Ubs europ unconstrained 130312


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Ubs europ unconstrained 130312

  1. 1. Citywire Vienna Forum 2013 For Professional Clients OnlySeeking alpha in Europe:An Unconstrained ApproachMax AnderlConcentrated Alpha EquityMarch 12, 2013
  2. 2. What sets us apartThe Concentrated Alpha Equities team• Independent investment boutique within UBS Global Asset Management – Access to the global infrastructure (compliance, trading, IT, distribution) – But full freedom in investment decisions• Strong performance record – In varying investment environments – Lower volatility than the benchmark• Innovative approach to portfolio construction – focus on limiting downside risk• Holistic approach to risk – focusing on Active Share An investment boutique for all seasons 1
  3. 3. UBS European Opportunity Unconstrained FundKey benefits for investors Investment goals • Access to European Equity markets via a Seek to outperform MSCI Europe Index by 300+ largely unconstrained portfolio* across basis points per annum over a market cycle the capitalization spectrum. How we aim to achieve this goal: • Benefit from a manager with substantial Typical active risk: Up to 15% freedom to implement best ideas based Number of equity holdings: Approximately 100 on extensive research using varying stocks approaches including the ability to hold Normal exposures: short positions. 100 – 150% long, 0 – 50% short • Profit from a specialized boutique-like investment team with a proven Typical Max investment process and successful track Individual stock weights record. Longs 1.0 – 4.0% 10% Shorts 0.5 – 1.5% 3% Beta 0.8 – 1.2* Benchmark agnostic and ability to implement investment strategies such as short sellingFor explanations on financial wordings please refer to the glossary at or contact for further information your UBS client advisor. 2
  4. 4. Turning insight into alphaAnother way of looking at transfer coefficient… Long only Long/ShortFor illustrative purposes only. 3
  5. 5. Flexibility to take short positions increases research impactExample: Research suggests meaningful underweight for stocks A and BStock A: 100 bps market weight Long-only 130/30 excess returns excess returns 100 100Basis points 50 0 Stock A +50 bps +50 bps -50 falls by 50% -100 Market weight Long-Only and UnconstrainedStock B: 10 bps market weight 100Basis points 50 10 0 Stock B +5 bps +50 bps 0 falls by 50% -50 -100 -90 Market weight Long-Only weight Unconstrained Total +55 bps +100 bps Source: UBS Global Asset Management. For illustrative purposes only. There are certain unique risks associated with the use of short sale strategies. For example, there is a risk that a client portfolio will incur a loss by subsequently buying a security at a higher price than the price at which the security was sold short. 4
  6. 6. Increasing the impact of time-tested researchEquity Unconstrained strategy provides the flexibility to capitalize onoverpriced and underpriced securities Number of stocks Largest weight Smallest weight MSCI Europe 436 Capitalisation: Top third 22 2.94% 0.92% Capitalisation: Next third 65 0.88% 0.28% Capitalisation: Bottom third 349 0.28% 0.01% 80% of stocks in MSCI Europe Index represent positions of 0.28% or less The ability to short an overvalued security allows our investment insights to have a greater impact on the portfolio Source: UBS Global Asset Management. Data to 31 December 2012 US-I 5
  7. 7. Performance to 31 January 2013UBS European Opportunity Unconstrained (EUR) Gross of fees % return¹ (Jan 2013) Return MSCI Europe Value added Ranking2 3 months 3.6 6.6 -3.0 1 year 29.5 16.2 +13.4 1 3 years 13.3 8.2 +5.1 1 5 years 6.6 0.6 +6.0 1 SI¹ 2.8 -2.9 +5.6 Portfolio characteristics 3 years Beta 0.7 Active risk3 7.7% Volatility:4 Fund 11.8% Benchmark 13.3% Information ratio5 0.4Source: UBS Global Asset ManagementNote: Historical active risk is not a guide to the future. See attached disclosure information. Active risk levels will vary according to market conditions and our views.Portfolio characteristics are shown net of fees1 Since inception 31 May 2007, annualised2 Lipper rankings to 31 January 20133 Active risk is the standard deviation of the difference between the monthly composite and benchmark returns, based on logarithmic returns. Active risk is annualised for periods greater than one year.4 Annualised standard deviation based on monthly logarithmic returns5 Information ratio is the arithmetic value added divided by the active risk. For periods greater than one year, annualised returns are used to calculate the value added and the active risk. 6
