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F:\Invictus F:\Invictus Presentation Transcript

  • The Next Fund Manager 2010 INVICTUS Global Emerging Market Fund Presented By: Nelson Lim Darryl Koh K o h Yo n g S e n g
  • The Scenario • Windstorm from Atlantic Ocean made a landfall in New York • Caused billions of dollars in damages and brought businesses in New York to a standstill
  • Agenda: The Preview Fund Composition – The Overview Reassuring Investors – The Effects Adjusted Fund Portfolio – The Strategy Investment – The Analysis Opportunities The Overview The Effects The Strategy The Analysis
  • Invictus Global Emerging Markets Fund Fund Composition DWS Lion Fund Fix Income 20% 30% United GEMs First State GEM Investments Leaders 10% 55% Equities Aberdeen Global 70% Opportunities 15% The Overview The Effects The Strategy The Analysis
  • Effects of Natural Disaster on Financial Markets • Past Similar Case: Hurricane Katrina(Aug 2005) – Caused damages in excess of US$100 billion – Devastated several US states and disrupted oil supply Hurricane Katrina Hurricane Katrina • Effects of Hurricane Katrina on Financial Markets: – Initial fall in stock prices – Shortly after, Markets recovered and continued to rise higher than before disaster The Overview The Effects The Strategy The Analysis
  • Effects of Natural Disaster on Financial Markets • Observed similar findings during Hurricane Andrew (1992), Hurricane Hugo (1989) and even during should be advised not to do Investors September 11 Terrorist Attack panic exit as this will result in selling at an unfavourable price The Overview The Effects The Strategy The Analysis
  • How will our Fund be Affected • Pre-dominantly invested in Emerging Markets • Minimum exposure in US markets (≈3%) • Negative impacts of US markets on our fund should be minimal The Overview The Effects The Strategy The Analysis
  • How will our Fund be Affected • However, we need to take a Cautious Approach! – Economy is just recovering – Fragile state – Possibility of triggering another recession in US The Overview The Effects The Strategy The Analysis
  • Investment Opportunities During a Natural Disaster The Overview The Effects The Strategy The Analysis
  • Implementing Changes to Portfolio Composition Maintaning •Moderately Existing Aggressive Strategy Maintaining •Emerging Key Revenue Markets Driver The Overview The Effects The Strategy The Analysis
  • Moderately Aggressive Portfolio Composition United GEM Investments, 10% Fixed DWS Lion Income, 30% Fund, 20% First State GEM, 45% Global Equity, 70% Aberdeen, 10% Construction, 5% Material , 10% The Overview The Effects The Strategy The Analysis
  • Moderately Aggressive Portfolio Composition United GEM Investments, 1 DWS Lion 0% Fund, 20% Increasing US Incurring Focus on High Sovereign Additional Grade Risk, especially Debt to Investmenet Eurozone finance Corporate reconstruction Bonds The Overview The Effects The Strategy The Analysis
  • Emerging Market as Key Revenue Driver Global Markets, 45 Emerging % Markets, 55 % The Overview The Effects The Strategy The Analysis
  • Analysis of Investment Opportunities Construction, 5% Material , 10% The Overview The Effects The Strategy The Analysis
  • URS Corporation • Leading US federal government contractor • Provides planning, design and program and construction management services for public buildings • Strong fundamentals, with stable growth in earnings • Participated in the rebuilding work in the aftermath of Hurricane Katrina The Overview The Effects The Strategy The Analysis
  • URS Corporation •Annualized return of approximately 17% between 2005 and 2007, compared to 10-yr annualized return of 13% The Overview The Effects The Strategy The Analysis
