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Final Draft Investment Process prestn

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  • 1. ® F&C Asset Management Investment Process Presentation October 2005 Contact: Simon Males Director, Institutional Business 1
  • 2. Agenda Section I – Business Overview Section II – Top Down Investment Process Section III – Bottom Up Investment Process - Equities - Bonds Section IV – Fund Performance Review Section V – Why Recommend F&C? 2
  • 3. Section I - Business Overview 3
  • 4. Significant Growth in Assets Supported by organic and acquisition driven growth Growth in Funds under Management (£bn) Funds under management have 130 quadrupled in the last 3 years from 120 FIS (£33bn) to F&C (£128bn) 110 100 90 The value of the company has 80 quadrupled in the past year from 70 ISIS (£300m) to F&C (£1bn) 60 50 Driven by ‘twin track’ growth 40 30 strategy of organic new business 20 and strategic acquisitions 10 0 Supported by FP board 2000 2001 2002 2003 2004 2005 FUM (£bn) Source: F&C Asset Management plc as at 30/06/05. 4
  • 5. F&C Asset Management plc A well structured ownership and organisational structure Friends 51% Provident London F&C 3% Employees Dublin Amsterdam Public Boston 26% Markets Edinburgh Frankfurt Eureko 20% Lisbon Paris Total Assets Under Management: £128.1 billion Source: F&C Asset Management plc as at 30/06/05. 5
  • 6. F&C Asset Management plc Significant size and scale gives F&C clients an advantage F&C manages £128.1bn with a Pan-European business and leading market positions in the UK and a number of continental European countries 4th largest UK headquartered asset manager 2nd largest active manager in the UK Top 10 manager of European pension monies F&C head office, Exchange House, Primrose Street, EC2A 2NY Source: F&C Asset Management plc as at 30/06/05. 6
  • 7. Highly Resourced Teams Global Strategy 9 Paul Niven 9 Global/US 10 Equity Jeremy Tigue 13 F&C has one of the Pan-European Equity 39 UK’s largest teams Richard Wilson 14 managing: Pacific Equity 6 M Hanbury-Williams 11 – Pan-European Chief Emerging Equity 9 Equities Investment Humphrey Carey 10 Officer Tony Broccardo 33 Fixed Interest – Fixed Interest Helene Williamson 12 8 Alternative Investments 11 – Property Property 30 Paul Herrington 19 SRI 11 Karina Litvack 8 Avg. years' experience Team Size Dealing 18 John Harwood 19 Source: F&C Asset Management plc as at 30/06/05. 7
  • 8. Business Overview F&C has a highly diversified business mix... By Asset Class By Client FUM as at 30 June 2005 FUM as at 30 June 2005 AlternativeLiquidity Other Retail Property Investments 3% Institutional 12% 1% Pension Funds 5% 1% 24% Overseas Fixed Interest Equities 58% 18% Charities 1% UK Equities 13% Insurance 61% Source: F&C Asset Management plc as at 30/06/05. 8
  • 9. What differentiates F&C? Competitive advantages - corporate Company scale: our investment teams have almost unrivalled access to company management, particularly outside of the bi-annual reporting season, where we meet regularly with corporates to add value to our research process Highly resourced: F&C has a large resource base of investment professionals managing client money. With over 200 staff directly responsible for investment management, we have an excellent flow of ideas and processes, structured within a transparent and accountable environment. Collegiate approach: Our competitive advantages lie with the skill sets of the individuals managing portfolios, and not the structure that we impose on them. 9
  • 10. Section II - Top Down Investment Process 10
  • 11. Friends Provident Managed Pension Fund Investment Approach Fund size: £3.2bn Diversified portfolio Fixed Property, Interest, Performance driven by top-down asset 1.1% 9.2% allocation and bottom-up stock selection Cash, Overseas 5.5% Performance benchmark is the Lipper Equities, Balanced Managed Sector 30.2% F&C Top-Down Strategy Overweight – Pacific Equities UK – European Equities Equities, 54.0% Underweight – UK Fixed Interest Source: F&C Asset Management plc as at 30/09/05. – US Equities Stock selection is the key driver to relative performance…but asset allocation can add significant value: ¼ to ⅓ 11
