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MENIGOZ - Global Alpha Concentrated may 2010 gb Presentation Transcript

  • 1. GLOBAL ALPHA Concentrated Strategy May 2010PROMOTIONAL DOCUMENT - FOR EXCLUSIVE USE OFPROFESSIONAL CLIENTS GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 1
  • 2. In three words… A Global equity strategy that aimsto generate Alpha by combiningopportunities in a Concentrated portfolio. GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 2
  • 3. Contents01 Investment Philosophy and Team Organisation02 Investment Process03 Performance Track Record & Attribution04 Current Portfolio Exposure05 Business update06 Biographies GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 3
  • 4. 01 Investment Philosophy and Team Organisation GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 4
  • 5. Our philosophy in 4 key points GLOBAL GLOBAL ex Uk EAFE GLOBAL ex EUROPE GLOBAL GLOBAL ex JAPAN ex Australia GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 5
  • 6. We do believe in International diversification E(r) GLOBAL GLOBAL ex Uk EAFE GLOBAL ex EUROPE GLOBAL GLOBAL ex JAPAN ex Australia ts RK BAL S ke ET ar MA LO ts lM ke G na ar lM gio ca Re Lo σAn enlarged investment universe offers Superior returns opportunities Inferior level of riskGlobal/International diversification enables higherrisk-adjusted returns (Modern Portfolio Theory) GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 6
  • 7. We are bottom-up investors Due to globalization, companies are less GLOBAL GLOBAL dependent on their domestic markets ex Uk EAFE GLOBAL ex EUROPE Therefore, macro-economic factors at the GLOBAL GLOBAL basis of a top-down approach are less ex JAPAN ex Australia relevant. Stock selection is more efficient than country bets Macro factors are considered at the stock level NOKIA HEINEKEN Sales Breakdown Sales Breakdown (as of 2009) (as of 2009) 1% Finland 2% 15% 12% Western Europe China India Russia Central & Eastern 7% Europe Indonesia 11% 4% Germany 49% The Americas 4% UK56% USA 4% Africa & Middle East Rest of the World 5% 26% Asia Pacific 4% GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 7
  • 8. We use a hybrid investment process With more than 3000 companies in our GLOBAL GLOBAL global universe, we definitely need a EAFE ex Uk structured approach : GLOBAL ex EUROPE GLOBAL GLOBAL The quantitative approach allows to reduce the ex JAPAN ex Australia universe into a subset of the most attractive candidates The fundamental analysis aims at selecting the best stocks to include in portfolio from the subset of α candidates Thus, we can qualify our strategy as Hybrid as it combines quantitative techniques and a fundamental analysis. Both approaches can be alpha additive. GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 8
  • 9. We are style opportunistic Stock returns are dependent on factors GLOBAL GLOBAL corresponding to different fundamentals or EAFE ex Uk styles GLOBAL ex EUROPE GLOBAL GLOBAL The market may alternatively play different styles such ex JAPAN ex Australia as Growth, Value, Size, Momentum, etc… Style leadership could be different within a region or sector Style leadership must be analyzed within a homogeneous group of stocks Style Opportunistic We have implemented a Dynamic Style Selection procedure in the Quantitative step of our investment process in order to adapt our stock selection to market shifts. This allows us to generate alpha at every stage of the market cycle GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 9
  • 10. An experienced team backed with strong research capabilities S2G Paris European Equities Research 9 buy-side analysts - SGAM Japan GLOBAL ALPHA Japanese Equities Research Michel Menigoz TCW Group Head of Global 10 buy-sideUS Equities Research Equities analysts12 buy-side analysts Lionel Gitzinger Quantitative Analyst Lionel Knezaurek Portfolio Equity Analyst SGAM Singapore Pacific ex Japan Nadine Glicenstein Equities Research Portfolio Equity Analyst 8 PMs Véronique Roux Product Specialist GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 10
  • 11. 02 Investment Process GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 11
  • 12. Bottom up approach3 Portfolio Portfolio Construction Risk management Stock selection through2 Fundamental Fundamental analysis List of candidates List of candidates First decile in each group of stocks First decile in each group of stocks1 Quantitative Dynamic factor selection within groups Selection of factors Split of the universe by Corresponding Homogeneous groups to different styles of stocks GLOBAL EQUITY UNIVERSE GLOBAL EQUITY UNIVERSE All caps, global equities (developed countries) All caps, global equities (developed countries) 3000 stocks 3000 stocks GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 12
