“It wasn’t the end of the world…so what now?” – Investec
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“It wasn’t the end of the world…so what now?” – Investec

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“It wasn’t the end of the world…so what now?” – Investec “It wasn’t the end of the world…so what now?” – Investec Presentation Transcript

  • Investec Asset ManagementIt wasn’t the end of the world… so now what?”The Senate Group – 14th March 2013
  • Agenda● Challenges facing low risk investors Morkel Kincaid● “It wasn’t the end of the world… So now what?” Sumesh Chetty● Questions and answersPage 2 | CONFIDENTIAL12573
  • Developed market interest rates tell the storyDeveloped market short-term interest rates: UK (Clearing bank rate, 0.50%),US (Fed funds rate, 0.25%), EU (repo rate, 0.75%) 6 5 4 Interest rates (%) 3 2 1 0 2007 2008 2009 2010 2011 2012 UK Clearning Banks Base Rate US Fed Funds Rate Euro Zone Repo RateSource: I-Net BridgePage 3 | CONFIDENTIAL12573 View slide
  • A liquidity wave has driven risk assets over the short term12-month asset class returns to end February 2013 135 SA Listed Property: 35.7% 130 125 120 FTSE/JSE All Share: 19.3% 115 SA All Bond Index: 14.3% 110 105 SA Cash 5.4% 100 95 Nov -12 Dec -12 Jul -12 Mar -12 May -12 Aug -12 Sep -12 Feb -12 Apr -12 Jun -12 Oct -12 Jan -13 Feb -13 FTSE/JSE All Share !BS(J203T,E,100) SA All Bond Index !BS(JAPI05[TP],E,100) SA Cash !BS(STFIND[CL],E,100) SA Listed Property !BS(J253T,E,100) 2010 2011 2012 Q3 2012 Q4 2012 Jan 2013 Feb 2013 YTD ALSI 18.98% 2.6% 26.7% 7.26% 10.34% 3.23% -1.89% 1.27% ALBI 14.96% 8.8% 16.0% 5.00% 2.60% 0.07% 0.66% 0.73% SA Cash 6.93% 5.7% 5.5% 1.36% 1.30% 0.43% 0.39% 0.82% Listed Property 29.62% 8.9% 35.9% 10.98% 2.75% 0.99% 4.64% 5.68%Source: I-Net BridgePage 4 | CONFIDENTIAL12573 View slide
  • It’s been a golden decade for SA asset classesPerformance over 10 years (annualised) 20% 18.7% 18% 16% 14% 12% 10.4% 10% 8.2% 8% 6% 5.5% 4% 2% 0% Average General Equity Fund Average Bond Fund Average Money Market Fund Average Foreign Equity FundSource: Morningstar, to 31 December 2012, based in Rands. Returns are calculated on a bid-to-bid basis, net of fees, with grossincome reinvested; indices are all gross of feesPage 5 | CONFIDENTIAL12573
  • Driving SA bond yields to record lows 7.2 9.0 JPMorgan GBI-EM Index (LHS) 7 R208 Govt bond (RHS) 8.5 6.8 R208 Government bond (%) 6.6 8.0 JPM GBI-EM (%) 6.4 6.2 7.5 6 7.0 5.8 5.6 6.5 5.4 5.2 6.0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13Source: Bloomberg as at 18 February 2013 and I-Net-BridgePage 6 | CONFIDENTIAL12573
  • Are income funds still relevant?