  • 12. Investment Team Strategy team Years in Years at Name Title Industry F&C Group Tony Broccardo Chief Investment Officer 19 3 Paul Niven Head of Strategy 9 9 Richard Philbin Head of Fund of Funds 11 4 Tom Caddick Analyst, Fund of Funds 7 2 Anna Stasny Analyst, Fund of Funds 4 1 Stergios Saloustos Quantitative Analyst 5 2 Steven Andrew Macro Economist 18 5 Michel de Groot Head of Strategy Netherlands 9 6 Jan Willemsen Investment Strategist (NL) 10 5 Peter Vanmeulen Investment Strategist (NL) 26 26 Toby Vaughan Assistant Strategist 4 4 Arjan de Ruijter ALM Analyst 6 6 Average Years of Experience 11 6 Source: F&C Asset Management plc as at 30/09/05. F&C’s Strategy Team combines strong continuity and scale with much experience 12
  • 13. GTAA – Top Down Investment Process Asset allocation decisions are critical to multi-asset class portfolios Quantitative Investment Process Quantitative Investment Process Qualitative Investment Process Qualitative Investment Process Global Tactical Asset Allocation Decisions Value of the process is greater than the sum of its parts 13
  • 14. GTAA – Quantitative Investment Process F&C has a very thorough and robust modelling process Quantitative Models – Equities vs Fixed Interest Global Equities - Historical Valuation Gap - 31 March 2005 50% – Equities 40% – Regions 30% – Momentum 20% 10% – Fixed Interest 0% -10% – Government bonds -20% – Corporate bonds -30% – High yield bonds -40% -50% Foreign Exchange Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 – F&C understands and exploits key relationships to develop successful investment policies 14
  • 15. GTAA – Qualitative Investment Process The judgmental decision-making process adds value Fundamentals – GDP growth, Inflation, Earnings, Policies (Monetary, Fiscal) Cyclical Analysis – Identification of the place in the cycle 3 above trend and declining – Judgement decisions Equities + Bonds - 2 above trend and rising Equities ++ 2 3 Bonds - 1 below trend 1 and rising 4 Equities +++ Bonds + 4 below trend and declining Equities -- Bonds ++ F&C exploits anomalies in economic and market cycles 15
  • 16. What differentiates F&C? Competitive advantages - asset allocation Dual investment approach: Our Global Tactical Asset Allocation process is supported by a thoroughly robust quantitative analysis modelling process and a qualitative overlay where we seek to add consistent incremental value. Quantitative models: We are convinced in our ability to understand and exploit key relationships to develop successful value-added multi-asset class allocations and investment policies. Qualitative overlay: Based on an investment approach that underlies the overall GTAA process. People and process driven: At F&C, we believe that it is the combination of this structured approach, with the views and opinions of our dedicated and experienced professionals, that distinguishes our process and makes the difference for the benefit of our clients. Value added performance: We aim to add 25% to 33% of value from asset allocation 16
  • 17. Section III - Bottom Up Investment Process Equities 17
  • 18. Friends Provident Managed Pension Fund Fund size: £3.2bn Fixed Property, Interest, 1.1% 9.2% Cash, Overseas 5.5% Equities, Equities = 84% 30.2% Pan-European Equities = 70% UK Equities, 54.0% Source: F&C Asset Management plc as at 30/09/05. 18
  • 19. Investment Team F&C has a highly resourced Pan-European equity team Richard Wilson Head of Pan European Equities (+38) UNITED KINGDOM PAN EUROPE CONTINENTAL EUROPE (3) (6) (3) (4) (3) High Alpha Core Core High Alpha Core (2) (4) (6) Stewardship Income Research SMALL CAP (5) (3) UK Continental Europe Source: F&C Asset Management plc as at 30/09/05. 19
  • 20. Pan-European Equity Team Competitive advantages Structural change from institutional : retail at ISIS to new core : high alpha mix positions the team more strongly 10 teams (max size 6 people) within Pan-European Equity rather than one very large mass More accountability, transparency and visibility in the investment management decision-making process Best of breed approach to research analyst & fund manager roles: 26 sector specialists of which 6 are career analysts Head of P-E Equities Richard Wilson (ex Gartmore) is very confident about attracting new business 20