  • 13. 1 Quantitative Approach Stock expected returns are dependent on factors corresponding to different fundamental and market styles The optimal set of factors is different according to region and industry and evolves with time FACTORS DATABASE UNIVERSE BREAKDOWN FACTORS DATABASE UNIVERSE BREAKDOWN Factors corresponding to 8 different styles Division of the Universe according to regions and sectors Value, Growth, Profitability, Risk, Momentum, Size, Earnings Revision, Leverage Groups of homogeneous stocks Dynamic factor selection within groups Stocks are ranked by attractiveness in their respective group Top-decile stocks in each group are considered as candidates GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 13
  • 14. 2 Fundamental Approach A reduced universe: The fundamental analysis only focuses on 10% of the universe Universe Comparative secondary analysis based on 3 main sources Candidates Portfolio of information: External Research Internal Research Team Expertise TCW – 12 analysts Primary S2G Paris – 9 analysts Nadine GLICENSTEIN : Financials research Global and regional Brokers SGAM Tokyo – 10 analysts Lionel KNEZAUREK : Non Financials SGAM Singapore – 8 PMs • Identification of the sub-sectors with the best prospects (prices, volumes, costs)Secondary • Identification of the companies most leveraged to these expected trends and with highest competitive research advantages/pricing power, and lowest risks • Proprietary fundamental analysis to compare companies in a group on a multi dimensional basis (Earnings Momentum, Earnings Quality, Valuation Multiples, Intrinsic Valuation, Sensitivity Analysis, Growth Perspective,..) FINAL STOCK SELECTION GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 14
  • 15. 3 Portfolio Construction (1/2) The portfolio construction phase aims to build a portfolio consistent with our philosophy principles: Investing in the stocks with strong convictions, both from a quantitative and fundamental point of view (Hybrid & Style Opportunistic) Building a well diversified Portfolio where these convictions are expected to be the main contributors to the excess return (Diversification & Bottom-up) Avoiding any unexpected bet that would generate systematic risk in the portfolio (Bottom-Up) When we trade in the portfolio, we run a formal optimization using the APT software with the following inputs: Universe: Constraints: – Stocks selected by the portfolio – No Cash equity analysts – Neutral in beta – Limiting stocks contributions to active risk – Targeted level of Tracking Error [3.5%, 6%] in our Benchmark: Concentrated portfolio – The appropriate MSCI Benchmark – Neutralizing the relative portfolio sensitivity to macro data (World, EAFE, KOKUSAI, etc…) such as Oil prices, Commodity prices, Interest rates, Currencies… – No unnecessary turnover GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 15
  • 16. 3 Portfolio Construction (2/2) As a consequence, the portfolio will meet the following characteristics: Little Regional or Sector deviations Predominance of Specific Risk versus Systematic risk Risk well diversified among stocks Buy and Sell Discipline We only buy a stock if it belongs to the first decile of its group ranking We sell a stock when it exits the first half of its group ranking (or before if there is a fundamental deterioration or a better substitute in the first decile) The strict rules regarding our sell discipline and or risk monitoring impact the turnover in two ways – When stocks exit the first half of their group ranking -> arbitrage – When the portfolio structure deviates from our risk constraints -> portfolio rebalancing – The total turnover is generally around 300% GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 16
  • 17. What makes Global Alpha differentAn exhaustive coverage of the Global Equity Universe – There is not a single stock that is not at least considered on a quantitative basisA dynamic factor rotation procedure – Which allows to quickly adapt to market shifts and to outperform at every stage of the cycleA structured portfolio construction phase – Which ensures the consistency of the portfolio with our convictions and our philosophyAn experienced and complementary team – Combination of fund management, fundamental analysis and quantitative analysis expertise dedicated to a unique investment processAn alpha generation – Which makes the strategy highly portable for other kind of portfolios (Long-Short, 130-30..) GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 17
  • 18. 03 Performance Track Record & Attribution As at end of May 2010 GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 18
