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Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
Smith &w
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Smith &w

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  1. Smith & WilliamsonA tale of two bond fundsChris LynasCitywire Private Client Manager Retreat17-18th May 2012 For professional adviser use only | www.sandwfunds.com
  2. For professional adviser use only | www.sandwfunds.comShort-dated bonds –spotting the opportunityFor illustrative purposes only 2
  3. For professional adviser use only | www.sandwfunds.comShort-dated Corporate Bond Fund –the proposition • A short-dated corporate bond fund  Investing in £, $ and € bonds • Aims to provide investors with a higher yield than cash. Underlying yield** GRY** Retail Share Class 3.8% 1.1% Institutional Share Class 4.1% 1.5% • Current size £370million * • ISAable • Target audience:  Investors seeking a better yield than cash without excessive credit risk  With a 12 month+ investing horizon*As at 11.05.12. **The Underlying yield reflects the annualised income net of expenses of the Fund as a percentage of the mid-marketunit price of the Fund as at the date shown. It is based on a snapshot of the portfolio on that day. It does not include any preliminarycharge and investors may be subject to tax on distributions. GRY stands for Gross Redemption Yield. The GRY is a forecast of the totalreturn on the Fund taking account of expected income receipts and capital charges if all holdings are held to redemption. Yield figuresare unaudited as at 30.04.12. 3
  4. For professional adviser use only | www.sandwfunds.comPortfolio construction: tramlines for investmentInstrument Range Current (as at 30.04.12)Portfolio holdings 50-75 62% in any one corporate issuer ≤ 5% ≤ 2% (1 bond per issuer)Maturity ≤ 6 years 4 years (weighted average maturity)£ corporate bonds 30-100% 61.9%$ or € corporate bonds (hedged back into £) 0-50% 25.8%Minimum benchmark size ≥ £150 m Per issue£ supranational bonds 0-20% 0.0%Gilts 0-10% 9.9%Cash 0-100% 2.4% 4
  5. For professional adviser use only | www.sandwfunds.comThe bank issue? • Current policy is not to invest in banks • Preference for transparent balance sheets • No appetite for hybrids or floaters where duration and income returns are harder to predict • Systemic risk, corporates also deposit with and borrow from banks • Our pragmatic approach allows us to amend this policy if we feel conditions improve (but our equally-weighted approach means bank exposure would never dominate the portfolio) 5
  6. For professional adviser use only | www.sandwfunds.com Not chasing yield% of portfolio Years 40.0 4.0 35.0 3.5 30.0 3.0 25.0 2.5 20.0 2.0 15.0 1.5 10.0 1.0 5.0 0.5 0.0 0.0 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 BBB (LHS) Duration (RHS) Source: Smith & Williamson Investment Management, 30.04.12 6
  7. For professional adviser use only | www.sandwfunds.com Invested portfolio characteristics Credit rating breakdown Sectors Underlying currency breakdown (hedged back to sterling) 1.5% 2.4% Aerospace & Defence 11.4% Beverages Building materials 25.8% 74.2% Cash 11.5% Chemicals Diversified Operations Food Producers Food Retail Food services Government Hotels Household Goods Insurance Life insurance Media Mining Oil & Gas34.0% Pharmaceuticals 39.2% Real Estate Retail AAA AA A Support Services Technology GBP USD EUR BBB NR Cash Telecom Tobacco Travel & Leisure Utilities 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Source: Bloomberg and Smith & Williamson Investment Management, all data as at 30.04.12. 7
  8. For professional adviser use only | www.sandwfunds.com“Quality Street”The above trademarks are all owned by the relevant companies. 8
  9. For professional adviser use only | www.sandwfunds.comInvestment case summary• Unusually prolonged and low cash deposit rates• Credit spreads at reasonable levels• Conundrum  Take risk on duration  Take risk on credit• Our solution: stay low risk in both  Short-dated  High grade creditA credible & complementary solution for clients frustrated by low returns from cash 9