  • 21. F&C’s Highly Resourced UK Equity Team Years in Years at Name Title Industry F&C Richard Wilson Head of Pan European Equities 17 1 Robin Woodall Head of UK Core Equities 22 9 Chris Rew Fund Manager, UK Core Equities 18 8 Julian Cane Fund Manager, UK Core Equities 13 12 John Hayes Fund Manager, UK Core Equities 19 4 Martin Smith Fund Manager, UK Core Equities 19 4 Roger Jones Fund Manager, UK Core Equities 4 4 Jamie Hooper Fund Manager, UK High Alpha 10 10 Derek Mitchell Fund Manager, UK High Alpha 23 21 Michael Gifford Fund Manager, UK High Alpha 21 1 Ted Scott Head of Stewardship 23 21 Hilary Aldridge Fund Manager, Stewardship Funds 7 4 Rodger McNair Head of UK Equities (Edinburgh) 18 15 Richard Bell Fund Manager, UK Equities (Edinburgh) 11 6 Gary Thomson Fund Manager, UK Equities (Edinburgh) 9 9 Julia Clark Fund Manager, UK Equities (Edinburgh) 8 5 Sandy Fleming Head of UK Small Cap 40 9 Catherine Stanley Fund Manager, UK Small Cap 13 4 Peter Ewins Fund Manager, UK Small Cap 15 9 Stephen Grant Fund Manager, UK Small Cap 21 8 Mike Willis Fund Manager, UK Small Cap 13 4 AVERAGE YEARS OF EXPERIENCE 16 8 Source: F&C Asset Management plc as at 30/09/05. 21
  • 22. UK Equity Team Competitive advantages c.350 years of investment experience for F&C’s UK team of 21 professionals Average of half their career – 8 years each – at F&C Strong continuity for FP UK Equity Fund managed by Martin Smith since 2002 Two-thirds ex-ISIS, one-third ex-F&C 22
  • 23. Equity Investment Philosophy We view all companies as potential investments Style F&C’s style is active and pragmatic Beliefs Independent fundamental research is the key to identifying investment opportunities We believe in a team based approach We are bottom up stock pickers F&C is not hampered by a dogmatic style 23
  • 24. Equity Portfolio Construction Overview Combining investment idea generation with risk management Research – Stock Research Analysts – Economics and Strategy Sector and – Risk Management Stock Research A continuous assessment process Informed team debate a critical ingredient Fund Managers Stock Selection & Portfolio Construction Risk Strategy Management Team Macro- Economic View (GTAA) A highly collegiate approach…with onus on fund manager to outperform 24
  • 25. Research - Lies at the Heart of Our Investment Process 3 stage process Industry assessment and franchise Industry Assessment ‘The Company’ & evaluation (qualitative) Franchise Evaluation Financial analysis & valuation (quantitative) Financial Analysis Tactical assessment ‘The Share Price’ & Valuation Recommendation and communication ‘The Timing’ Tactical Assessment Recommendation ‘The Decision’ & Communication Prolific idea generation is the key to delivering business winning performance 25
  • 26. What differentiates F&C? Competitive advantages - equities Not dogmatic: We are not bound by ‘value’ or ‘growth’ investment styles, hence we do not expect portfolios to experience long periods of underperformance. Every stock is a potential investment. Practical approach: The result is an active and pragmatic approach to fund management in which we view all companies as potential investments. Fair Value driven: We focus on determining a “fair value” for each company, hence our style is not a driver of our process, but a result. In this way, we aim to provide consistent performance in all normal market environments. 26
  • 27. Section III - Bottom Up Investment Process Fixed Interest Government & Corporate Bonds 27
  • 28. Friends Provident Managed Pension Fund Fund size: £3.2bn Fixed Property, Interest, 1.1% 9.2% Cash, Overseas 5.5% Equities, Fixed Interest = 9% 30.2% Government Bonds = 5% Corporate Bonds = 4% UK Equities, 54.0% Source: F&C Asset Management plc as at 30/09/05. 28
  • 29. Government Bonds Team summary Years in Years at Name Title Industry F&C Jacob de Wit Head of Fixed Income 11 0 Helene Williamson Head of Emerging Debt 28 10 Helen Roberts Head of Government Bonds 17 6 Paul Grainger Director, UK Government Bonds 10 2 Philip Chow Fund Manager, UK Government Bonds 11 0 Alex Dale Fund Manager, UK Government Bonds 7 3 Lionel Oster Director, European Government Bonds 9 8 Antonio Serra Assistant Director, European Government Bonds 8 6 Henry Hunt Director, Global Government Bonds 19 19 Jose Salinas Investment Analyst 2 2 Average Years Experience 12 6 Source: F&C Asset Management plc as at 30/09/05. Team has specialist skills in quant and qualitative areas 29