  8. 8. Ranking development of European Opportunity UnconstrainedBased on rolling 3 year performance (June 2010 – January 2013)1st Quartile2nd Quartile3rd Quartile4th Quartile Jun.10 Sep.10 Dez.10 Mär.11 Jun.11 Sep.11 Dez.11 Mär.12 Jun.12 Sep.12 Dez.12Source: UBS Global Asset Management, Lipper LIMNote: These figures refer to the past. Past performance is not a reliable indicator of future results. 7
  9. 9. UBS European Opportunity UnconstrainedMorningstar rating:     3 year performance vs. Peers 20 15 10 Return % 5 0 -5 -10 0 5 10 15 20 25 30 Risk % std dev Peers UBS European Opportunity Unconstrained P-acc EUR MSCI EuropeSource: Morningstar, data as of 31 December 2012Note: Based on Morningstar European Equity Large Blend Universe. Net of fees using P share class. Past performance is no guarantee of future results. 8
  10. 10. A look at upside performance/downside performanceEuropean Opportunity Unconstrained: 31 May 2007 to 31 December 2012 105 Upside (%) Since Inception 100 95 85 90 95 100 105 110 115 Downside (%)Upside Market Capture Ratio – A measure of the manager’s performance in up markets relative to the market itself. A value of 110 suggests the manager performs ten percent better thanthe market when the market is up during the selected time period. The return for the market for each period is considered an up market if it is greater than or equal to zero. The UpsideCapture Ratio is calculated by dividing the return of the manager during the up market periods by the return of the market during the same periods.Downside Market Capture Ratio – A measure of the manager’s performance in down markets relative to the market itself. A value of 90 suggests the manager’s loss is only nine tenths ofthe market’s loss during the selected time period. A market is considered down if the return for the benchmark is less than zero. The Downside Capture Ratio is calculated by dividing thereturn of the manager during the down market periods by the return of the market during the same periods.Source: UBS Global Asset ManagementAs of December 31, 2012.UBS Global AM European Opportunity Unconstrained Composite inception date of 31 May 2007.The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information. Returns greater than one year are annualized. Returns in EUR. Benchmark used for calculation is the MSCIEurope Index. Information is supplemental to the Pan European Concentrated Composite. US-I, US-P (RU) 9
  11. 11. European Opportunity Unconstrained Concentrated AlphaReturns driven by stock selection Fund Index Return Stock Sector Group weight(%) weight(%) (%) Selection(%) Allocation(%) Total(%) Consumer Staples 23.3 14.5 45.5 9.0 3.5 12.5 Health Care 19.6 11.9 32.7 2.0 1.5 3.4 Consumer Discretionary 10.5 9.1 5.0 -5.2 2.6 -2.6 Energy 1.5 10.5 1.1 1.8 3.9 5.7 Not Classified 0.0 0.0 0.0 0.3 0.9 1.1 Materials 0.2 9.7 -3.2 0.4 -2.9 -2.5 Telecom Services 4.9 5.4 -7.2 3.0 -0.4 2.5 Industrials 7.4 11.2 -12.2 -3.6 -0.7 -4.3 Information Technology 14.2 3.0 -26.0 4.8 -2.0 2.8 Utilities -3.4 4.2 -32.2 3.7 1.6 5.2 Financials 21.8 20.6 -52.7 8.5 0.3 8.9 TOTAL 100.0 100.0 -14.3 24.6 8.2 32.7Source: Wilshire, 31 May 2007 – 31 December 2012Past performance is no guarantee of future results. Data not annualized. Returns in EUR Proven stock selection driven process 10
  12. 12. UBS European Opportunity UnconstrainedReturns in aggregate: shorts consistently underperformed 40% 36.3% Longs Shorts MSCI Europe 29.6% 30% 23.9% 21.9% 20% 17.1% 10% 8.3% 6.8% 4.7% -0.2% 0% -4.7% -10% -12.0% -20% -24.4% -30% 1 year 3 years 5 years Since InceptionSource: Wilshire, UBS Global Asset Management. Since inception date 31 May 2007. Data to 31 January 2013 11
  13. 13. Section 2Team, Process andPositioning