  10. For professional adviser use only | www.sandwfunds.comPerformance – Retail ‘A’ share class 118 116 114 112 110 108 106 104 102 100 98 Jun-11 Feb-12 Mar-10 Apr-10 Jun-10 Jul-10 Sep-10 Oct-10 Mar-11 Apr-11 Jul-11 Mar-12 Apr-12 Feb-11 Jul-09 Aug-10 Nov-10 Dec-10 Jan-11 Jan-12 Apr-09 May-10 May-11 Jun-09 Sep-09 Oct-09 Sep-11 Oct-11 Feb-10 May-09 Dec-09 Aug-11 Nov-11 Jan-10 Dec-11 Aug-09 Nov-09 A share class TR daily gross A share class TR daily net*Source: Morningstar. Data from launch, mid to mid, excluding initial charges, income reinvested at exdividend dates, to 30.04.12.*Net of UK basic rate tax 10
  11. For professional adviser use only | www.sandwfunds.comPerformance – gross income reinvested RETAIL INSTITUTIONAL 2009 2010 2011 2012 2009 2010 2011 2012 JAN +0.98 -0.62 +0.78 JAN +1.01 -0.59 +0.81 FEB +1.00 +0.18 +0.46 FEB +1.03 +0.20 +0.48 MAR +0.59 -0.05 +0.02 MAR +0.62 -0.02 +0.04 APR +0.56 +0.89 +0.11 APR +0.59 +0.92 +0.13 MAY -0.40 +0.10 +0.91 MAY +0.13 +0.95 JUN +0.35 +0.46 +0.06 JUN +0.49 +0.10 JUL +1.41 +0.62 +1.59 JUL +0.65 +1.61 AUG +1.47 +1.55 +0.03 AUG +0.46 +1.58 +0.07 SEP +0.47 -0.07 +0.03 SEP +0.48 -0.05 +0.06 OCT +0.15 -0.02 +0.28 OCT +0.18 +0.01 +0.31 NOV +1.02 -0.35 +0.20 NOV +1.05 -0.32 +0.24 DEC -0.08 -0.43 +1.01 DEC -0.05 -0.41 +1.04 YEAR END +4.46 +5.07 +4.59 YEAR END +2.14 +5.43 +4.97 TOTAL TOTAL SINCE +16.37 SINCE +14.71 INCEPTION INCEPTIONPlease note figures shown are total return figures. For a period after the Fund declares a dividend other third party data providers may not shownet income reinvested immediately, therefore not displaying the total return for that period.Source: Morningstar. Data from launch, mid to mid, excluding initial charges, income reinvested at exdividend dates, to 30.04.12. 11
  12. For professional adviser use only | www.sandwfunds.comProduct features • Dublin ICVC (UCITS) • FSA recognised • Single priced income distributing share classes • ISAable (within a stock & share ISA) • Available on Ascentric, Cofunds, Elevate, FundsNetwork, Novia, Nucleus, Skandia (this month) £ Retail £ Institutional $ Institutional € Institutional Initial 5% 0% 0% 0% AMC (charged to income) 1% 0.65% 0.65% 0.65% TER* 1.01% 0.66% 0.66% 0.66% Minimum investment £1,000 £250,000 $400,000 €300,000 Subsequent investment £500 £500 $25,000 €25,000 • Settlement T+4 • Dealing & Valuation: Dealing 5pm, valuation 11.59pm each Irish business day • XD dates: Interims: 31 March, 30 June, 30 Sept, • Distribution within six weeks of the XD date • Dividends  Paid without any withholding tax (ideal for gross accounts)* Calculated on a £201m NAV 12
  13. For professional adviser use only | www.sandwfunds.comImportant information Key risks • Investment does involve risk. The value of investments can go down as well as up and investors may not receive back the original amount invested. • The Fund will invest substantially in short-dated corporate bonds globally and will therefore carry a lower degree of interest rate and capital risk than funds investing in long term fixed income or equity securities. However, please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost. • The Fund will be exposed to credit risk on parties with whom it trades and may also bear the risk of settlement default. • When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. • Past performance is not a guide to future performance. • Investment is subject to documentation (Prospectus, Simplified Prospectus and Terms & Conditions), copies of which can be obtained free of charge in English from Smith & Williamson Investment Management Limited, 25 Moorgate, London EC2R 6AY or online www.sandwfunds.com 13
