Presentation by Humbert Garreau De Labarre

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Humbert Garreau de Labarre, Director Private Banking - La Compagnie Financière Edmond De Rothschild - France

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Presentation by Humbert Garreau De Labarre

  1. 1. MICROFINANCE LA COMPAGNIE FINANCIÈRE EDMOND DE ROTHSCHILD BANQUE
  2. 2. LCF ROTHSCHILD GROUP : AN INTERNATIONAL FAMILY-OWNED INDEPENDANT GROUP <ul><li>Founded in 1953 by Baron Edmond de Rothschild and now chaired by his son, Baron Benjamin de Rothschild. </li></ul><ul><li>Owned by the Rothschild Family, an international group headquartered in </li></ul><ul><ul><li>Paris : for institutional money management. </li></ul></ul><ul><ul><li>Geneva : for private banking. </li></ul></ul><ul><li>Assets under management of $ 80 billions. </li></ul><ul><li>Staff of 2 200. </li></ul><ul><li>More than 100 portfolio managers (both institutional and private). </li></ul><ul><li>30 branches. </li></ul>
  3. 3. SHAREHOLDERS Compagnie Financière Saint-Honoré (Paris) LA COMPAGNIE FINANCIÈRE HOLDING BENJAMIN ET EDMOND DE ROTHSCHILD GENÈVE <ul><li>Chairman of the Supervisory Board : Baron Benjamin de Rothschild </li></ul><ul><li>CEO : Michel Cicurel </li></ul>Banque Privée Edmond de Rothschild (Genève) La Compagnie Financière Edmond de Rothschild Banque Caisse de Dépôt et Placement du Québec Cogifrance (Paris)
  4. 4. SUBSIDIARIES AND EXPERTISES Edmond de Rothschild Asset Management Edmond de Rothschild Multi Management Edmond de Rothschild Corporate Finance Edmond de Rothschild Private Equity Partners International Operations (China, Italy, Israel) Edmond de Rothschild Financial Services Assurances et Conseils Saint Honoré Private Banking, wealth management Private banking Equity, fixed-income and diversified management Structured Asset Management Diversified and alternative Multi-management Private equity Mergers & Acquisitions Insurance Brokerage Asset Management Private banking Private Equity
  5. 5. TRENDS IN ASSETS UNDER MANAGEMENT
  6. 6. MORNINGSTAR® RANKINGS <ul><li>Regularly among the top 5 </li></ul><ul><li>Since 2002, La Compagnie Financière Edmond de Rothschild has systematically ranked among the top 5 European asset managers according to Global Investor / Morningstar </li></ul><ul><li>2005 </li></ul><ul><li>This leadership position has once again been confirmed by the 2005 rankings, naming us 5th best manager for equity funds , ahead of Schroders, Axa, Merrill Lynch, HSBC, Crédit Agricole… </li></ul>45 Fund manager No. of funds ranked Average 1 LCF Rothschild 40 3.35 2 UBS 113 3.25 3 CDC IXIS 41 3.22 4 Aviva 3.21 5 Schroder 66 3.20 6 50 3.19 BEST EQUITY MANAGER IN EUROPE 2003 T Rowe Price Fund manager No. of funds ranked Average 1 68 3.74 2 American Century 95 3.65 3 Baillie Gifford 54 3.64 4 Threadneedle 94 3.52 5 LCF Rothschild 60 3.49 BEST TRANSATLANTIC FUND MANAGER 2002 Global Investor / Morningstar 75 45 Fund manager No. of funds ranked Average 2 LCF Rothschild 39 3.31 1 Storebrand 35 3.37 3 State Street 42 3.26 4 Robur 3.25 5 Barclay’s 45 3.24 BEST EQUITY MANAGER IN EUROPE 2004 40
  7. 7. Microfinance : a New Double Bottom Line Asset Class LA COMPAGNIE FINANCIÈRE EDMOND DE ROTHSCHILD BANQUE
  8. 8. The economically active poor – a huge need <ul><li>2 billion people living under poverty threshold </li></ul><ul><li>500 million micro-enterprises </li></ul><ul><li>Informal rural & urban areas of emerging markets </li></ul><ul><li>A very dynamic, grassroots economic sector </li></ul><ul><li>USD 500 credit need per micro-enterprise per year </li></ul><ul><li>Need for credit, but also savings, insurance, pension, transfers </li></ul><ul><li>Demand is still largely unmet - a vast untapped potential </li></ul>
  9. 9. Microfinance – a truly commercial approach <ul><li>No need for charity but flexible provision of adapted financial services </li></ul><ul><li>No contradiction with social objectives </li></ul><ul><li>Lasting social impact through profitability </li></ul><ul><li>Greater outreach through commercialisation </li></ul><ul><li>Acceleration of growth through K markets access </li></ul><ul><li>Microfinance is a new segment of global finance </li></ul>
  10. 10. Microfinance – investment impacts <ul><li>Strong link to family economics </li></ul><ul><li>Stimulating grassroots entrepreneurship </li></ul><ul><li>Growth of micro and small businesses, job creation </li></ul><ul><li>Raising family living standards </li></ul><ul><li>Reinforcing self-esteem </li></ul><ul><li>Community & financial infrastructures development </li></ul><ul><li>Dynamic inter-generational virtuous cycles </li></ul><ul><li> ➔ A very efficient way to alleviate poverty </li></ul><ul><li> ➔ 2005, the UN year of Microfinance </li></ul>
