Galloway Capital - December 11


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Galloway Capital - December 11

  1. 1. CAPITAL December 2011
  3. 3. Identify the best investment opportunities in the Emerging and Frontier Markets, providing clients non-leveraged equity-like returns with fixed income seniority within a company’s capital structure OPPORTUNITY 3
  4. 4. Current Scenario ●High growth expectation for the Emerging Markets ●Tendency for the developed economies to maintain its low fixed income rates ●Constantly growing overseas interest in Emerging Markets assets ●Well-managed Emerging Market companies solidified their balance sheets and are gaining access to capital MARKET PROFILE 4
  5. 5. OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD Emerging Markets and Advanced Economies GDP Growth Source: Bloomberg / Dec 2010 0% 100% 200% 300% 400% 500% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 GDP Current USD Emerging Markets GDP Current USD Developed Economies 5
  6. 6. OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD EM High Yield, US High Yield and US Equities accumulated return over the last 10 years 6 Source: Bloomberg / Oct 2011 -50% -25% 0% 25% 50% 75% 100% 125% 150% dez-01 dez-02 dez-03 dez-04 dez-05 dez-06 dez-07 dez-08 dez-09 dez-10 Accumulated returns over the last 10 years S&P 500 Index CS EM Corp Bonds Index iBoxx USD Liquid HY Index 16% 11% 9%9% 71% 116% 0% 20% 40% 60% 80% 100% 120% 140% SPX IBOXHY CEMBTOTR Vol (Std. Dev.) Acum. Return
  7. 7. OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD Ever since 2002, the major selloffs in EMD occurred after credit crises that emanated from the developed world, not the emerging world. Lehman crisis created a huge buying opportunity in EMD in 2008/2009. If this pattern holds, the selloff induced by the European crisis could be creating another big buying opportunity. Source: JP Morgan Asset Management 7
  8. 8. OPPORTUNITY INVESTING IN EMERGING MARKETS HIGH YIELD The trend toward improving credit quality in EM is structural and secular in nature. The long-term drivers of this structural change are: lower and more sustainable debt levels than most developed economies, younger populations, higher commodity prices, improving current account balances, rising foreign exchange reserves, sustainable wage increases driven by productivity gains, rising consumption due to rising wages, more government taxing power due to better demographics and rising incomes, etc… Source: IMF – as of September 2011 8
  9. 9. ●Emerging Markets countries in general have higher expected growth rates with often lower leverage when compared to Developed Markets ●Selective Emerging Markets countries still show gaps between its current ratings and their macroeconomic reality providing opportunities to obtain higher returns when upgrades occur INVESTING IN EMERGING MARKETS SOVEREIGN OPPORTUNITY 9
  10. 10. INVESTING IN EMERGING MARKET BONDS OPPORTUNITY ●The Emerging Markets Debt market is dominated by Large Institutional Funds and Private Banks ●Large institutional funds also tend to focus on Emerging Markets High Grade credits due to issue size and liquidity ●Private Banks will mostly offer clients obvious Emerging Markets High Grade names which the bank supports and that the client feels comfortable with Lack of reach from the larger players often forces the Emerging Markets High Yield asset class to provide investors higher yields, even beyond its implicit risks 10
  11. 11. THE FUND
  12. 12. GALLOWAY GLOBAL EMERGING MARKETS FIXED INCOME FUND ●Fixed Income long-only fund specialized in both Emerging Markets Corporate and Sovereign Credit Bonds ●The Fund aims for consistent risk-adjusted returns by focusing on Global Emerging Markets ●Multi-approach Due Diligence ●Highly diversified strategy ●No Leverage and No use of Derivatives ●Fully Invested 12