  14. For professional advisers only | www.sandwfunds.comGlobal Government Bond Fund –the proposition• A fund of global government and investment grade bonds  Investing in mainly index-linked and conventional government bonds  Flexibility to protect against inflation and deflation  Targets protection of capital and lower volatility  Currency and portfolio diversification benefits  ISAble  Launch period closes Friday 25th May  Approved and regulated by the Irish Financial Services Regulatory Authority, awaiting recognition from the Financial Services Authority. 14
  15. For professional advisers only | www.sandwfunds.comWhy are we launching this fund?• Global financial background volatile and fraught with risk• Forecasting uncertainty high• Persistent low interest rates• 2 - 4% annual current inflation rates in G20• Reduced supply of safe haven assets 15
  16. For professional advisers only | www.sandwfunds.com Inflation / deflation historyUK Annual Rate of inflation % Date Source: Officer and Williamson, Credit Suisse Feb 2012 16
  17. For professional advisers only | www.sandwfunds.com Both an inflation and deflation hedge• Index-linked government Real bond and equity returns vs. inflation rates 1900-2011 bonds offer most reliable Rate of return/inflation % inflation hedge• Inflation proofed bonds issued with a floor of par also offer a deflation hedge• Conventional bonds offer Percentiles of inflation across 2128 country-years most reliable deflation Real bond return Real equity return Inflation rate of at least % hedge Source: Dimson, Marsh and Staunton; Credit Suisse Feb 2012 17
  18. For professional advisers only | www.sandwfunds.com Yield gap reversed with equities – heading back to early1950s levels US 10-year yield 16 14 12 10 8 6 4 2 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 US Dividend Yield US long run interest rateSource: Shiller, Yale University as at 16.04.2012 18
  19. For professional advisers only | www.sandwfunds.com“Risk on” / “risk off” examples “Risk-on” currencies protect Safe havens protect capital during capital during risk-on phases “risk-off” phases Australia and Canada Singapore Sweden Switzerland Eurozone US and Canada Norway Norway 19
  20. For professional advisers only | www.sandwfunds.comWhen will we hedge?• Currencies can add diversification benefits to sterling-based investors• Hedging methodology  The Fund has the freedom to hedge the currency risk if appropriate  Opportunity to pick up yield from forward curve anomalies (eg US$)  High yield currencies with strong fundamentals unlikely to be hedged (eg Australian $) 20
  21. For professional advisers only | www.sandwfunds.comPortfolio constructionInstrument Range (percentage of value) Anticipated portfolio‘Cash Reserve’ (<5yr Gilts/T-bills) 0-10% 5%(forms part of the conventional bonds category)Global Government Index-Linked Bonds 30-70% 61%Global Government Conventional Bonds 20-60% (including ‘Cash Reserve’ above) 39%Investment Grade Corporate Bonds 0-20% 0%Average maturity variable 18.1Average modified duration variable 9.7% in any one Government Less than or equal to 30% US – 12.5% Except UK which may be up to 100% UK – 42%Number of holdings 20-40 27Note: Index-linked bonds future global inflation rate assumptions; local prevailing rate continues to maturity(except UK bonds: Debt Management Office assumption of 3% to maturity) 21
  22. For professional advisers only | www.sandwfunds.comAnticipated portfolio characteristics: Anticipated underlying currency Anticipated effective currency 7.0% 8.0% 3.5% 10.0% 76.0%GBP 10.0%USD 15.0% GBP 7.0%AUD AUDSGD NOK 3.5% 3.5%NOK SEKSEK 3.5% CADCADEUR 3.5% 49.5% Anticipated top ten holdings 1 I-L Gilt 0.125% 2029 10.0% 6 Gilt 2.25% 2014 4.0% 2 I-L Gilt 4.125% 2030 10.0% 7 German I-L 0.1% 2023 3.5% 3 I-LGilt 0.625% 2040 10.0% 8 Swedish Gov I-L 0.25% 2022 3.5% 4 US TIP 0.125% 2022 5.0% 9 Australian I-L 1.25% 2022 3.5% 5 US TIP 0.75% 2042 5.0% 10 Australian I-L 2.5% 2030 3.5%Source: Smith & Williamson Investment Management, 17.04.2012 22