  • ArcelorMittal • World’s largest steel company • 10% of world’s steel output in 2007 • 23% of steel sales to USA, 39% to EM • Demand of steel, a key material for construction, is expected to rise substantially during the rebuilding stage of natural disaster recovery The Overview The Effects The Strategy The Analysis
  • ArcelorMittal • Annualized return of approximately 49% between 2005 and 2007, compared to 10-yr annualized return of 10.7% The Overview The Effects The Strategy The Analysis
  • • Largest steel producer in China,tord largest in Share price is highly correlated 3 world steel price the world • An increase in demandgiven the will raise the High growth potential for steel likelihood on increase in demand of steel caused by disaster price of steel Share Price Chart for Baosteel (2005-2009) The Overview The Effects The Strategy The Analysis
  • Projected Fund Performance Invictus Global Emerging Markets Fund Proportion Returns Std Dev Security 10-yr Annualize Projected First State GEM Leaders SGD United Baosteel, 0.45 Annualized 11.25% d Return 2-yr 5.30 GEM, 1 Aberdeen Global Opportunities 5% Return between Annualized SGD 0% First 0.10 2.49% 2005-07 Return 4.84 DWS United GEMs Investments SGD State 0.10 6.84% 2.04 Lion GEM, 4 URS 13.0% 17% 17% Fund, 2Lion Fund DWS 5% 0.20 Corp. 2.70% 0.46 0% Arcelor Mittal 0.05 49% 27.40 URS Corporation Arcelor 10.7% 49% 49% 0.05 Mittal 17% 6.92 Baosteel Group 0.05 11.1% 13.02 Aberdeen, Arcelor Expected Returns URS Bao 3.9% N/A 11.1%* 10% Mittal, 5 Corp, 5% % steel10.39% (7.79%) Std Dev 5.532 (3.937) Coefficient of Variation * approximated using rise in steel price from 2005-07 0.53 (0.51) The Overview The Effects The Strategy The Analysis
  • Looking Forward PROPOSED STRATEGY IMPLEMENTATION Current 2011 2012 Onwards MAIN STRATEGY • Divest into US • Capitalize and reap the • Re-Analyse Market disaster recovery profits of projected Conditions industries growth in disaster • Explore recovery companies • Balance of portfolio opportunities Allocation • Consistent with Objectives BACKUP STRATEGIES • US market becomes too volatile • Re-allocate portfolio by pulling out of USA • Possible use of gold fund as hedging tool Overview Challenges Implications Measures Evaluation
  • INVICTUS Global Emerging Market Fund “today’s investment for tomorrow’s growth”
  • Appendix Slides: Additional Fund Information: Client Profile Fund Composition First State GEM Leaders Fund Aberdeen Global Opportunities Fund Effects on Capital Market United GEMs Investments Fund Effects on the Fund DWS Lion Bond Fund United Gold and General Fund Investment Opportunities Original Fund Overview Implementing Changes B.Strategy 1 – Bearish EM Outlook B.Strategy 2 – Bearish Equities Moderately Aggressive Portfolio First State Peer Comparison/ Additional Info Key Revenue Driver Aberdeen Peer Comparison/ Additional Info United GEMs Peer Comparison/ Add Info Analysis of Opportunities DWS Lion Bond Peer Comparison/ Additional Info United Gold & General Fund Additional Info URS Corp Arcelor Mittal Baosteel New Assets Information: Projected Fund Performance Analysis on URS Corporation Looking Forward Analysis on Arcelor Mittal Analysis on Baosteel
  • Client Profile • Moderately aggressive investors • Mid to long-term investment horizon • Willing to withstand short-term fluctuations
  • •Diversification Main Strategy •Cushion downside risk •More emphasis on Fixed Income global bond funds Funds (30%) Equities Commodity Funds Funds (70%) (Backup) Invictus •Mid to Long Term Global •Hedging purpose Capital Appreciation Emerging •Times of highly •Main driver of return Market Fund volatile market •Key focus on Emerging conditions Markets