  • SA interest ratesKeeping cash rates negative in real termsSA real returns 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: Investec Asset ManagementPage 8 | CONFIDENTIAL12573
  • Interest rates are expected to remain lower for longerSource: Investec Asset ManagementPage 9 | CONFIDENTIAL12573
  • The market has changedOpportunities still exist... theyre just harder to find
  • Opportunities exist to achieve meaningful real returns Active management Meaningful real returnsPage 11 | CONFIDENTIAL12573
  • Active management over the years has been crucial 20% Inflation linked bonds 18% Bonds 16% Cash 14% 12% 10% 8% 6% 4% 2% 0% -2% 2007 2008 2009 2010 2011 2012Source: I-Net BridgePage 12 | CONFIDENTIAL12573
  • Active managementWill be crucial in a low return environmentSA fixed income team London fixed income team● SA Duration ● Offshore Duration● SA Credit ● Offshore Credit● Listed Property ● Currencies exposure● Rand Hedge ● EM exposureUSD/ZAR exchange rateSource: I-Net Bridge and Investec Asset Management as at 31 December 2012.Page 13 | CONFIDENTIAL12573
  • Opportunities exist to achieve meaningful real returns Active management Meaningful Corporate credit real returnsPage 14 | CONFIDENTIAL12573
  • Corporate bonds remain the bright spotQuality corporates offering higher yields than government bondsReturns in excess of government bonds1 ● Corporate SA has a very strong balance sheet ● Corporate bonds now offering 2-3% p.a above government bonds AAA We only invest in AA investment grade instruments A BBB1Creditspreads per rating band calculated as average of spreads of each bond against its companion benchmark government bondSource: RMB as at 31 December 2012.Page 15 | CONFIDENTIAL12573
  • Opportunities exist to achieve meaningful real returns Active management Meaningful Corporate credit real returns A global universe – a larger opportunity setPage 16 | CONFIDENTIAL12573
  • Global fixed income offers a broad opportunity setAnnual Returns in USD for different fixed income asset types – best to worst 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 13.5% I8.9% 22.0% 27.9% 23.0% 6.3% 15.2% 18.1% 13.9% 60.9% 15.7% 9.6% 18.9% Highest ● Returns vary return significantly across the 9.2% 6.7% 11.6% 18.5% 12.1% 3.7% 10.8% 11.5% 10.1% 22.0% 15.3% 5.2% 16.8% range of fixed income 6.6% 4.2% 11.4% 16.9% 11.3% 3.4% 6.9% 9.0% 2.9% 16.3% 7.4% 5.0% 10.8% opportunities 2.0% 3.5% I8.4% 6.3% 5.5% 3.4% 5.2% 5.4% -4.8% 4.4% 5.8% 3.2% 2.0% -2.6% 3.2% 1.8% 2.3% 3.5% 2.8% 3.8% 3.4% -5.2% 0.3% 5.2% 0.2% 1.5% Lowest ● We look to hold assets -5.3% -3.5% -1.0% 1.2% 1.5% -9.2% 3.1% 2.1% -26.6% -3.7% 0.3% -1.8% 0.2% return that suit the economic Emerging market debt Investment grade corporate bond environment and that offer value Treasuries Cash Global High yield corporate bondsSource: Investec Asset Management, Bloomberg BBA 1 month LIBOR, Citigroup Treasury Index, Citigroup WGBI-ex US, JPMorgan ELMI+ in USD to 2003, JP Morgan GBI-EM Global Diversified in USD from 2003, Merrill Lynch Global HY Index hedgedinto USD, Merrill Lynch Global Corporate Index hedged into USDPage 17 | CONFIDENTIAL12573
  • Overall expect lower and narrower returns, but opportunitiesstill existExpected 12 month returnsCash 5.0%Bonds/ILB’s 6.8%Corporate 8.8%CPI 5.8%Property yield 7.4%Page 18 | CONFIDENTIAL12573
  • Investec Asset ManagementSouth African Funds – core range Fixed Income Multi-Asset Equity Value Equity Expected Return Managed Opportunity Cautious Managed Diversified Income Opportunity Income Absolute Income Money Market Low Moderate High VolatilityPage 19 | CONFIDENTIAL12573