  14. 14. Experienced team that delivers resultsConcentrated Alpha Equities – 16 years’ of experience and 14 years’ at UBS Portfolio Equity Technical Support/ Management Strategists Execution Rob Howard Team Max Anderl April Robbins David Legg Jeremy Leung Alison Charles Steve King …and supported by 800+ individuals in global functions Leveraging UBS’s Trading Legal & Risk Distribution Compliance global resourcesSource: UBS Global Asset Management. October 2012 13
  15. 15. Investment process: Research + construction 3-Circle Research Process Portfolio Construction & Risk Management • Bottom up stock selection process Fundamental • Disciplined yet flexible approach Client Portfolio Results • Benchmark agnostic • Approx 100 stocks • High active share Qualitative Quantitative • Holistic approach to risk • Uncorrelated information sourcesFor illustrative purposes only. US-I 14
  16. 16. How we deal with risk… Risk parameters Results Risk systems • Taking risk when rewarded for it • Awareness of low volatility and leverage Price paid • Active risk of European Opportunity Unconstrained 7.3% since inception¹ to 31 Corporate Governance December 2012 • Active share with index averaged 115% for Leverage and industry structure European Opportunity Unconstrained as at 31 December 2012 Use of uncorrelated information sourcesSource: UBS Global Asset ManagementNote: Please note that historical active risk is not a guide to the future.Active risk levels will vary according to market conditions and our views.1 31 May 2007 …a holistic approach 15
  17. 17. Consistently high active shareAs at 31 December 2012 150 European Opportunity Unconstrained 125 Active share (%) 100 75 50 25 0 Dec-07 Mar-08 Dec-08 Mar-09 Dec-09 Mar-10 Dec-10 Mar-11 Dec-11 Mar-12 Dec-12 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12• Active Share measures the share of portfolio holdings that differ from the benchmark• Empirical studies have shown the highest Active Share funds significantly outperform their benchmarks and exhibit strong performance persistence¹Source: UBS Global Asset Management. Data to 31 December 20121 Cremers, Martijn and Petajisto, Antti, How Active is Your Fund Manager? A New Measure That Predicts Performance (March 31, 2009). AFA 2007 Chicago Meetings Paper; EFA 2007 Ljubljana Meetings Paper; Yale ICF Working Paper No. 06-14. Available at SSRN: or 16
  18. 18. What to own and what not to own?European and many Global economies remainin deleveraging mode, resulting in:• Low growth• Low inflation despite monetary excess of low interest rates and QEWe continue to prefer low leverage and growth,preferably asset light for strong conversion ofprofits into free cash-flow to reward shareholders• For example: Pharma, IT, Insurance• Underweight to Southern Europe (Italy, Spain, Portugal & Greece), banks, materials and utilitiesSource: UBS Global Asset Management 17
  19. 19. Key overweightsAs at 31 January 2013 UBS European Opportunity Unconstrained O/W Software & Services Sage, SAP Pharma & Biotech Bayer, Grifols, Novartis, Fresenius, GSK, Sanofi Insurance Jardine Lloyd Thompson, Legal & General, Prudential, SampoSource: UBS Global Asset Management 18
  20. 20. UBS (Lux) Equity SICAV –European Opportunity Unconstrained (EUR) P-accPortfolio structure – 31 January 2013Top 10 holdings by stock (%) Active positions by industry group (in %)GlaxoSmithKline 4.6%Bayer 3.1% Insurance 11.3Novartis 2.9%Sampo 2.8%SAP 2.7% Pharms & Biotech 9.6Sanofi 2.6%Heineken 2.4% Software & Services 6.2Roche 2.3%Reckitt Benckiser 2.3% Food, Beverage & Tobacco 4.7Qinetiq 2.2% Household & Personal 4.2Holdings by investment domicile Capital Goods -4.7 NorwayOthers 4.0% 0.9% Utilities -5.9 Germany Switzerland 22.1% Banks -8.6 6.2% France Materials -9.3 6.2% Netherlands Energy -9.3 UK 7.2% 53.4% -15 -10 -5 0 5 10 15Source: UBS Global Asset Management 19
  21. 21. SummaryConcentrated AlphaAn independent investment boutique with…• Backing of a strong organisation• Innovative investment process• Strong and consistent performance in varying environments• Lower volatility than the benchmark• Good upside and downside capture• High Active Share and holistic approach to risk• A long term client base of sophisticated investors An investment boutique for all seasons 20
  22. 22. Section 4Outlook
