110 105 Perf. Gross of fees 100 Perf. Benchmark 95 90 ua 9 ua 0 g u 09 ua 1 g u 10 g u 11 g u 12 Ju 09 9 Ju 10 0 Ju 11 em r-11 Ju 12 Ap 09 Ap 10 Ap 11 Ap 12 D tob 9 D tobe 0 D tobe 1 2 br r-0 br r-1 br r-1 em -0 em r-1 c -0 1 1 -1 - Au e- Au e- Au e- - - - - - - - - O st- O st- ne ec e r ri l ri l ri l ri l ry ry ry ry st st Fe be Fe be Fe be n n n ua br Au c c O ec ec Fe 7 30/10/2012Referring to any ranking or award does not guarantee future results of the fund or the investment manager. The figures given refer to previous years. Past performance is not a reliable indicatorof future performance. The full GIPS disclosure is provided in Appendix.
  8. 8. Performance of the Euro Fixed Income Government BondComposite’s Most Representative Account AUM €m Perf YTD Quartile 1Y Lipper* Decile 3Y Lipper* 28/09/12 28/09/12 28/09/2012 28/09/2012I/A EUR Share of the account 914 7.94 1 1 As of Account Benchmark Excess Annualized Information ratio 28/09/2012 (cumulative, (cumulative return Tracking nof) , nof) Error 1Y 7.99 6.98 +1.02 0.97 0.97 3Y 15.34 11.12 +4.22 1.00 1.25 Historical Tracking Error – Euro Fixed Income Government Bond Composite’s Most Representative Account. Sept. 2007- Sept. 2012 Spurce: Natixis Asset Management 8 30/10/2012*As at end-September 2012. Quartile rankings: each fund is ranked by quartile among a universe of funds marketed in France and belonging to the same Lipper category. Referring to any rankor award does not guarantee future results of the fund or the investment manager. The figures given refer to previous years. Past performance is a not a reliable indicator of future performance
  9. 9. Information Ratio • Moderate tracking error and rising alpha generation result in greater information ratio 9 30/10/2012*Source: MPI Stylus Pro, As at end June 2012, Universe: Lipper "Bond Eurozone“ category made up of 72 funds that are marketed in France .
  10. 10. The Increasing Weight of Country Selection as Alpha Driver • Country selection has been essential in the Euro Fixed Income Government Bond composite’s most representative account’s outperformance since 2008. 4.0 3.5 3.0 2.5 2.0 (%) 1.5 1.0 0.5 0.0 -0.5 -1.0 04 05 06 10 07 08 09 11 12 20 20 20 20 20 20 20 20 20 Global duration contribution Global maturity contribution country selection contribution Global excess-return 10 30/10/2012*Source: Point, calculations Natixis AM, as of 30/09//2012
  11. 11. Diversified Strategies with Country & Maturity Selection • Strong convictions per country and per maturity have multiplied the sources of added value (Euro Fixed Income Government Bond’s most representative account as at end August 2008). Country Allocation/Selection Attribution 400 350 300 250 200 (bp) 150 100 50 0 -50 -100 2009 2010 2011 2012 France Germany Greece Ireland Italy Portugal Spain Total 11 30/10/2012*Source: Point, calculations Natixis AM, as of 30/08/2012
  12. 12. Recent strategies12 30/10/2012
  13. 13. Global Duration Management• The range of modified duration decisions has narrowed in recent yearsreflecting more management being done at country level and no major trendon the average yield. Global Duration of Natixis Souverains Euro 20% 6% 15% 5% 10% 4% (% of benchmarck) 5% 0% 3% -5% 2% -10% 1% -15% -20% 0% 03 04 02 05 06 08 07 09 10 12 11 n- n- n- n- n- n- n- n- n- n- n- Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Modified Duration Euro Sov. Avg Yield (EMTS Index) 13 30/10/2012Source: Natixis AM, as of 12/09/2012.
  14. 14. Country Allocation : Spain• Different strategies for Spain with a majority of underweight positions, anda regular outperformance Spanish allocation of Natixis Souverains Euro 0.20 8.00 7.00 0.10 (modified duration versus benchmark) 6.00 0.00 5.00 (%) -0.10 4.00 3.00 -0.20 2.00 -0.30 1.00 Impact : +25 bp +7 bp +19 bp -0.40 0.00 0 1 2 9 0 0 1 1 2 0 1 2 0 1 -1 -1 -1 -1 -1 -1 -0 -1 -1 -1 -1 -1 -1 -1 ay ay ay ec ec ec ug ug ug ar ar ar ct ct O O M M M M M M D D D A A A Exposure 5 Yr Rate (%, r.h.s.) 14 30/10/2012Source: Natixis AM, as of 12/09/2012.The figures given refer to previous years. Past performance is a not a reliable indicator of future performance.