  • SA fixed income fundsDifferent strategies have different objectivesFund strategy Investec Fund SectorMoney market alternatives Investec Absolute Income SA Multi-Asset IncomeDomestic only – Fixed Income Investec Opportunity Income SA Multi-Asset IncomeSolutionComplete - Fixed Income solution Investec Diversified Income SA Multi-Asset Income(incl. international)Page 20 | CONFIDENTIAL12573
  • Globally integrated fixed income investment teamSION 01/12/11 We are unique to the SA market Text size 15 Main W 16 Fixed Income & Currency Capability Leaders ● Globally integrated team Second W 8 John Stopford – Co-Head of André Roux – Co-Head of Global Global Fixed Income Fixed Income ● 37 investment professionals Photo 2.2 Textbox 5.8 Multi-strategy & Developed Markets Emerging Markets ● Average of 13 years Text size 12 Peter Eerdmans – Emerging Markets John Stopford – Allocation & Debt & Currency investment experience Spacing 0.1 Text size 12 Developed Credit 12 Investment Specialists 4 Investment Specialists ● Specialist teams with 8 Main W 16 Second W clear Malcolm Charles – Southern African Rates accountability and 4 Investment Specialists Photo 1.4 Russell Silberston – Developed responsibility Textbox 6.6 Rates & Currency Simon Howie – Text size 11 7 Investment Specialists South Africa & Frontier Credit 4 Investment Specialists André Roux Economic Research Thanos Papasavvas Fixed Income & Currency Strategist 5 Fixed Income & Currency Dealers Page 21 | CONFIDENTIAL 12573
  • Investec Absolute Income FundCompelling alternative to money marketAnnualised performance 10% Investec Absolute Income 9% SA money market sector average 8% 7% 6% 5% 4% 3% 2% 1% 0% 1 year 3 years p.a. 5 years p.a. Since inception*Investec Absolute Income 7.1% 7.1% 8.6% 8.8%SA money market sector average 5.4% 5.9% 7.7% 8.0%Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested.Market indices are gross of fees. Periods less than one year are not annualised.*Inception date: 1 July 2003Page 22 | CONFIDENTIAL12573
  • Investec Diversified Income FundComplete fixed income solution● A diversified fixed income retail fund, established in 2008● Globally integrated approach drawing on the best investment ideas from the SA and London teams● Diversified strategic allocation to multiple sources of uncorrelated fixed income returns● Actively manages the asset allocation between cash, government bonds, inflation linked bonds, corporate bonds and listed property in SA and abroad● Offshore assets are actively managed with currency hedgingPage 23 | CONFIDENTIAL12573
  • Investec Diversified Income FundComplete fixed income solution for SA investorsPortfolio allocation Corporate bonds: Inflation- Property, Overweight (40%) Linked Bonds, 2.0% 1.0% Foreign Exposure (incl. Credit linked Corporate notes): Bonds, 15.0% Government Bonds, 24.0% Actively managedFloating Rate Money market:Notes, 23.0% NCDs = higher income yields and liquid Money Market Government bonds and Property: (NCDs), Foreign 22.0% Underweight Exposure, 13.0%Duration: 1year and 3 monthsYield: 5.8%Source: Investec Asset Management 22 February 2013Page 24 | CONFIDENTIAL12573
  • Investec Diversified Income FundComplete fixed income solution for SA investors 12% 10% 8% 6% 4% 2% 0% 3 months 1 year 3 years p.a. Investec Diversified Income 1.8% 9.6% 9.8% ALBI 1-3 1.3% 5.5% 6.8% STeFI 1.3% 5.5% 6.0%Source: Morningstar as at 31 January 2013. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvestedInception date: 29 August 2008Page 25 | CONFIDENTIAL12573