  23. For professional advisers only | www.sandwfunds.com Product features• Dublin ICVC (UCITS) – sub-fund of the existing Dublin umbrella company Smith & Williamson Investment Funds Plc• Settlement T+4• Dealing: 5pm each Irish business day; Valuation: 11.59pm each Irish business day• XD dates: Interims: 30 June Final: 31 December• Distribution within six weeks of the XD date• ISAable• Four single priced £ share classes:  A share class: retail (income and accumulation)  B share class: institutional (income and accumulation)• Charges A share class:  Initial N/A  AMC 1% (charged to income)• Minimum Investment: Initial: £1,000, Subsequent: £1,000• Charges B share class:  Initial N/A  AMC 0.65% (charged to income)• Minimum Investment: Initial: £250,000, Subsequent: £1,000• Launch period 16-25 May 2012 23
  24. For professional advisers only | www.sandwfunds.comSummary• Unusually low interest rates likely to persist• Aiming to protect capital in uncertain times• Minimising credit risk• Aiming to protect against inflation and deflation• Focusing on safe haven assets 24
  25. For professional advisers only | www.sandwfunds.comSmith & Williamson – Fixed interest team Ian Kenny Chris Lynas Fund Manager Head of Fixed Interest Ian Kenny joined Smith & Williamson in 1997 Chris Lynas has been working in investment as an institutional fund accountant. He management since 1986 and joined Smith & Qualified as a Chartered Certified Accountant Williamson in 1990. He has had primary in 2001 and has since assumed fund responsibility for the Smith & Williamson Management responsibilities for a variety of Fixed Interest Trust since February 1998. Institutional funds. He is a Member of the Chris is also the team leader for Fixed Interest. Chartered Institute for Securities & Investment and a CFA Charterholder. Robin Marshall Thomas Wells Fund Adviser Fund Manager Robin Marshall is a Director of Fixed Income at Smith & Williamson, and advises UK institutional Thomas joined the firm in September 2007 clients on fixed income portfolios and currency on the Graduate programme. He achieved exposures. These clients range from local authority a First class degree in Financial Services pension funds and insurance companies to absolute with Economics and is a Member of the return (hedge) funds. Previously Robin spent 18 years at Chartered Institute for Securities & Investment. JPMorgan Chase as an economist and strategist in fixed He has been working with Chris and Ian income and foreign exchange, and became Managing Director as a member of the Fixed Interest team for Economic and Policy Research. Robin graduated in Economics since January 2009. from Oxford University and also holds an M.Phil in Economics. Robin is frequently quoted in the international press and is a regular contributor to Bloomberg TV, Bloomberg news and other media outlets. 25
  26. For professional advisers only | www.sandwfunds.comContacts Nick Hodgson Matthew Kemp Director, Marketing and Sales Associate Director - Sales Tel: 020 7131 4630 Tel: 020 7131 4506 Mob: 07720 558636 Mob: 07584 150797 E-mail: nick.hodgson@smith.williamson.co.uk E-mail: matthew.kemp@smith.williamson.co.uk Julian Polnik Andrew Groves Head of Broker Desk Associate Director - Sales Tel: 020 7131 4628 Tel: 020 7131 4756 E-mail: julian.polnik@smith.williamson.co.uk Mob: 07917 580592 E-mail: andrew.groves@smith.williamson.co.uk Martin Orrin Associate Director - Sales Tel: 020 7131 4706 Mob: 07760 178523 E-mail: martin.orrin@smith.williamson.co.uk Dedicated funds website: www.sandwfunds.com 26
  27. For professional advisers only | www.sandwfunds.comImportant informationKey risks•Investment does involve risk. The value of investments can go down as well as up and investorsmay not receive back the original amount invested.•The Fund will invest in government bonds globally, but substantially in UK government bonds. Itwill therefore carry a lower degree of credit risk than funds investing in corporate fixed income orequity securities. However, please note that bond funds may not behave like direct investments inthe underlying bonds themselves. By investing in bond funds the certainty of a fixed income for afixed period with a fixed return of capital are lost.