  • First State GEM Leaders • Consistently outperforming the emerging market • 5-yr annualized returns of 11.25% • Low volatility with standard deviation of 5.3% Performance of First State GEM Leaders Fund Versus MSCI Emerging Markets Index
  • First State GEM Leaders • Strong emphasis on Asia – region of high growth • Heavily focused on defense industries – creating stable growth
  • • Uptrend shift, consistently support by 100-day and 200-day moving average since mid-July 2009 • Highest returns (2.49%) with least volatility (4.84%) among peers
  • • Investments in developed countries • Primary allocations in financials, energy and IT • Well poised to capture effects of economic recovery
  • United GEMs Investments • Stable growth even in times of volatile market conditions • Highest annualized returns per unit risk taken • Impressive excess return (alpha) of 0.35 Performance of United Global Emerging Markets versus MSCI World Index and MSCI Asia EX Japan
  • United GEMs Investments • Significant interests in Brazil and Russia, complementing First State GEM Leaders • Focused on government bonds and corporate bonds from defense industries, providing stability Asset Allocation - by Country Asset Allocation - by Industry Brazil Energy 3.00% 13.13% 5.38% Indonesia 9.68% 11.14% 5.01% Financials 7.94% Mexico 41.88% Government 7.85% Philippines 10.58% Russia Government Agency USA 57.74% 16.42% Special Purpose Others Entity 4.76% Utilities
  • • Resistant to market fluctuations • Stable growth of 2.70% (annualized) • 2X Sharpe ratio of competing funds at 0.11 Performance of DWS Lion Fund versus MSCI World Index and MSCI Asia EX Japan
  • • Mainly in developed Asian countries which are less affected by recent economic crisis • Comprising of corporate bonds from key sectors such as banking and transportation Asset Allocation - by Country Asset Allocation - by Industry 5.23% 11.16% Banks Singapore 26.34% Real Estate South Korea 37.24% 8.61% Transport USA 10.79% Finance 64.21% Hong Kong 18.40% Electronic Others Others 10.29% 3.75% 3.98%
  • • Used as a hedging tool given negative correlation with the global market • Cumulative return of 88.25%, 6.16% YTD Annualised Standard Sharpe Fund Current NAV Return Deviation Ratio United Gold & General Fund 15.57% 10.10 0.10 1.861
  • • Over 70% investments in gold and precious metals  good hedging instrument • Used as backup strategy to hedge against downside risk of a possible W-shaped recovery
  • Original Fund Overview Invictus Global Emerging Markets Fund Proportion Returns Std Dev First State GEM Leaders SGD 0.55 11.25% 5.30 Aberdeen Global Opportunities SGD 0.15 2.49% 4.84 United GEMs Investments SGD 0.1 6.84% 2.04 DWS Lion Fund 0.2 2.70% 0.46 United Gold & General Fund 0 15.57% 10.10 Expected Returns 7.79 Std Dev 3.937 Coefficient of Variation 0.51
  • Backup Strategy 1 Bearish Expectations on Emerging Markets Backup Strategy + Gold Options 10% Std Proportion Returns 20% Dev First State GEM Leaders 0.2 11.25% 5.30 SGD 20% Aberdeen Global 0.4 2.49% 4.84 Opportunities SGD United GEMs Investments 0.1 6.84% 2.04 SGD DWS Lion Fund 0.2 2.70% 0.46 10% United Gold & General 0.1 15.57% 10.10 40% Fund Expected Returns 6.03 Std Dev 4.302 Coefficient of Variation 0.71
  • Backup Strategy 2 Bearish Expectations on Equities Market Backup Strategy + Gold Options 10% Proportion Returns Std Dev 20% First State GEM Leaders 0.2 11.25% 5.3 SGD Aberdeen Global Opportunities SGD 0.2 2.49% 4.84 United GEMs Investments 30% 0.2 6.84% 2.04 SGD 20% DWS Lion Fund 0.3 2.70% 0.46 United Gold & General Fund 0.1 15.57% 10.1 Expected Returns 6.48 20% Std Dev 3.584 Coefficient of Variation 0.55
  • First State GEM – Peer Comparison