  • Summary● Challenging macroeconomic conditions prevail − Low / negative real returns − Lower and narrower returns from SA income assets● Opportunities exist − Active management − Corporate credit − Global diversification● Investec Asset Management offers a globally integrated and experienced team managing a complete fixed income solutionPage 26 | CONFIDENTIAL12573
  • Biographies Sumesh Chetty Years updated 2013 Portfolio Manager 6 years with the firm 11 years of industry experienceSumesh is a portfolio manager at Investec AssetManagement with responsibility for our absolute returnstrategies. He is co-portfolio manager of the InvestecCautious Managed Fund and the Investec AbsoluteBalanced Fund.He joined the firm in 2007 from Metropolitan AssetManagers where he managed the MetropolitanAbsolute Return Fund from 2005. Before joiningMetropolitan, Sumesh spent three years as aninvestment actuary at Metropolitan Employee Benefits,where he was responsible for managing smooth bonusfunds. Sumesh began his career at Swiss Re Life &Health, where he spent over three years as an actuarialspecialist.Sumesh graduated from the University of Cape Townwith a Bachelor of Business Science (Honours) degreein Actuarial Science and a Post Graduate Diploma inActuarial Science. He is also a Fellow of the Institute ofActuaries in the United Kingdom.Page 27 | CONFIDENTIAL12573
  • It wasn’t theend of the world…So what now?Sumesh Chetty, Portfolio Manager
  • Agenda● Our investment philosophy● Challenges facing investors● Implications for portfolio constructionPage 29 | CONFIDENTIAL12573
  • South Africa Absolute Return team Co-Chief Investment Officers - John McNab, Domenico Ferrini Experienced Portfolio Managers – 20 managers Equity Fixed Income Absolute Return Growth: Richard Middleton André Roux, John Stopford Clyde Rossouw Value: John Biccard, Rajay Duration: Malcolm Charles Sumesh Chetty Ambekar High Income: Vivienne Taberer Active Quants: Grant Irvine-Smith Cash: Lisa McLeod General: Chris Freund Credit: Simon Howie, Marshall Sector: Angelique de Rauville, Neil Brown, Steven Loubser Clyde Rossouw Sumesh Chetty 14 years with the firm 6 years Investec Stuart-Findlay 19 years experience 11 years experience RI: Malcolm Gray Common research platform – 21 analysts Implementation and pre-trade compliance – 3 members Dealing – 5 dealers Performance measurement, attribution & risk – 6 analystsAs at November 2012Page 30 | CONFIDENTIAL12573
  • Investec Opportunity FundLong term consistent outperformanceInvestec Opportunity Fund relative to new sector:South Africa Multi Asset – High EquitySource: Morningstar as at January 2013.Page 31 | CONFIDENTIAL12573
  • Investec Opportunity and Cautious Managed FundsA proven investment processRisk vs Return scatterplot: 10 years to 31 December 2012 19% Risk-cognisant Investec Opportunity 17% SA equity general sector average 15% SA AA variable equity Return p.a. 13% sector average 11% Quality-centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average 5% 0% 2% 4% 6% Valuation-bias 8% 10% 12% 14% 16% Standard Deviation p.a. Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested. Market indices are gross of fees.Page 32 | CONFIDENTIAL12573
  • Investec Opportunity and Cautious Managed FundsOur investment philosophy Outperforming inflation with the lowest possible risk Risk is defined primarily as the risk of losing money Downside volatility is more detrimental than overall volatilityPage 33 | CONFIDENTIAL12573