•The Fund will be exposed to credit risk on parties with whom it trades and may also bear the riskof settlement default.•Not all government securities are backed by the full faith and credit of the relevant nationalgovernment. Some are backed only by the credit of the issuing agency which accordingly subjectsthe fund to additional credit risk.•When investments are made in overseas securities, movements in exchange rates may have aneffect on the value of that investment. The effect may be favourable or unfavourable.•Past performance is not a guide to future performance.•Investment is subject to documentation (Prospectus, Simplified Prospectus and Terms &Conditions), copies of which can be obtained free of charge in English from Smith & WilliamsonInvestment Management Limited, 25 Moorgate, London EC2R 6AY or online www.sandwfunds.com 27
  28. For professional advisers only | www.sandwfunds.comDisclaimerFor professional advisers only - not for use by or distribution to retail investors. This document contains information believed to be reliable butno guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitationto buy or sell any investment referred to in this document. Smith & Williamson Investment Management (SWIM) documents may contain futurestatements which are based on our current opinions, expectations and projections. Smith & Williamson Investment Management does notundertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate adviceshould be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from basedon this publication.The opinions expressed are those held by SWIM at the time of going to print and are subject to change. This material should not be considered bythe recipient as a recommendation relating to the acquisition or disposal of investments. This material does not contain sufficient information tosupport an investment decision and investors should ensure that they obtain all available relevant information before making any investment.There can be no assurance that the professionals currently employed by SWIM will continue to be employed by SWIM or that the pastperformance or success of any such professional serves as an indicator of such professional’s future performance or success.There can be no assurance that the Fund will achieve its investment objective, the target return or any other objectives. Any target return shown isneither guaranteed nor binding on the Manager.Any information about specific stocks or investments is given for illustrative purposes. It is considered to be accurate at the time of writing but nowarranty of accuracy is given and no liability in respect of any error or omission is accepted. Any examples of specific stocks are included solely toillustrate the investment process and strategies which may be utilised by the Fund. These investments are not necessarily representative of futureinvestments that the Fund will make.The Smith & Williamson Short-Dated Corporate Bond Fund and Global Government Bond Fund are sub-funds of Smith & Williamson InvestmentFunds PLC, a Dublin domiciled OEIC regulated by the by the Irish Financial Services Regulatory Authority. The Short-Dated Corporate Bond Fund isa recognised scheme under section 264 of the Financial Services and Markets Act 2000. The rules made under the Act for the protection of privatecustomers (for example, those conferring rights to cancel or withdraw from certain investment agreements) do not apply in connection with aninvestment in the Fund. In addition, the protections available under the Financial Services Compensation Scheme and the Financial OmbudsmanService may not be available. The Smith & Williamson Global Government Bond Fund is awaiting FSA recognition under section 264 of the FinancialServices and Markets Act 2000.Issued in the UK by Smith & Williamson Investment Management Limited which is authorised and regulated by the Financial Services Authority(registration number is 131816).Ref: 277/2012/db 28

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