  23. 23. The last two years were challenging Contagion shifts to Yields rise as LTRO effect Spain and Italy leading wears off. ECB promises to 8 to ESM and LTRO “do whatever it takes” 7 6 5 4 3 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 6% Threshold Italy SpainSource: Thomson Datastream. Data to 11 January 2013. 22
  24. 24. Still printing money 4 years on…Size of balance sheet of each central bank in relation to its economySource: Bloomberg, BOE, FED, BOJ and ECB, December 2012 23
  25. 25. Eurozone shrinking to a balanced economyCurrent account balanceSource: Datastream, ECB, November 2012 24
  26. 26. 2012 policy action – Get out of jail card?Positive development• Clear path for sustainable financing for struggling countries• Significant reduction of tail risk for bond investors and banks as seniority falls• Full bail out not necessary – a less painful exercise with less political consequencesBut• Northern Europeans will remain firm with conditionality resulting in painful near term fiscal and structural adjustments• Growth could therefore continue to disappoint• Spain and Italy will only agree to bail out (ECCL – enhanced condition credit line) if bonds yields start to rise again Big improvement but most likely no “get out of jail card” yet. Source: UBS Global Asset Management 25
  27. 27. Are European equities attractive?Schiller Price-to-Earnings: Europe = 13.0, US = 22.2 50 45 40 35 30 US 25 20 15 10 Europe 5 0 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 MSCI Europe MSCI Europe Average (1979 - present) S&P 500 S&P 500 Avg (1881 - present)Source: Morgan Stanley Research, MSCI. Data to 10 January 2013 26
  28. 28. What about growth?GDP growth vs. equity returns – fact or myth? End of Q3 GDP year-on-year 130 Europe -0.2% China +7.4% 120 110 100 12 month Equity Returns 90 Europe +17.3% 80 China -1.1% 70 60 50 2009 2010 2011 2012 MSCI Europe SSE A Share IndexSource: Datastream – 31 December 20121 SSE A Share index in Local currency terms. MSCI Europe in EUR currency terms 27
  29. 29. Not about growth but returnsReturn on capital employed for the listed sector % 2007 2012 USA 13.5 13.6 Europe 13.1 11.7 Brazil 15.6 10.7 China 15.6 10.7 India 11.6 9.6 Russia 15.8 15.9Source: CLSA Asia-Pacific Markets - 10 September 2012 28
  30. 30. Appendix AAdditional Information
  31. 31. Global and multi-faceted approachDiverse information sources are necessary… • More than 14,000 companies in Holt • Selective internal & external analysts Fundamental Portfolio Holding • More than 8,000 companies covered by Governance Metrics and ISS; Qualitative Quantitative more than 300,000 individuals covered by Boardex • Contacts with global, US, Asian and European specific strategists • More than 4,000 quantitative • Contacts with bond strategists and profiles of global companies, asset allocators and corporate biweekly refreshed data activists • From 5 different data providers • Exchange of information with buy side investorsSource: UBS Global Asset Management. December 2012 …but specific targeting is key US-I 30
  32. 32. Monthly net gross exposure data – UnconstrainedData to 31 December 2012Line chart 200 Sum of Long Sum of Short Sum of Gross Sum of Net 180 160 140 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 2012Source: UBS Global Asset Management US-I, US-P (RU) 31 GEN019n.ppt
  33. 33. Maximilian Anderl, CFAHead of Concentrated Alpha EquityExecutive DirectorYears of investment industry experience: 14Education: University of Innsbruck (Austria), MS; University of St Gallen (Switzerland) andStockholm School of Economics (Sweden), Lic.oec.HSG• Maximilian Anderl is Head of Concentrated Alpha Equity and is the lead portfolio manager for the Global and European Concentrated Alpha long only and long / short strategies.• Maximilian has worked on the Concentrated Alpha team and its distinctive approach and strategies since its inception in 2004, becoming head of that team in January 2011.• Maximilian joined the European Equity Team in London in 2002, having joined UBS Global Asset Management, Zurich, in 2000 as an equity fund manager. In that role he was responsible for the retail funds and European client mandates.• Prior to joining UBS, Maximilian worked in academic research, university teaching, research and development and corporate finance for the pharmaceutical industry.• Maximilian is a Regular Member of the CFA Society of the UK and the CFA Institute. 32