  15. 15. Country Allocation : Spain Curve Strategy• A steepening anticipation throughout the last few years, until very recently Spain: maturity allocation of Natixis Souverains Euro 0.70 4.00 0.60 3.50 Steepening position 0.50 (modified duration versus benchmark) 3.00 0.40 2.50 0.30 (%) 0.20 2.00 0.10 1.50 0.00 Flattening position 1.00 -0.10 0.50 -0.20 -0.30 0.00 0 1 2 9 10 0 11 1 0 12 1 2 0 1 -1 -1 -1 -1 -1 -1 -0 -1 -1 -1 -1 g- g- g- ay ay ay ec ec ec ar ar ar ct ct Au Au Au O O M M M M M M D D D 2-10 Yr Exposure 2-10 Yr slope (%, r.h.s.) 15 30/10/2012Source: Natixis AM, as of 12/09/2012.The figures given refer to previous years. Past performance is a not a reliable indicator of future performance.
  16. 16. Country Allocation : Greek Strategies•A large exposure on short term Greece which matured last August, with astrong positive impact on performance•No other holdings : Greece’s under performance also positively contributed Greece: allocation of Natixis Souverains Euro 60% 0.25 50% 0.20 40% 0.15 30% 0.10 20% 10% 0.05 0% 0.00 -10% -0.05 -20% -0.10 -30% +210 bp +8 bp Impact : +49 bp -40% -0.15 0 1 9 0 1 0 1 0 1 2 0 1 -1 -1 -1 -1 -1 -0 -1 -1 -1 -1 -1 -1 ay ay ug ug ec ec ec ar ar ar ct ct O O M M M M M D D D A A Exposure (% of assets, l.h.s.) 2 Yr Rate (%, l.h.s.) mod.duration (vs bench.) 16 30/10/2012Source: Natixis AM, as of 12/09/2012.The figures given refer to previous years. Past performance is a not a reliable indicator of future performance.
  17. 17. Outlook for Euro-Zone Sovereign Debt17 30/10/2012
  18. 18. G4 Interest Rates : Scoring and Conclusion On 10 Yr €Inputs : Impact Comment (1 month) Macro =/- Better economic data in the US Flows = Year end issuance : net <0 for Core, high pressure for peripherals (25% remaining) Consensus =/- Consensus Duration slightly Short and Peripherals are now overweight vs core !Equilibrium - Fair value : 1.95% on 10y ModelQuant. Model - Signals : Higher Yield / Steeper curveTechnical A. =/- Yield : bearish above 1.40%, 1.60% as a support, if 1.69 broken then 1.73, 1.95, 2.07 Conclusion =/- Still waiting for spanish official demand for OMT Impact scores: -, =, + Conclusion scores rank from -2 to +2, -1 meaning higher rate 18 30/10/2012 Source: Natixis AM, as at 24/10/2012
  19. 19. Sovereign Debt Selection Conclusions• Outperformance of Belgium and Finland in the Core countries.• Our anticipations recently changed, from Negative to Neutral or Positive, onSpain, Italy and Ireland, as a result of the ECB OMT operations. 2Y 5Y 10Y 30Y Total Finland 0 0 2 0 1 Netherlands 0 0 -1 0 0 Austria 0 1 1 0 1 France 0 0 0 0 0 Belgium 0 1 1 1 1 Spain 0 0 0 0 0 Italy 1 1 1 1 1 Ireland 1 1 1 0 1 Portugal 0 -1 -1 -2 -1 The anticipation ranges from -2 to +2 and expresses a change of spread versus Germany : -2 equals strong widening 19 30/10/2012Source: Natixis AM, as at 24/10/2012
  20. 20. Opportunities • Core country interest rates and ECB key policy rates should remain low in light of the mild recession anticipated in the Euro zone for 2012 - The 2-year German yield (+0,11% as of 18 October 2012) has reached the nadir and should remain stable at this historically low level in 2012 and probably next year too. The 10-year German yield should remain close to our model’s equilibrium level. • AAA downgrade: both a threat and an opportunity - S&P put most Euro-zone countries under watch and stripped France and Austria of their AAA rating on 13 January 2012. Further downgrades would have an impact on AAA indices. - Market perception, which affects spread volatility, has quickly changed during the summer. Foreign central banks bought French, Belgium, Austrian and Finnish debts during the last few months. They diversified their German holdings and their perception of the zone’s stability has improved. • The euro crisis is fading but not over yet. - The auctions in the Euro zone are well on their schedule, particularly for the Core countries which might seek to pre- fund their 2013 borrowing needs by taking advantage of low spreads and yields. - In Spain and Italy, the last quarter is always essential for their funding needs and, at some point, they will have to finance their debt on longer maturities. In fact, so far this year, they have favoured short maturities (generally within 3 years) with the LTRO operations. After they officially ask for financial support, the OMT operations should offer them support. - With the new measures taken by the ECB and the federalisation of the banking sector, financial pressures should ease within the Euro Zone but these solutions have a great cost in terms of growth and social pressure may be an issue in some countries in the months to come. 20 30/10/2012Source: Natixis AM, as at 18/10/2012