  13. 13. JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD Since Inception 2009 1.47% 0.31% 4.21% 4.95% 6.50% 1.65% 1.94% 1.20% 24.33% 24.33% 2010 1.72% 1.44% 3.48% 1.12% -3.32% 0.64% 3.90% 0.35% 3.61% 3.22% 0.32% 1.19% 18.91% 47.84% 2011 1.87% 0.86% 0.90% 1.27% -0.02% -0.21% 2.14% -7.26% -11.82% 8.64% -4.73% -9.43% 33.90% Historical Performance GALLOWAY GLOBAL EMERGING MARKETS FIXED INCOME FUND 13 11.96% 13.17% 14.64% 6.80% Annualized Return Vol (Std. Dev.) Galloway GEM FI Fund CS EM Corp Bonds Index Source: Bloomberg / Oct 2011 0% 10% 20% 30% 40% 50% 60% 06-09 07-09 08-09 09-09 10-09 11-09 12-09 01-10 02-10 03-10 04-10 05-10 06-10 07-10 08-10 09-10 10-10 11-10 12-10 01-11 02-11 03-11 04-11 05-11 06-11 07-11 08-11 09-11 10-11 11-11 Galloway GEM FI Fund CS EM Corp Bond Index
  14. 14. GALLOWAY GLOBAL EMERGING MARKETS FIXED INCOME FUND 14 Uruguay Chile Mexico South Africa Cash Peru India Poland Oman Hong Kong Belarus Turkey Venezuela Emirates Indonesia Russia China Ukraine Brazil 0% 5% 10% 15% 20% 25% 30% Country Breakdown Number of Positions: Yield To Worst (%): Duration: Average Rating: 45 15.01% 3.16 B Currency Breakdown 97.6% 2.4% USD Euro
  15. 15. INVESTMENT PROCESS GENERATION OF INVESTMENT IDEAS ●Experienced investment team focused on Emerging Markets: over 50 years of EM experience combined ● Proprietary Research: In depth analysis of opportunities through company visits, calls and meetings with companies’ top management ●Sell Side & Buy Side Research: Wide network of relationships with over 350 counterparties around the world (Investment Funds, Family Offices, Brokers, Banks, etc.) providing a deeper level of information and access to local expertise 15
  16. 16. INVESTMENT PROCESS PORTFOLIO CONSTRUCTION ●Committee’s based investment decisions: • Monthly: Strategy and Risk Management Committees • Weekly: Investment Committee ●Daily Meetings to discuss investment opportunities ●Dynamic process of monitoring the portfolio and opportunities through the constant reassessment of the positions ●Replacing good ideas with better ideas. We change a position when we find a bond with: • The same risk and a higher yield • The same yield and a lower risk 16
  17. 17. INVESTMENT PROCESS 17 INVESTMENT TEAM • Generation of Investment Ideas • Discussion of Current Portfolio • Macroeconomic Inputs RESEARCH TEAM • Quantitative and Qualitative Research • Sovereign and Company’s Bonds Reports RISK MANAGEMENT • Risk Control • Adherence to Mandates TRADING DESK • Trade Execution • Pricing and Flow Information INVESTMENT UNIVERSE Emerging Market Bonds: 2,400+ Names FIRST SCREENING Emerging Market Bonds: 400 Names CLOSE FOLLOW UP Investment Grade: 100 Names High Yield: 100 Names SPECIFIC MANDATES High Information Flow Environment Portfolio Screening
  18. 18. There is always a reason why a given company is paying an above average market return. To assert why, and reach conviction to invest, we first have to understand: It is paramount for companies and/or sovereign issues to be in countries or regions that have a positive growth outlook or are in a turning point Companies have to be aligned with local governments Thoughtful analysis to understand the sector’s importance to the country (subsidies, government support, etc); and its relative value to global peers 1. COUNTRY MACRO ECONOMIC OUTLOOK 2. GEOPOLITICS 3. SECTOR INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE 18
  19. 19. In-depth analysis of the Company/Country’s and Bond structure. (leverage, debt profile, cash flow, ownership structure, etc.; Bond seniority, guarantees, covenants, etc.) Company and/or country have to be checked through our local network of contacts (sell and buy side) Careful analysis of entry and exit points, new issuance outlook and relative value 4. CREDIT METRICS 5. LOCAL NETWORK 6.TECHNICAL ANALYSIS INVESTMENT PROCESS MULTI-APPROACH DUE DILLIGENCE 19 7. GOLDEN RULE: It is fundamental that the cost of a company/country not paying its obligations be “higher” than if it pays.