  • 30. Investment Philosophy Challenging the consensus US GDP Growth: Consensus and Actual Markets “price in” what investors expect to happen but ... % 6 … investors are often wrong and bond markets 5 often overshoot! 4 Our approach is to anticipate these “errors” by 3 the application of in-house economic fundamental and quantitative tools 2 1 0 2000 2001 2002 2003 2004 Start of Year Consensus Actual GDP Growth Source: Consensus Economics F&C measures consensus and establishes its own macro-economic view 30
  • 31. Investment Process Process Stages Stage 1 Stage 2 Stage 3 Research & Forecasting Portfolio Construction Portfolio Analysis Model portfolios Performance Fundamental and measurement quantitative Research Scenarios & Out-performance Portfolio Performance Forecasts objective attribution How do we deviate from the Risk parameter Risk analysis Consensus? One clear, repeatable process, consisting of three stages 31
  • 32. Corporate Bond Team Name Primary Sector Years in Years at industry F&C Patrick Hendrikx Head of Credit 11 3 Ian Robinson Head of Credit Strategy 13 3 20 specialists on corporate Rebecca Seabrook Director, UK Credit 9 4 bonds – one of the UK’s largest Adam Mossakowski Ass. Portfolio Manager 4 1 teams Han Altink Portfolio Manager, Financials 23 5 Dominique Dijkhuis Portfolio Manager, Consumers 7 4 c.240 years experience within Tjomme Dijkma Portfolio Manager, Financials 9 9 the team – average 11 years Mario Hooghiemstra Portfolio Manager, Utilities 15 5 Cor Moons Portfolio Manager, Industrials 16 5 each Judith van der Ven Portfolio Manager, TMT 10 10 Paul Allen Credit Analyst, Financials 5 3 Strong mix of dedicated career Holly Barton Credit Analyst, Consumers 8 1 analysts and portfolio managers Heinie Hakker Credit Analyst, Financials 20 1 Henri Jongschaap Credit Analyst, Industrials/TMT 15 1 Sven Scholze Credit Analyst, Utilities 1 1 Source: F&C Asset Management plc as at 30/09/05. Fatima Luis Portfolio Manager – Retail 8 6 Kevin Mathews Credit - Head of High Yield 23 1 Roman Gaiser Euro HY Portfolio Manager 10 5 Guido Billstein Credit Analyst, - High Yield 13 1 Arjuna Rajasingham Credit Analyst - High Yield 4 1 Average Years of Experience 11 4 One of the most experience and largest teams in Europe 32
  • 33. Corporate Bonds Investment philosophy We believe that investors process Stage 1 Stage 2 Stage 3 company information inefficiently Allocation to Non- Allocation to Stock Selection Government Bonds Sectors In the short run, securities may be temporarily mis-priced Through fundamental credit analysis we identify under and over-valued Model Portfolio securities Stage 4 Risk Control F&C has never held a corporate bond downgraded to junk 33
  • 34. What differentiates F&C? Competitive advantages - bonds Scale: Actively managing fixed interest portfolios is a core competency at F&C and to reflect this over £70bn is invested in government bond and corporate bond funds. People: Our fixed interest fund managers are amongst the most experienced in the industry. With extensive experience constructing portfolios to meet the risk/return needs of a wide variety of clients, we are ideally positioned to meet the growing demand for specialist fixed income management. Process: We blend qualitative and quantitative approaches to analysing both markets themselves as well as the expectations of other market participants. This provides a robust and disciplined framework for investment decision-making and we believe that the strength of our long-term performance record fully justifies our confidence in the effectiveness of our process. 34
  • 35. Section IV – Fund Performance Review 35
  • 36. Friends Provident fund performance Friends Provident Managed Pension Fund % 25 21.3 21.3 20 15.7 15.3 14.6 14.4 15 12.9 12.2 10 5 0.6 0 -1.3 -5 6 Months 1 Year 2 Years 3 Years 5 Years Percentile: 33rd 51st 38th 55th 93rd Friends Provident Managed Fund Balanced Managed Sector Source: Lipper Hindsight. Basis: total return to 30/09/05. 2, 3 and 5 years are annualised. 36
  • 37. Friends Provident fund performance Friends Provident UK Equity Pension Fund % 25 23.1 21.9 20 17.9 18.0 16.2 16.9 15 12.1 12.5 10 5 -0.1 0 -5 -2.5 6 Months 1 Year 2 Years 3 Years 5 Years Percentile: 60th 72nd 54th 64th 87th Friends Provident UK Equity Fund UK All Companies Sector Source: Lipper Hindsight. Basis: total return to 30/09/05. 2, 3 and 5 years are annualised. 37
  • 38. Friends Provident fund performance Friends Provident Overseas Equity Pension Fund 30 27.1 24.2 25 20 17.9 16.9 16.4 15.2 15.7 15.9 15 10 5 0 -5 -3.8 -3.2 -10 6 Months 1 Year 2 Years 3 Years 5 Years Percentile: 24th 27th 39th 44th 63rd Friends Provident Overseas Equity Fund Global Equities Sector Source: Lipper Hindsight. Basis: total return to 30/09/05. 2, 3 and 5 years are annualised. 38