  • The rules of absolute investingRule number 1: Never lose moneyRule number 2: Never forget rule # 1 Why? R 100 R 100 -30% +43% R 70 Start Year 1 Year 2Page 34 | CONFIDENTIAL12573
  • High quality opportunities with a valuation bias● We prefer predictable cash flows over Brand / Balance uncertainty Cash Flow Competitive Management Sheet Advantage● We only buy uncertainty if paid handsomely for it● ‘Cheap’ is not ‘value’ Quality● We prize franchise value highly● We do not change our minds often Emphasis on quality and consistency to ensure long-term sustainable growthPage 35 | CONFIDENTIAL12573
  • It wasn’t the end of the world… So what now? We are cautiously optimistic • Global risks still remain • Local risks have increased • Market sentiment appears overly bullish Select opportunities can still be foundPage 36 | CONFIDENTIAL12573
  • %12573 10 12 14 16 18 20 6 8 Jan-94 Jun-94 Nov-94 Apr-95 Sep-95 Feb-96 Page 37 | CONFIDENTIAL Jul-96 Dec-96 May-97 Oct-97 Mar-98 Source: I-Net Bridge, to 31 December 2012. Aug-98 Jan-99 Limited potential returns Jun-99 Nov-99 Apr-00 Sep-00 Feb-01 Jul-01 Dec-01 Bond yields at historic lows May-02 Yield on the generic 10 year government bond Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12
  • Low short term rates resulting in negative real returnsSource: Investec Asset ManagementPage 38 | CONFIDENTIAL12573
  • Investec Cautious Managed FundPutting your cash to work – the search for real incomeInflation-linked bonds as an alternative to cash120118116114112110108106104102100 Mar-12 Apr-12 May-12 Jul-12 Feb-12 Oct-12 Jan-12 Jun-12 Aug-12 Sep-12 Nov-12 Dec-12 Inflation-linked bonds CashSource: I-Net Bridge; Investec Asset Management to 31 December 2012.Page 39 | CONFIDENTIAL12573
  • Building a better bond portfolioOur best Inflation Linked BondBritish American Tobacco PLC • Global tobacco manufacturer with dominant position in many international markets • 35% ROE and Operating Margins of 35% • Global Drive Brands (Dunhill, Pall Mall, Kent, Lucky Strike) – the key drivers of growth • On-going share buybacks • Dividend Yield of 3.8% • FCF yield of 4.8% Earnings per share growth of 12% p.a. Dividends per share growth of 14% p.a.Page 40 | CONFIDENTIAL12573
  • 12573 0.5 0.7 0.9 1.1 1.3 1.7 1.5 Jan-03 Apr-03 Jul-03 Oct-03 Source: I-Net Bridge. Jan-04 Page 41 | CONFIDENTIAL Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Resources relative to Industrials Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 relative to industrials Resources expensive Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Resources cheap Jan-12 relative to industrials Apr-12 Jul-12 Stretched valuations in select parts of the SA equity market Oct-12 Jan-13
  • Bottom-up stock selectionHistoric PE and subsequent real total returns Investec Opportunity Fund ALSISource: I-Net Bridge.Page 42 | CONFIDENTIAL12573
  • Investec Opportunity FundQuality companies, reasonable valuationsTop 10 holdings as % of fundCompany %Assore 5.7British American Tobacco 3.9Sasol 3.5MTN Group 3.2Newgold Issuer 3.2Tiger Brands 3.0Impala Platinum Holdings 2.6Steinhoff International Holdings 2.5Santam 2.0Richemont 1.7Total 31.3Source: I-Net Bridge and Investec Asset Management as at 31 December 2012Page 43 | CONFIDENTIAL12573