  11. 11. Micro-banks – Local financial services providers <ul><li>Microfinance institutions as specialized financial intermediaries </li></ul><ul><li>Different legal formats (banks, NBFC, cooperatives, NGOs, etc.) </li></ul><ul><li>Increasingly regulated entities (65% of BlueOrchard clients) </li></ul><ul><li>Know intimately the sector in which they operate </li></ul><ul><li>Created financial products adapted to target segment </li></ul><ul><li>Developed specific delivery channels (ensuring proximity) </li></ul><ul><li>Included sophisticated IT developments (ATMs, palm pilots, etc.) </li></ul>
  12. 12. Micro-banks : strong track record of leaders <ul><li>Solid profitability (ROE in the 20s is usual) </li></ul><ul><li>Very fast growth (average DMCF clients = 40% per year over last 3 years </li></ul><ul><li>Low portfolio at risk (average default rates of 3%), excellent diversification </li></ul><ul><li>Products and services range adapted to client need </li></ul><ul><li>Low D/E ratios, high solvency </li></ul><ul><li>Very good MIS systems and reporting capabilities </li></ul><ul><li>Solid governance and high professionalism of boards and management </li></ul><ul><li>Access to many commercial sources, no subsidies at all </li></ul>
  13. 13. Microfinance – A nascent global financial segment <ul><li>Increased attention and specific legislation by regulators </li></ul><ul><li>Audits by superintendents of banks </li></ul><ul><li>External annual audits by recognized local auditors </li></ul><ul><li>Ratings by top rating agencies and specialized rating agencies </li></ul><ul><li>Creation of credit bureaus </li></ul><ul><li>Formation of local intermediaries’ associations </li></ul><ul><li>Development of international microfinance networks </li></ul><ul><li>Multiplication of investment funds both in debt and equity </li></ul>
  14. 14. Importance of global Microfinance funds <ul><li>Provide diversification of funding sources to MFI </li></ul><ul><li>Provide fast and flexible access to funding </li></ul><ul><li>Complement the domestic capital offering </li></ul><ul><li>Serve as catalyst and demonstration effect for local capital </li></ul><ul><li>Maintain demanding reporting standards </li></ul><ul><li>Introduce Microfinance practitioners to new investors’ segment </li></ul><ul><li>Provide opportunity to investors of doing well by doing good </li></ul>
  15. 15. Microfinance debt – a new asset class ? <ul><li>Attractive to both institutional and individual investors </li></ul><ul><li>Unique combination of social and financial returns within same product </li></ul><ul><li>Very high and effective social impact </li></ul><ul><li>Appealing financial risk – return profile </li></ul><ul><li>Limited credit risk </li></ul><ul><li>High insulation of microfinance sector from macroeconomic shocks </li></ul><ul><li>Low correlation with other asset classes in portfolio </li></ul><ul><li>Attractive fast growing industry </li></ul>
  16. 16. International capital markets and BlueOrchard <ul><li>Microfinance market is huge and needs are largely unmet. The only long term source of funding able to meet global demand is the capital markets. Donor money and public subsidies will not be sufficient. </li></ul><ul><li>While domestic capital markets should become the main driver of growth of local microfinance, international capital markets do play an important role (complementary offering, diversification, international awareness, image building, catalytic effect) </li></ul><ul><li>BlueOrchard mission is to bridge the gap between Microfinance institutions and international capital markets by creating and developing financial investment products meeting the needs and requirements of both microfinance institutions and commercial investors </li></ul>
  17. 17. BlueOrchard Finance <ul><li>Staff of 10 finance professionals with presence in Geneva, London and New-York; A stable and committed shareholders’ base and board </li></ul><ul><li>Total current assets under management of $300 million invested in over 23 countries in more than 60 microfinance institutions. </li></ul><ul><li>Five investment products and partnerships with leading financial institutions, including La Compagnie Financière Edmond de Rothschild Banque </li></ul><ul><li>A robust investment track-record : over 350 loans made in more than five years, without any defaults to date </li></ul>
  18. 18. Saint-Honoré Microfinance : an investment socially useful and profitable
  19. 19. SAINT-HONORÉ MICROFINANCE’S STRENGTHS <ul><ul><li>An opportunity to participate in the development of poorer regions by encouraging entrepreneurship </li></ul></ul><ul><ul><li>A stable investment thanks to high portfolio diversification </li></ul></ul><ul><ul><li>Microfinance institutions and investment partnerships included in the fund are rigorously selected </li></ul></ul><ul><ul><li>High quality fund management performed by reputable professionals </li></ul></ul>