  • 19. Performance as at end of May 2010 Cumulative Returns Annualized Returns A s of the end of May 2010 : 1 month Ytd 6 months 1 Year 3 Years 5 Years Inception From : 30/04/2010 31/12/2009 30/11/2009 29/05/2009 31/05/2007 31/05/2005 31/12/2002 To : 31/05/2010 31/05/2010 31/05/2010 31/05/2010 31/05/2010 31/05/2010 31/05/2010 SG Actions Monde** - 8.52% - 5.08% - 3.84% 17.20% - 8.95% 2.92% 9.66% MSCI World (ND) - 9.58% - 6.64% - 4.96% 13.60% - 10.66% 0.93% 6.31% Excess Return : 1.06% 1.56% 1.12% 3.60% 1.71% 1.99% 3.35% SG Actions Monde is the representative portfolio for the Global Alpha Concentrated strategy Inception: 31/12/2002, performance figures are in USD, gross of management fees with monthly date Cumulative Returns **The representative portfolio for the Global Concentrated strategy is a French340 domiciled retail mutual fund charged with internal transaction fees which do not exist for institutional segregated mandates. The representative track record above is based on real performance gross of these commissions in290 order to present performance representative of the portfolio management implemented.240 The figures shown in this document are those applicable for the years mentioned. Past performance is not a guarantee of future results and is not constant over time.190 The performance shown in this document is expressed in USD. This same140 performance may be increased or reduced depending on market rates movements between this currency and the one in which you invest. 90 Please note that the potential return of the product may also be reduced by déc-02 déc-03 déc-04 déc-05 déc-06 déc-07 déc-08 déc-09 the effect of commissions, fees or other charges. SG Actions Monde MSCI W orld (ND) Source: S2G Performance Measurement Department GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 19
  • 20. Performance as at end of May 2010 The Global Alpha Strategy does not seek a specific level of volatility. The absolute risk of the strategy is more or less that of the benchmark The target range in terms of tracking error is [3.5%;6%] The Information Ratio of the strategy is typically in the range [0.5 ; 1.0] Risk Indicators Relative Returns Global Alpha Concentrated MSCI World (ND)130 Volatility 16.6% 16.2%125 Tracking Error 4.1% Information Ratio 0.82120 Global Alpha Concentrated representative portfolio, gross of all fees115 annualized figures in USD from monthly data - January 2003 - May 2010110 The representative portfolio for the Global Concentrated strategy is a French domiciled retail mutual fund charged with internal transaction fees which do not exist105 for institutional segregated mandates. The representative track record above is based on real performance gross of these commissions in order to present100 performance representative of the portfolio management implemented. The figures shown in this document are those applicable for the years mentioned.95 Past performance is not a guarantee of future results and is not constant over time. The performance shown in this document is expressed in USD. This same90 performance may be increased or reduced depending on market rates movements déc-02 déc-03 déc-04 déc-05 déc-06 déc-07 déc-08 déc-09 between this currency and the one in which you invest. Please note that the potential return of the product may also be reduced by the effect of commissions, SG Actions Monde fees or other charges. Source: S2G Performance Measurement Department GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 20
  • 21. Performance Analysis as at end of May 2010 (1/2)The Global Alpha Concentrated strategy offers a good globally diversifiedinvestment compared to the major regional indices: An attractive Risk/Return positioning Risk / Return 18% 16% 14% Pacific ex Jp Global Alpha 12% Concentrated 10% Return 8% Europe 6% World 4% Japan USA 2% 0% 10% 15% 20% 25% Risk Annualized figures, Monthly Data from 31/12/2002 to 31/05/2010 in USD A higher Risk adjusted return Global Alpha Region USA World Europe Japan Pacific ex Jp Concentrated Risk Adjusted Return 0.58 0.31 0.38 0.39 0.32 0.72The representative portfolio t for the Global Concentrated strategy is a French domiciled retail mutual GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 21fund charged with internal transaction fees which do not exist for institutional segregated mandates
  • 22. Performance Analysis as at end of May 2010(2/2) The strategy tends to outperform in The Alpha generation is the both directions of the market strongest contribution to the Excess return since its inception: Upside/Downside Capture Beta = 1 vs. MSCI World Index Excess Return = 3.4% Up Markets Down Markets Alpha = 3.2%150% 110% 100%100% 94% of the Excess Return is Alpha driven 50% 0%-50% Global Alpha Concentrated-100% -95% -100% MSCI World-150% The representative account for the Global Concentrated strategy is a French domiciled retail mutual fund GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 22 charged with internal transaction fees which do not exist for institutional segregated mandates