  21. 21. Why allocate to Euro-zone government and notcredit or global bonds?21
  22. 22. Sovereign Rates versus Credit • Credit spreads have narrowed strongly since the crisis of 2008 (barclays index) : 5 Yr € average yields 8% 7% 6% 5% 4% 3% 2% 1% 0% 08 09 10 11 12 ct- ct- ct- ct- ct- O O O O O Sovereign rate Corporate rate 22Source: Natixis AM, Barclays (12/10/2012)
  23. 23. Allocating to Government bonds ex Euro?Correlations • Correlation is very high and stable between Euro and G4 (US, UK, Jap, Euro). • Emerging markets bring a strong diversification : 12M rolling correlation of normalized returns120%100%80%60%40%20% 0%-20%-40%-60% 08 09 11 12 04 05 06 07 10 b- b- b- b- b- b- b- b- b- FeFe Fe Fe Fe Fe Fe Fe Fe Emerging Markets / G4 Euro / G4 Euro AAA / G4 23Source: Natixis Asset Management , Barclays (10/10/2012)
  24. 24. Appendices24 30/10/2012
  25. 25. Fair Value Model : 10-Year € Yield Valuation • The market price and fair value have recently converged as a result of weaker macro data and less “flight to quality” premium 10-year German Bund Yield (spot & fair value) 6 6 5 5 4 4 3 3 Bund 10-year yield (Generic Bloomberg, %) 2 Distance to Fair Value (%) 2 Fair Value (%) 1 1 0 0 -1 -1 -2 -2 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: Bloomberg, Natixis AM Variables : ISM, money-market, foreign holdings 25 30/10/2012Source: Natixis AM, as at 04/10/2012
  26. 26. Sovereign Volatility versus Credit • During crisis volatility rises and is currently higher on sovereigns : (12m rolling volatility on 5yr barclays index) Volatility 6% 5% 4% 3% 2% 1% 0% 03 04 5 6 07 08 9 10 11 -0 -0 -0 ct- ct- ct- ct- ct- ct- ct ct ct O O O O O O O O O Sovereign Credit 26Source: Natixis Asset Management , Barclays (12/10/2012)
  27. 27. 27
  28. 28. Awards 2012Citywire Awards • Olivier de Larouzière ranked 3 out of 27 in the 2012 Citywire ranking of the Best managers in the euro zone Bond - Lipper Global France category over a 3-year period(1) • Olivier de Larouzière is rated AAA in the euro zone Bond - Lipper Global France category(2)Swiss Lipper Fund Awards • Best Fund in the euro zone bond category over a 3, 5 and 10-year period(3)The figures given refer to previous years. Past performance is a not a reliable indicator of future performance. Referring to any ranking or award does not guaranteefuture results of the fund or the investment manager. (1) Source: Lipper, within a universe of funds marketed in France and belonging to the same Lipper category (Bond Eurozone) which comprises 116 constituentsover 3 years. (2) Source: Citywire. (3) Source: Lipper. Universe: Funds registered for sale in Switzerland. The methodology can be found on Lipper website www.lipperweb.com 28 30/10/2012
  29. 29. Biography Olivier de Larouzière Head of Interest Rates, Senior Portfolio Manager Olivier de Larouzière began his career in 1994 at Ecureuil Gestion, the fund management arm of the French Savings Bank. He successively managed money market, European and global fixed income funds. He joined BNP-Paribas in 1998 as fixed income proprietary trader and then Credit Lyonnais Asset Management in 2001 as senior fixed income portfolio manager. Olivier de Larouzière joined Ixis Asset Management in 2003 as Head of Euro Aggregate investment team. In 2005 he became Head of the Euro Government and Aggregate investment team. In 2007, Olivier de Larouzière began working as head of the Interest Rates and Currency team within Natixis Asset Management. Since 2010, Olivier has been the head of the Euro Fixed Income team. Olivier de Larouzière holds a diploma of Advanced Studies in Mathematics Applied to Economic Studies from the University of Paris IX - Dauphine. Olivier de Larouzière has 17 years of experience and has been working within our company for more than 9 years .29