  20. 20. INVESTMENT STRATEGY <ul><ul><li>Saint-Honoré Microfinance aims to develop micro-entrepreneurship, via the development of microcredit and microbanking establishments. </li></ul></ul><ul><ul><li>Saint-Honoré Microfinance, a SICAV-type fund, is accordingly putting forth a clear and contained investment strategy. </li></ul></ul><ul><ul><li>Saint-Honoré Microfinance provides funding to local specialized institutions in charge of transferring and redistributing funds to microbanks (MFIs) and subsequently to microbusinesses. </li></ul></ul>
  21. 21. COMPLEMENTARY KNOWHOW <ul><ul><li>BlueOrchard Finance </li></ul></ul>Edmond de Rothschild Asset Management (1) The Saint-Honoré Microfinance SICAV is managed jointly by <ul><ul><li>Loan and stakeholding management </li></ul></ul><ul><ul><li>Fund and investment company financing </li></ul></ul><ul><ul><li>Cooperative and small institution network financing </li></ul></ul><ul><ul><li>Investing in shares of local and regional funds </li></ul></ul><ul><ul><li>Financial fund management </li></ul></ul><ul><ul><li>Global asset allocation </li></ul></ul><ul><ul><li>Cash and liquidity management </li></ul></ul><ul><ul><li>(1) Edmond de Rothschild Asset Management, subsidiary of La Compagnie Financière Edmond de Rothschild. </li></ul></ul>
  22. 22. SELECTING MICROFINANCE INSTITUTIONS <ul><ul><li>Selecting microfinance institutions is accomplished through a rigorous and consistent process </li></ul></ul><ul><li>Quantitative & qualitative criteria analysis </li></ul><ul><ul><ul><li>Most recent audited accounts </li></ul></ul></ul><ul><ul><ul><li>Portfolio review (number of loans outstanding, maturities, etc…) </li></ul></ul></ul><ul><ul><ul><li>Cost structure </li></ul></ul></ul><ul><ul><ul><li>Review of possible lags in loan redemption </li></ul></ul></ul><ul><ul><ul><li>Data double-checked against rating agency information </li></ul></ul></ul><ul><ul><li>On-site Evaluations </li></ul></ul><ul><ul><li>To contact microfinance institutions, meet their boards and managers, and review capital allocation </li></ul></ul><ul><ul><li>To contact micro-entrepreneurs who are MFI customers, and check on the consistency of services offered </li></ul></ul>
  23. 23. PORTFOLIO DISTRIBUTION <ul><ul><ul><li>60 % debt, via the funding of local and regional microfinance institutions the geographical location of which is determined by qualitative, criteria-based, selection decisions. </li></ul></ul></ul><ul><ul><ul><li>20 % to 30 % maximum Dexia Micro-Credit Fund shares and possibly shares of another microfinance fund </li></ul></ul></ul><ul><ul><ul><li>Dexia Micro-Credit Fund is a Luxemburg investment company (SICAV) set up seven years ago. The fund is diversified and active in 20 countries with 50 client MFIs. Its investments are in sound microfinance institutions, and provide investors with risk diversification. </li></ul></ul></ul><ul><ul><ul><li>10% cash at most (exceedable however during investment period). </li></ul></ul></ul><ul><ul><ul><li>Saint-Honoré Microfinance’s asset allocation template </li></ul></ul></ul>
  24. 24. FUND FEATURES <ul><ul><li>Fund type : Luxemburg Part II investment company (SICAV) </li></ul></ul><ul><ul><li>Composition : Loans </li></ul></ul><ul><ul><li>Expected return : 3 % to 4 % </li></ul></ul><ul><ul><li>Valuation : monthly </li></ul></ul><ul><ul><li>Exit rule : quarterly (January, April, October, December) with one month’s notice </li></ul></ul><ul><ul><li>Initial unit price : 5 000 € </li></ul></ul><ul><ul><li>Entry fee : 2 % maximum </li></ul></ul><ul><ul><li>Exit fee : 0 % </li></ul></ul><ul><ul><li>Management fee : 3 % </li></ul></ul><ul><ul><li>Assets currency : Euro </li></ul></ul>
  25. 25. Avertissement / Legal information The data, comments and analyses in this bulletin reflect the opinion of the LCF Rothschild Group with respect to the markets and their trends, regulation and tax issues, on the basis of its own expertise, economic analyses and information currently known to it. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of the Group. In no event shall the LCF Rothschild Group assume responsibility for any decision to invest, to disinvest or to maintain a position on the basis of these comments or analyses. It is the responsibility of each and every investor to obtain the various regulatory prospectuses for each fund or financial product prior to making any investment and to analyse the risk incurred and establish his or her own opinion, independent of the LCF Rothschild Group, and where necessary, to take specialist advice regarding such questions, and especially in order to determine the relevance of such investment to his or her own financial situation. Past performance and volatility is no guide to the future. The value of investments may fall and rise and performance is not constant over time. The prospectuses of the funds mentioned are available upon request and may be found on our websites (www.lcf-rothschild.fr or www.edrfund.com).
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