  20. 20. ● Limit of 5% per individual corporate credit at cost ● Limit of 20% per individual Sovereign Bond at cost Corporate Risk ● Limit of 30% for any other currency than USD ● Non USD Bonds must settle via Euroclear / Cedel Currency Risk ● Limit of 20% for single countries ● Limit of 40% for Brazil, Russia, India or China Country Risk Liquidity Risk All Bonds must be Euroclearable/ DTC/ Clearstream RISK MANAGEMENT 20 ● Limit of 20% in less liquid bonds (Issues size below USD 100 Million)
  21. 21. Easy access to Portfolio Management team and current portfolio ideas Portfolio positions and trading history disclosure upon client’s request TRANSPARENCY FULL DISCLOSURE 21
  22. 22. THE MANAGER
  23. 23. THE MANAGER Galloway Capital is a Global Emerging Markets investment boutique exclusively focused on active Fixed Income High Yield strategies. With a solid and extensive research approach and a performance-driven investment style, our team aims to identify the most interesting opportunities around the world to provide equity-like returns with fixed income risk The investment committee members combine over 50 years of careers dedicated to Credit including: Trading, Sales, Origination, Due Diligence and Execution. Counting 21 professionals, Galloway Capital manages over USD 350 Million. 23
  24. 24. INVESTMENT COMMITTEE Nathan Shor Guillermo Bauder Ulisses de Oliveira PORTFOLIO MANAGEMENT Ulisses de Oliveira RESEARCH Roger Braun RISK MANAGEMENT João Ferrari SALES & PRODUCTS Andre Simon COMPLIANCE Arie Milner OPERATIONS Tathiana Raso TRADING Joao Paulo Vicente ASSET MANAGEMENT STRUCTURE 24
  25. 25. INVESTMENT TEAM Nathan Shor Nathan Shor holds a BSBA from Boston University (Boston, USA) and a Masters degree in Finance from IESA (Instituto Estudios Superiores de Administracion, Caracas, Venezuela). He began his professional carrier at The Nash Fund in 1998, being responsible for its Fixed Income, US Equities and Forex allocations. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their international division offering Fixed Income, Futures, Commodities and US Equities to institutional clients. Envisioning the future of the Emerging Markets Fixed Income market, Nathan decided to create Galloway Wealth Management, providing Emerging Markets Fixed Income investment solutions to institutional investors and high net worth individuals. The idea of an asset management company focused on their Emerging Markets Fixed Income expertise came in 2006, with the creation of Galloway Capital Management. Guillermo Bauder Guillermo studied business in the UNIMET (Universidad Metropolitana in Caracas-Venezuela). He began his career at Confimerca, the broker dealer of Grupo Confinanzas in 1993. Starting as a floor broker in the Caracas Stock Exchange, he was later transferred to the Local Fixed Income Area and finally ended at the International Fixed Income Area. In 1998 was a Foreign Associate in Peru for North American Institutional Brokers covering US Equity institutional clients. In 2000 joined FTC Securities as Foreign Associate for Latin America, in charge of developing Fixed Income and US Equity for institutional clients. In 2003, he joined forces with Convenção, a Brazilian Broker Dealer to develop their international division offering Fixed Income, Futures, Commodities and US Equities to institutional clients. Envisioning the future of the Emerging Markets Fixed Income market, Nathan decided to create Galloway Wealth Management, providing Emerging Markets Fixed Income investment solutions to institutional investors and high net worth individuals. The idea of an asset management company focused on their Emerging Markets Fixed Income expertise came in 2006, with the creation of Galloway Capital Management. Ulisses de Oliveira Bachelor of Science in Finance and International Business of NEW YORK UNIVERSITY, certified Series 7 and 66 registered, FSA Rules an Regulations, Securities and Derivatives registered. He began his career in 1996 at then commodity house E D & F Man. Later he joined Safra Bank of NY as Assistant Treasurer until 2000 when he joined Citigroup NY as a Relationship Officer, later he was Vice President of Investments responsible for research, originating and marketing investment ideas directly to clients on a wide range of asset classes: emerging markets and G- 7 fixed income, equities, options, and structured products. At the beginning of 2009 he joined Galloway Capital to be responsible for managing its Emerging Markets bond funds. 25