  • 23. Performance Attribution Since 2005Stock selection remains the main contribution to the Excess Return 25 Allocation Stock Selection 20 Cummulative Excess Return 15 10 5 0 -5 -10 2005 2006 2007 2008 2009 2010(*) GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 23
  • 24. 04 Current Portfolio Exposure As of May 2010 GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 24
  • 25. Investment strategy: sector and regional allocation Sector Allocation Regional Allocation Energy North Materials America Industrials Europe ex Emu C. Disc Staples Eurozone Healthcare Finance Japan Technology Telecoms Pacific ex Jp Utilities 0 10 20 0 20 40 60 Portfolio MSCI World Portfolio MSCI WorldSource: Global Alpha team GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 25
  • 26. Investment strategy: top holdings Risk Stock Name Ctry - Industry Weight CtrBritish American Tobacco UK – Food Beverage & Tobacco 5.2% 3.8%Perrigo Co US – Pharmaceuticals 5.1% 8.1%Murphy Oil Corp US – Energy 4.9% 5.0%Western Digital US – Technology 4.6% 5.3%Best Buy US – Retailing 4.3% 1.8%Sumitomo Rubber JP – Automobile & Components 4.3% 5.0%Chiba Bank JP – Banks 3.8% 3.0%Rogers Communications CA – Telecoms 3.6% 2.8%Red Electrica Corp ES – Utilities 3.6% 1.3%Chevron Corp US – Energy 3.6% 0.2%TOTAL 43.0% 36.3%Source: Global Alpha team GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 26
  • 27. Investment strategy: portfolio characteristics FACTORS Global Alpha MSCI WorldValue Factors P/E Forward 11.0 11.9 Price to book 1.5 1.7 Dividend Yield 2.2 2.5 Price to Cash Flow 5.8 7.3 Price to Sales 0.7 1.0Growth Factors Hist 3 years EPS Growth 4.0% -0.1% 3 years fwd EPS Growth 13.5% 12.9%Size Avg Market Cap USD 19.7 USD 43.1 Max wgt 5.6% 1.4% #Sec 46 1658Quality Factors ROE 11.5 10.0 ROA 5.4 5.6 OP Margin 15.0 15.6Source: Global Alpha team GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 27
  • 28. 05 Business update GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 28
  • 29. Business as of the end of May 2010 Type Client Assets (m€) Bench StrategyRetail Simbad 170 MS World (ND) Core Actions MondeRetail SG Actions 28 MS World (ND) Concentrated MondeRetail Lux SGAM Fund 27 MS World (ND) Core Equities GlobalInstit KIC 81 MS World (ND) ConcentratedInstit Sogecap 94 MS World ex Concentrated Europe (ND)Instit AAO-SGAM 48 - CoreInstit MOF Brunei (*) 100< MS World (ND) ?(*) :To be Funded GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 29
  • 30. 06 Biographies GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 30
  • 31. Biographies of key people (1/2)Michel MENIGOZ Head of Global Equities team 19 years experience / 19 years with Société Générale Michel graduated from ISUP (Institut de Statistiques de Paris) and holds a master degree in mathematics applied to fundamental sciences. He is a member of L’Institut des Actuaires Français. In 1991, Michel was recruited by Société Générale’s Actuarial Department. In 1994, he joined the S2G investment strategy team. Since 1996, he has been responsible for managing international equity portfolios for individual clients (open-ended UCITS) and for institutionals (dedicated funds). He became Head of Global Equity in 2001 and launched the Global Alpha strategy in 2002.Lionel GITZINGER Quantitative Analyst 6 years professional experience / 5 years with S2G Lionel has a Masters in Engineering from the Ecole Nationale Supérieure des Mines de Nancy. He also holds a Masters in Mathematics and Computer Science from the University of Nancy. He began his career in 2004 for Advanced Portfolio Technologies where he was associated with the development of portfolio analysis tools. In August 2005, Lionel joined S2G as a Quantitative Analyst. He has been working closely with the Global Alpha team since its arrival at SGAM. Lionel joined the Global Alpha team in October 2006 as the dedicated quantitative analyst.Lionel KNEZAUREK Portfolio Equity Analyst 13 years professional experience / 10 years with S2G Lionel has a Masters Degree in Management and a Post-Graduate Degree in Finance from the University of Paris-Nanterre. He is also a graduate of the French Society of Financial Analysts (SFAF). He began his career in 1997 at AGF Asset Management where he worked as a Buy-Side analyst (in the European steel, non-ferrous metals and paper sectors) for the pan-European Allianz Asset Management Equity Research team. Lionel joined S2G’s Equity Research Department in 2000. Since October 2005, he is dedicated to the Global Alpha strategy. GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 31