  • Associated OreA great asset in our portfolio, held for 8 years 2.5 Assore’s profits have grown faster than Anglos by 20% p.a. But you still only pay 10 times 2 earnings! 1.5 EPS T12M (ASR/AGL) Anglo shares outstanding have grown 6X Last Px (ASR/AGL) Before buying back shares in 2007 1 0.5 0 No change in Assore since 1950 2000/06/01 2001/02/01 2001/10/01 2002/06/01 2003/02/01 2003/10/01 2004/06/01 2005/02/01 2005/10/01 2006/06/01 2007/02/01 2007/10/01 2008/06/01 2009/02/01 2009/10/01 2010/06/01 2011/02/01 2011/10/01 2012/06/01 11 11Source: I-Net BridgePage 44 | CONFIDENTIAL12573
  • 12573 "Cash costs+sustaining capex" (R/5PGE+Au oz) 2,000 4,000 6,000 8,000 10,000 12,000 14,000 0 Mimosa Two rivers Platinum Mile Page 45 | CONFIDENTIAL Zimplats Mototolo West tailings Modikwa Marula R10,500/ounce Impala Boschkoppie Mogalakwena Platinum industry cost curves Amandelbult Impala Platinum is our preferred platinum stock Kroondal Union Lonmin Northam Rustenburg Marikana CTRP
  • SA specific risks have been on the rise• Labour unrest 9.5• Rating agency downgrades 9.0• Rand depreciation 8.5• Political uncertainty• Risk of foreign outflows 8.0 7.5 7.0 May-12 May-12 Apr-12 Feb-12 Mar-12 Mar-12 Jul-12 Jul-12 Oct-12 Oct-12 Aug-12 Sep-12 Nov-12 Dec-12 Dec-12 Jan-12 Jan-12 Jun-12 Jan-13Source: I-Net Bridge.Page 46 | CONFIDENTIAL12573
  • Offshore EquityHigh quality global franchises at attractive valuationsTop 10Name Weight PE FCF Yield DY EM % SalesNestlé (Nescafe, Maggi ,Nesquik) 5.6% 16.6 4.5 3.7 41%Japan Tobacco (Camel, Winston, Mild Seven, B&H) 5.1% 13.4 11.4 3.0 28%Samsung Electronics (Samsung) 4.8% 8.2 4.8 0.6 75%Imperial Tobacco Group (Davidoff, Gauloises, West) 4.8% 11.1 5.8 4.9 40%Microsoft Corp (Windows, Office, Xbox, Bing) 4.5% 8.8 11.7 3.5 13%Reckitt Benckiser Group (Nurofen, Finish, Vanish, Dettol, Strepsils) 4.4% 12.5 6.6 3.4 35%Unilever (Axe, Knor, Blue Band, Lipton, Dove, Lux, Flora, Omo) 4.4% 17.2 5.4 3.4 55%Anheuser-busch Inbev ( Budweiser, Becks, Stella Artois ) 4.3% 17.4 7.7 2.6 56%International Business Machines (IBM) 4.1% 11.7 6.8 1.8 21%Coach (Coach) 4.0% 14.1 6.6 2.1 13%Total/Average 46.0% 13.1 7.1 2.9 37.7%Source: Investec Asset Management to 31 December 2012.Page 47 | CONFIDENTIAL12573
  • Nestlé – the quintessential franchise stockNestle has outperformed the market through multiple EM is adding 1bn new emerging market consumers bycycles due to compounding and steadily increasing 2020exposure to EM Share price: source of 1973 - 2012 return 7 000 50 6 000 45 Business (profit) growth 8.1% 405,000 5 000 Valuation uplift 2.7% 35 % of sales Population (m) 4 000 30 CAGR % 13.1% 25 3 000 20 2 000 15 10 1 000Log scale 5 500 0 0 2000 2005 2010 2015 2020 % of Nestle Sales EM Population (Million) Develop Market Population(Million) 50 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Feb-97 Feb-98 Feb-99 Mar-01 Mar-02 Mar-03 Mar-04 Feb-96 Feb-00 Mar-05 May-11 May-12 Jan-90 Jan-92 Jan-93 Jan-94 Jan-91 Jan-95 MSCI World Nestle Source: DataStream, company data, Investec Asset Management, USD Total Return Index This is not a buy or sell recommendation for any particular stockPage 48 | CONFIDENTIAL12573
  • Investec Cautious Managed FundIncome generation and real returns at lower volatility Commodities - ● High quality stocks to provide real Offshore - gold SA Equities capital growth in volatile markets cash 4.5% with lower levels of risk 3.5% Domestic - cash Domestic - 29.4% ● Preferred asset class equities 18.7% Offshore ● High quality global franchises on Equities attractive valuations ● Uncorrelated returns – provides Gold protection in uncertain markets Offshore - equities 18.9% Domestic - SA Fixed ● Bonds and ILBs provide a superior bonds return to cash which yields a 25.0% interest negative real returnSource: Investec Asset Management as at 31 December 2012Page 49 | CONFIDENTIAL12573