  • 39. Friends Provident fund performance Friends Provident Fixed Interest Pension Fund % 10 8.6 8.6 7.2 6.3 6.3 6.2 5.9 5.7 5.5 5.6 5 0 6 Months 1 Year 2 Years 3 Years 5 Years Percentile: 37th 50th 52nd 39th 12th Friends Provident Fixed Interest Fund UK Fixed Interest Sector Source: Lipper Hindsight. Basis: total return to 30/09/05. 2, 3 and 5 years are annualised. 39
  • 40. Section V - Conclusion Why Recommend F&C? 40
  • 41. What differentiates F&C? Competitive Advantages – Scale and Size The second largest active UK manager - allows excellent access Highly resourced teams - around 200 investment professionals, with one of the largest P-E equity (39), fixed interest (33) and property (30) teams in the UK Very stable management post-merger F&C is one of the largest and most well resourced UK managers 41
  • 42. What differentiates F&C? Competitive Advantages – Investment Process Equity process is not bound or constrained by value/growth style - driven by Fair Value Bond process driven by highly robust and disciplined quant and qualitative approach Competitive advantage comes from F&C’s dedicated proprietary research capabilities – having superior access to companies is very important F&C does not impose style on fund managers – this flexibility maximises performance prospects 42
  • 43. Contact Details Head Office United F&C Asset Management plc, Exchange House, Primrose Street, London EC2A 2NY, United Kingdom Tel: +44 (0) 20 7628 8000 Kingdom Authorised and regulated in the UK by the Financial Services Authority Investment Offices United F&C Asset Management plc, 80 George Street, Edinburgh, Scotland, EH2 3BU, United Kingdom Tel: +44 (0) 131 465 1000 Kingdom Authorised and regulated in the UK by the Financial Services Authority F&C Asset Management plc, Park Lodge, London Road, Dorking, Surrey, RH4 1QP, United Kingdom Tel: +44 (0) 1306 651800 Authorised and regulated in the UK by the Financial Services Authority Ireland F&C Ireland Limited, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland Tel: +353 (0) 1 436 4000 Authorised in Ireland by the Irish Financial Services Regulatory Authority under the Investment Intermediaries Act, 1995. Netherlands F&C Netherlands B.V., Gatwickstraat 1, 1043 GK, Amsterdam, The Netherlands Tel: +31 (0) 20 582 3000 Regulated in the Netherlands by the Autoriteit-FM. Portugal F&C Portugal, S.A., Av. José Malhoa, Lote 1686, 1070-157 Lisboa, Portugal Tel: +351 (0) 21 003 3200 Regulated in Portugal by the CMVM and the Bank of Portugal. Marketing & France F&C Management Limited, 11 Place des 5 Martyrs du Lycée Buffon BP 148, 75664 PARIS, Cedex 14 Tel: +33 (0) 1 43 22 13 66 Client Services Authorised and regulated in the UK by the Financial Services Authority Germany F&C Management Limited, Niederlassung Deutschland, Mainzer Landstr. 49/49a, 60329 Frankfurt Tel: +49 (0) 69 308 55 098 Germany. Authorised and regulated in the UK by the Financial Services Authority United States F&C Management Limited, 30 Rowes Wharf, Suite 540, Boston, MA 02110, USA Tel: +617 426 9050 Authorised and regulated in the UK by the Financial Services Authority www.fandc.com for professional investors only PRIVATE & CONFIDENTIAL Past performance should not be seen as an indication of future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested. The information, opinions estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time. F&C Group Companies may from time to time deal in investments mentioned herein on behalf of their clients. The source of information in all graphs is F&C unless otherwise stated. Issued and approved in the UK by F&C Asset Management plc, 80 George Street, Edinburgh, Scotland, EH2 3BU, United Kingdom. Authorised and regulated in the UK by the Financial Services Authority (FSA) ® F&C, F&C Monogram, FANDC, FandC and fandc are all registered trade marks of F&C Management Limited © Copyright F&C Asset Management plc. 2004. All Rights Reserved. Neither this document nor any part of it may be reproduced by any party whether by photocopying or storing in any medium by electronic means or otherwise without the prior approval of F&C Asset Management plc. 43

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