  • First State GEM – Peer Comparison Current Annualise Standard Sharpe Fund Alpha Beta NAV (caa d Return Deviation Ratio 03/02/10) First State GEM 11.25% 5.3 0.23 0.69 0.13 1.86 Leaders SGD Aberdeen Global 4.33% 7.36 0.28 0.84 0.03 1.57 Emerging Markets RIC Emerging Markets Equity J 10% 7.47 -0.1 1.02 0.09 41.58 Acc Schroder Emerging 9.58% 6.94 -0.07 0.94 0.08 1.43 Markets
  • First State GEM Additional Information
  • Aberdeen Global – Peer Comparison
  • Aberdeen Global – Peer Comparison Current Annualised Standard Sharpe NAV Fund Alpha Beta Return Deviation Ratio (caa 03/02/10) Aberdeen Global 2.49% 4.84 0.30 1.06 0.01 0.80 Opportunities SGD United International -1.73% 4.33 -0.07 0.98 -0.07 1.59 Growth Fund Henderson Global 1.97% 5.38 0.11 0.93 0.00 1.32 Technology Schroder Global 1.09% 4.97 0.09 0.91 -0.02 1.76 Smaller Companies
  • Aberdeen Global – Additional Information
  • United GEMs – Peer Comparison
  • United GEMs – Peer Comparison Annualized Standard Alpha Beta Sharpe Current Return Deviation Ratio NAV Fund (caa 03/02/10) United GEMs 6.84% 2.04 0.35 0.29 0.21 1.42 Investments SGD 4.20% 3.99 0.04 0.95 0.05 1.00 Fidelity Emerging Market Debt A SGD Schroder Emerging 3.15% 1.65 0.12 0.2 0.11 0.91 Market Bond
  • United GEMs – Additional Information
  • DWS Lion Bond – Peer Comparison
  • DWS Lion Bond – Peer Comparison Annualized Standard Alpha Beta Sharpe Current Return Deviation Ratio NAV Fund (caa 03/02/10) DWS Lion Bond 2.70% 0.46 0.05 0.07 0.11 1.48 SGD 1.03% 1.72 (0.06) 0.85 (0.05) 1.20 Legg Mason Global Bond Trust LionGlobal Bond 1.98% 1.1 0.06 0.08 0.05 1.56 A SGD
  • DWS Lion Bond – Additional Information
  • United Gold & General Fund – Peer Comparison Cumulative Performance by % Fund 1m 3m 6m 1y 2y 3y 5y SI United Gold & -10.39 -2.52 2.43 32.12 -9.96 17.90 106.13 88.25 General Fund Equity Sector -7.79 1.96 10.23 36.18 -- 5.60 78.61 -- Gold&Prec Metals FTSE AW/Mining -11.91 -0.41 4.54 60.58 -24.56 14.14 98.50 -- TR Cust Benchm UOB -10.88 -1.84 2.43 28.32 -13.91 13.43 76.00 -- United Gold & General Fund SIBOR SGD 3 0.04 0.13 0.25 0.52 1.81 4.57 10.71 -- Months
  • United Gold & General Fund – Peer Comparison Calendar Year Performance by % Name 2005 2006 2007 2008 2009 YTD United Gold & General 51.84 15.15 29.02 -30.84 32.12 6.16 Fund Equity Sector Gold&Prec 58.30 6.84 23.82 -37.37 36.18 -- Metals FTSE AW/Mining TR 66.36 4.80 45.60 -52.47 67.80 -10.08 Cust Benchm UOB United 64.11 -5.46 31.76 -32.91 28.32 -10.88 Gold & General Fund SIBOR SGD 3 Months 2.30 3.49 2.71 1.29 0.52 0.05
  • United Gold & General Fund – Additional Information
  • Effects of Hurricane Hugo and Camille on Financial Markets • Markets move upwards subsequent to the occurrence of the natural disasters
  • Correlation between US and EM equity markets • Past financial market trends have shown slight positive co-relation between US equities and Emerging Markets equities MSCI Emerging Markets Index S&P 500 Dow Jones
  • Analysis of URS Corp • Average increase of 15% in EPS for the past 5 years • Healthy financial leverage, D/E ratio of 17% • Operating income at approx. 5% of revenue, increasing over the past 5 years. • Revenue from Federal sector (energy and construction) increased by 67% over past year • Key Competitors: Fluor & Jacobs Engineering • Key Competitive Advantage: Relationship with Government
  • Analysis of Arcelor Mittal • Showing signs of recovery from the economic crisis • Improved EDITBA and CF from Operations in 2009 • Improved leverage with a USD13.7 billion reduction in debt since the economic crisis • Key Competitors: Ternium, US Steel Corp. • Outperformed during Hurricane Relief
  • Analysis of Baosteel • Low financial leverage, D/E Ratio approx. 10% • CF from operating activities take up 50% of net CF of the year in 2009 • Good growth potential with heavy investments in research and development • Key Competitors: Angang Steel, Wuhan Iron and Steel