  30. 30. Legal informationNatixis Asset ManagementRegistered Office: 21 quai d’Austerlitz – 75 634 Paris Cedex 13 – Tel. +33 1 78 40 80 00Limited Liability Company, Share Capital 50 434 604,76 eurosRegulated by AMF under n°GP 90-009RCS Number 329 450 738 ParisNatixis MultimanagerRegistered Office: 21 quai d’Austerlitz – 75 634 Paris Cedex 13 – Tel. +33 1 78 40 32 00Regulated by AMF under n°GP 01 054A French simplified joint-stock company Share Capital of 7 536 452 euros – RCS Number 438 284 192 ParisThis document is destined for professional clients. It may not be used for any purpose other than that for which it was conceived and may not be copied,diffused or communicated to third parties in part or in whole without the prior written authorization of Natixis Asset Management.None of the information contained in this document should be interpreted as having any contractual value. This document is produced purely for thepurposes of providing indicative information. It constitutes a presentation conceived and created by Natixis Asset Management from sources that it regardsas reliable.Natixis Asset Management reserves the right to modify the information presented in this document at any time without notice and particularly theinformation concerning the description of the management processes which does not in any way constitute a commitment on behalf of Natixis AssetManagement.Natixis Asset Management will not be held responsible for any decision taken or not taken on the basis of information contained in this document, nor in theuse that a third-party may make of it.Figures mentioned refer to previous years. Past performance does not guarantee future results. Reference to a ranking and/or a price does not indicate thefuture performance of the UCITS or the fund manager.The funds mentioned in this document have received the approval of the French Financial Market Authority (AMF) or have received authorization to bemarketed in France. The risks and costs related to investment in a fund are described in the fund’s prospectus. The prospectus and the periodical reports areavailable on request from Natixis Asset Management. Potential subscribers must be in possession of a copy of the prospectus before making anysubscription.In the case of funds that qualify for a special tax status, we remind potential investors that the special tax conditions depend on the individual situation ofeach customer and that such conditions may be subject to future modification.Under Natixis Asset Management’s social responsibility policy, and in accordance with the treaties signed by the French government, the funds directlymanaged by Natixis Asset Management do not invest in any company that manufactures sells or stocks anti-personnel mines and cluster bombs.30 30/10/2012
  31. 31. Additional NotesThis material has been provided for information purposes only to investment service providers or other Professional Clients or Qualified Investors. It is theresponsibility of each investment service provider to ensure that the offering or sale of fund shares or third party investment services to its clients complies withthe relevant national law.In Germany and Austria This material is provided by NGAM S.A. or its branch office NGAM S.A., Zweigniederlassung Deutschland. NGAM S.A. is a Luxembourgmanagement company that is authorized by the Commission de Surveillance du Secteur Financier and is incorporated under Luxembourg laws and registeredunder n. B 115843. Registered office of NGAM S.A.: 51, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg. Registered office of NGAMS.A., Zweigniederlassung Deutschland (Registration number: HRB 88541): Im Trutz Frankfurt 55, Westend Carrée, 7. Floor, Frankfurt am Main 60322, Germany.The above referenced entity is a business development unit of Natixis Global Asset Management, the holding company of a diverse line-up of specialisedinvestment management entities worldwide. The investment management subsidiaries of Natixis Global Asset Management conduct any regulated activities onlyin and from the jurisdictions in which they are licensed or authorized. Their services and the products they manage are not available to all investors in alljurisdictions.Although Natixis Global Asset Management believes the information provided in this material to be reliable, it does not guarantee the accuracy, adequacy, orcompleteness of such information.The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or arecommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of anyinvestment carefully before investing. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of theportfolio manager(s) as of the date indicated. These, as well as the portfolio holdings and characteristics shown, are subject to change. There can be noassurance that developments will transpire as may be forecasted in this material.This material may not be distributed, published, or reproduced, in whole or in part.All amounts shown are expressed in USD unless otherwise indicated. Additional Notes – Authorized Countries – Professional Investors – Germany & Austria Customized

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