  34. 34. Jeremy Leung, CFAPortfolio Manager – Concentrated Alpha EquityDirectorYears of investment industry experience: 8Education: Tufts University (US), BS; London School of Economics and Political Science (UK), MSc• Jeremy Leung is a member of the Concentrated Alpha Equity team. He is responsible for supporting the investment process and capability management for the team.• Prior to undertaking his role in March 2011, Jeremy was a Quantitative Analyst within the Equities Group. He was responsible for conducting quantitative and fundamental research for the Group’s investment teams. He also worked extensively on the Group’s fundamental equity valuation model.• Prior to joining UBS in 2007, Jeremy worked as a consultant for FactSet Research Systems. He was responsible for providing advice and support to large investment managers across Europe on various analytical tools for investing.• Jeremy is a Regular Member of the CFA Society of the UK and the CFA Institute. 33
  35. 35. GIPS DisclosurePerformance: European Opportunity Unconstrained 34
  36. 36. DisclaimerFor marketing and information purposes by UBS. For professional investors only. Prospectuses, simplified prospectuses orKey investor information, the articles of association or the management regulations as well as annual and semi-annual reports ofUBS funds are available free of charge from the Austrian branch of UBS (Luxembourg) S.A., Wächtergasse 1, A-1010 Wien. UBSInstitutional Funds under Swiss and Luxembourg law. Before investing in a product please read the latest prospectus carefullyand thoroughly. This document is for distribution only under such circumstances as may be permitted by applicable law. It waswritten without reference to any specific or future investment objective, financial or tax situation or requirement on the part ofa particular individual or group. The document is for information purposes only and is not intended to be construed as asolicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities or related financialinstruments. The products or securities described herein may not be eligible for sale in all jurisdictions or to certain categories ofinvestors. The information and opinions contained in this document have been compiled or arrived at based upon informationobtained from sources believed to be reliable and in good faith, but is not guaranteed as being accurate, nor is it a completestatement or summary of the securities, markets or developments referred to in the document. The details and opinionscontained in this document are provided by UBS without any guarantee or warranty and are for the recipients personal use andinformation purposes only. Past performance of investments (whether simulated or actual) is not necessarily an indicator offuture results. The performance shown does not take account of any commissions and costs charged when subscribing to andredeeming units. Commissions and costs have a negative impact on performance. Should the currency of a financial product orservice not match your reference currency, performance may rise or fall due to currency fluctuations. All such information andopinions are subject to change without notice. UBS AG and / or other members of the UBS Group may have a position in andmay make a purchase and / or sale of any of the securities or other financial instruments mentioned in this document. Thisdocument may not be reproduced, redistributed or republished for any purpose without the written permission of UBS AG. Thisdocument contains statements that constitute "forward-looking statements", including, but not limited to, statements relatingto our future business development. While these forward-looking statements represent our judgments and future expectationsconcerning the development of our business, a number of risks, uncertainties and other important factors could cause actualdevelopments and results to differ materially from our expectations. Source for all data and charts (if not indicated otherwise):UBS Global Asset Management.© UBS 2013. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. 35