  26. 26. RESEARCH TEAM Roger Braun – Head of Research Roger Braun Barends is a partner at Galloway where he works as Head of Research and New Transactions. Roger has large experience in the credit analysis of companies since he has acted as a corporate finance banker in various industry sectors in special the commodity sector incl. agribusiness. In the past 2 years he acted as a financial advisor for foreign funds (Texel Capital & DZB) developing investment opportunities in Brazil. He started his career as auditor with Coopers & Lybrand and after joining the finance department of Ralston Puring Canada, where he developed feasibility studies for clients to expand their livestock business, entered the banking market. Roger acted for the last 15 years in the Brazilian market where he worked for BNP Paribas, HVB, Calyon and Natixis in leadership positions focused in Project Finance, ECA and Structured Trade & Commodity Finance- STCF in Petrochemicals, Energy, Pulp & Paper, Metals & Mining and Soft commodities. In these last institutions, he was involved in financing the largest Brazilian corporates such as Riopolimeros, CVRD, Petrobras, Ipiranga, Aracruz, Votorantim and Cosan. When working as financial advisor he focused on funding the middle sized companies of the soft & hard commodity business. Roger has a degree in Business Administration from Vienna University and a European Masters of Business Science from Heriot-Watt University and is member of the Brazilian Capital Markets Institute “APIMEC” since 1998. 26 Giuliano Amaral – Research Analyst Graduated in Business Administration from Fundação Getúlio Vargas in São Paulo in 2009. He started an internship at Moody’s Investors Service in July 2008, where he spent 18 months supporting analysts covering various industries within the Corporate Finance Group. In December 2009, he joined the Structured Finance Group as an Associate Analyst, focusing in ABS backed by several asset classes such as auto loans, consumer loans and mortgages. Giuliano joined Galloway Capital in May 2011 as a research analyst.
  27. 27. APPENDICES
  28. 28. GALLOWAY GLOBAL EMERGING MARKETS FIXED INCOME FUND 28 0 10 20 30 40 50 60 70 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Assets Under Management (USD million) Galloway Global Emerging Markets FI Fund
  29. 29. FUNDS MAIN CHARACTERISTICS Galloway Global Emerging Markets Fixed Income Fund Galloway LatAm Fixed Income Fund Galloway Brazil Fixed Income Fund NAV Liquidity Monthly Monthly Monthly Minimum Initial Investment USD 100,000 USD 100,000 USD 100,000 Additional Investment USD 25,000 USD 25,000 USD 25,000 Redemption Monthly with 15 days notice Monthly with 15 days notice Monthly with 15 days notice Management Fee 1.5 % per year 1 % per year 0.5 % per year Performance Fee 15% quarterly on a HWM basis 10% quarterly on a HWM basis 10% quarterly on a HWM basis ISIN Code VGG3723N1024 VGG3723N1362 VGG3723N1446 Administrator SFT Fund Admin. Services SFT Fund Admin. Services SFT Fund Admin. Services Custodian Pershing Pershing Pershing Auditor Ernst & Young Ernst & Young Ernst & Young 29
  30. 30. This presentation has been prepared by Galloway Capital. This presentation is provided for informational purposes only and does not constitute or should not be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instrument or to participate in any particular trading strategy in any jurisdiction. The information herein is believed to be reliable as of the date in which this material was issued and has been obtained from public sources believed to be reliable. Galloway Capital does not make any representation or warranty, express or implied, as to the completeness, reliability or accuracy of such information, nor is this presentation intended to be a complete statement or summary of the securities, markets or developments referred to herein. Opinions, estimates, and projections expressed herein constitute the current judgment of the analyst responsible for the substance of this presentation as of the date in which it was issued and are therefore subject to change without notice. Prices and availability of financial instruments are indicative only and subject to change without notice. The financial instruments discussed in this presentation may not be suitable for all investors, and it does not take into account the investment objectives, financial situation or particular needs of any particular investor. Investors should obtain independent financial advice based on their own particular circumstances before making an investment decision on the basis of the information contained herein and it is strongly recommended that investors read carefully the disclosure document of the funds presented herein before making an investment decision. Foreign investments may involve greater risk than domestic investments. If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial instrument, and the reader of this presentation assumes any currency risk. Income from financial instruments may vary and its price or value, either directly or indirectly, may rise or fall. Past performance is not necessarily indicative of future results, and no representation or warranty, express or implied, is made herein regarding future performances. Galloway Capital does not accept any liability whatsoever for any direct or consequential loss arising from any use of this presentation or its content. This presentation may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of Galloway Capital. Additional information relative to the financial products discussed in this presentation CONTACT & LEGAL INFORMATION 30 +55 11 4082-2250