  • Investec Opportunity FundLong term real wealth creationInvestec Opportunity Fund ● High quality stocks to provide real Domestic - property, 0.7% SA Equities capital growth in volatile markets Offshore - Domestic - with lower levels of risk bonds, 2.6% equities, Offshore - 41.6% cash, 3.1% ● Preferred asset class Commodities - Offshore ● High quality global franchises on Gold, 3.2% Equities attractive valuations Domestic -bonds, 14.9% ● Uncorrelated returns – provides Gold protection in uncertain markets Domestic - cash , 15.8% Offshore - SA Fixed ● Bonds and ILBs provide a superior equities, 18.1% return to cash which yields a interest negative real returnSource: Investec Asset Management as at 31 December 2012Page 50 | CONFIDENTIAL12573
  • Superior long-term returnsA focus on risk, quality and valuation 19% Investec Opportunity Risk 17% SA equity general sector average cognisant 15% SA AA variable equity Return p.a. 13% sector average Quality 11% centric SA Bond sector average 9% SA Money Market sector Foreign equity general 7% average sector average Valuation bias 5% 0% 2% 4% 6% 8% 10% 12% 14% 16% Standard Deviation p.a.Source: Morningstar as at 31 December 2012.Page 51 | CONFIDENTIAL12573
  • Investec Asset ManagementInternational Funds – Core Range Global Fixed Income Global Multi-Asset Global Equity Global Strategic Equity (USD) Worldwide Equity Feeder (ZAR) Expected Return Global Equity (USD) Global Equity FoF (ZAR) Global Franchise (USD) Global Strategic Managed Feeder (ZAR) Global Strategic Managed (USD) Global Opportunity Income FoF (ZAR) Money Market (USD, EUR, GBP) Low Moderate High VolatilityPage 52 | CONFIDENTIAL12573
  • Investec GSF Global Franchise Fund● Highly differentiated global franchise philosophy● Concentrated portfolio and not benchmark constrained● Low historic correlation with traditional benchmarks● Record of long-term outperformance: − participating meaningfully in up markets − with smaller draw-downs in down markets − lower than average absolute volatility● Managed by a globally integrated investment team based in London and Cape Town We seek to invest in companies with business models which can provide some certainty in uncertain marketsPage 53 | CONFIDENTIAL12573
  • Investec GSF Global Franchise FundPerformance track recordAnnual performance in USD Cumulative performance in USD 40% 36.1% 40% 30.0% 28.8 30% 30% 14.7% 16.1% 20% 20% 11.8% 5.9% 7.4% 10% 10% 5.9% 5.3% 0.3 3.9% 4.6% 0% 0% -10% -10% -5.9% -20% -20% -30% -30% -40% -40% -32.6% -50% -50% -40.7% -60% 2007 (Apr) 2008 2009 2010 2011 2012 2013 (YTD) Apr 07 Jan 08 Oct 08 Jul 09 Mar 10 Dec 10 Sep 11 Jun 12 Feb 13 Investec GSF Global Franchise A Acc Investec GSF Global Franchise A Acc MSCI AC World NR (MSCI World NR pre 1/10/11) MSCI AC World NR (MSCI World NR pre 1/10/11) Since inception 1 month 3 months YTD 1 year 3 years p.a. 5 years p.a. p.a.*Investec GSF Global Franchise A Acc 1.2% 5.2% 5.3% 13.6% 11.6% 5.6% 5.0%MSCI AC World NR (MSCI World NR pre 1/10/11) 0.0% 7.0% 4.6% 9.3% 9.5% 1.4% 0.4%Relative performance 1.2% -1.8% 0.7% 4.4% 2.1% 4.2% 4.6%Quartile ranking 1 3 2 1 1 1 1Past Performance figures are not audited and should not be taken as a guide to the futureSource: Lipper, dates to 28 February 2013, NAV based, (inclusive of all annual management fees but excluding any initial charges),gross income reinvested, in USD*Inception date: 10 April 2007Page 54 | CONFIDENTIAL12573
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