  • 32. Biographies of key people (2/2)Nadine GLICENSTEIN, CFA Portfolio Equity Analyst 25 years professional experience / 14 years with S2G Nadine is a graduate from the University Paris II with a Master’s degree in Economics. She also holds a degree from the Institut d’Etudes Politiques de Paris. She began her career as an auditor at Frinault Fiduciaire, a member of the Arthur Andersen Network in 1985. In 1989 she became a financial analyst at Atlantic Finance. In 1991 she joined CPR where she worked as a sell side analyst, then moved on as a buy side analyst. Nadine joined S2G as a sector analyst in 1996. She joined the Global alpha team at the beginning of 2006. Nadine is a CFA charterholder.Véronique ROUX, CFA European-Based Product Specialist 11 years professional experience / 8 years with S2G Véronique is graduate from the University Paris-Dauphine with a Master’s degree in Asset Management. She also had Master Degree courses in Economics at the University of Ottawa and a Business degree from Amiens School of Business. She started her career as a financial advisor at Cortal Consors and then became a private banking advisor at La Compagnie Financière Edmond de Rothschild. She joined S2G in 2002 within the Institutional Marketing team. Since July 2006, she is dedicated to the Global Alpha strategy. GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 32
  • 33. DisclaimerThis document is provided on a confidential basis only for the use of the recipient.SG Actions Monde is a FCP constituted under French law. The distribution of this product is strictly limited in the countries where this product have been approved for publicoffering, in accordance with applicable local laws and regulations. The distribution of these products outside those countries is prohibited. This document has not been approved byany regulatory authority in any country. It is your responsibility to ensure that the laws and regulations applicable to you do not prohibit the subscription/redemption and/or thedistribution of these products.Prior to any investment, you should make your own appraisal of the risks from a legal, tax and accounting perspective, without relying exclusively on the information with which youwere provided, by consulting, if you deem it necessary, your own advisors in these matters or any other professional advisors. Subject to compliance with legal and regulatoryrequirements linked to MIFID, including the suitability requirement applicable to any investment services provider, neither the product nor Société Générale Gestion (S2G) as wellas their affiliates, directors and employees may be held responsible for the financial or other consequences that may arise from the investment or disinvestment in these products.The information contained in this document is purely indicative. This document is subject to changes, from time to time, without any prior notice. It should be read with the mostrecent prospectus and relevant simplified prospectuses. These documents together with the latest periodic reports are available upon request to S2G’s head office. Any offer,inducement or solicitation to invest in these products may only be made by the prior reading and delivery of their prospectus. This document and its contents are proprietaryinformation of the manager and entities belonging to Amundi Group. This document and its contents not be reproduced or otherwise disseminated without the manager’s written consent. This document is furnished at the request of the recipient for theexclusive purpose of identifying the nature of the investment, the products or other instrument referred to herein. This document is not deemed to circulate and therefore neither theproduct nor S2G as well as their affiliates will be responsible for the content of this document when transmitted by any entity other than S2G.The information contained in this document is deemed accurate as at 14/01/2010. The information contained in this document is valid as of January 2010. Emitted by This material is solely for the attention of institutional, Société Générale Gestion (S2G), SGAM Fund is promoted by S2G, French joint stock professional, qualified or sophisticated investors and distributors. company (“Société Anonyme”) with a registered capital of € 567 034 094 and approved It is not to be distributed to the general public, private customers by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under or retail investors in any jurisdiction whatsoever nor to “US number GP 09000020 as a portfolio management company, 90 boulevard Pasteur - Persons”. In no event may it be distributed in the European 75015 Paris- France – 437 574 452 RCS Paris. Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do www.societegeneralegestion.fr not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation. GLOBAL ALPHA - Concentrated Strategy - 24/10/2011 - page 33