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2012 06 citywire cologne ubs


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2012 06 citywire cologne ubs

  1. 1. Asset management For professional investors onlyGlobal convertible bondsUli Sperl, CFASenior Portfolio ManagerJune 2012
  2. 2. Table of contentsSection 1 Asset Class 2Section 2 Convertible Bonds at UBS Global Asset Management 9Section 3 Performance & Positioning 15 1
  3. 3. Section 1Asset Class
  4. 4. Convertible bonds: The best of both worlds? Convertible bonds are fixed-income instruments that pay a coupon and can be redeemed at a predetermined price at maturity Prior to maturity, the investor may exchange a convertible bond for a predetermined number of shares When the stock markets are performing well, the convertible bond will behave like an equity share, and the probability of conversion will increase When the stock markets are performing badly, the convertible bond will behave like a straight bond, and the probability of conversion will fallNote: For illustration purposes only 3
  5. 5. Global Convertible Bond Market Capitalization by region Others 35.0  Total = USD 475 billion Europe 117.0 Asia  2280 issues 77.0  US the largest market  Asia & Europe were the most active with new issues in the past 2 years  Broadly diversified by sector andJapan 40.0 countries USA 206.0 Source: UBS Investment Bank Data: as at 29 December 2011 4
  6. 6. The multi-asset angle: Attractive risk/return attributesGlobal Convertibles hedged in EUR 1994 – 2012 17.5% 15.3% 15.0% 12.5% 10.7% 10.0% 7.5% 6.7% 5.9% 5.2% 5.0% 3.4% 2.5% 0.0% Return in % Risk in % Convertibles (UBS Global Convertible Index - Global Vanilla Hedged (EUR)) Equities (MSCI World Total Return Hedged (EUR)* ) Bonds (JPM GBI Global Hedged (EUR)*)Source: Bloomberg, UBS Global Asset Management, * currency hedged returns based on own calculationsData: as of 31 May 2012These figures refer to the past. Past performance is not a reliable indicator of future results 5
  7. 7. Global CB hedged in EUR relative performance vs equitiesMore green than red and with much less risk Dec-11 Annualized outperformance of global convertible Dec-08 bonds vs. MSCI World Total Return Dec-05 Sell date 20%-25% Dec-02 15%-20% 10%-15% 5%-10% Dec-99 Example: Investing in converts at 0%-5% the end of 1996 and selling in 2002 generated between 5-10% -5%-0% Dec-96 more return per annum than an -10%--5% investment in equities -15%--10% Dec-93 -20%--15% Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11Source: Bloomberg, UBS Buy dateData: as of 31 May 2012These figures refer to the past. Past performance is not a reliable indicator of future results. 6
  8. 8. Convertible bond asset classPositive drivers slightly dominateEquity Markets  We believe equity markets are fairly valued from a fundamental point of view(equity component)  Many convertible bonds convert into shares with high alphasInterest rates  Rates may increase from current levels, negatively impacting performance  Convertible market exposure to interest rates, however, is quite low (approx. 1.5 year duration)Credit spreads  Credit spreads trade after on attractive levels(Credit component)  Diversification remains keyMarket valuation  The overall convertible bond market trades on a cheap valuation.(Option component)  Cheapness is most pronounced in smaller, less well known, more complex, less liquid, sub investment grade issuesNew issues  Volumes are picking up in 2012 so far.(Supply)  We expect more attractively priced new issues as companies need financing for future M&A as well as refinancingInvestor demand  The selling pressure from outright investors has abated and the market seems to have found a new equilibrium  Hedge funds, non traditional buyers and issuing companies are selective buyers into weakness This information represents the views of UBS Global Asset Management as of June 2012 While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual 7 developments and results to differ materially from our expectations.
  9. 9. Global theoretical convertible bond valuationsStill rather cheap15 Asia & Other Japan10 Europe US 5 0-5 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12Source: BoA Merill Lynch Global ResearchData: As of 31 May 2012These figures refer to the past. Past performance is not a reliable indicator of future results. 8
  10. 10. Section 2Convertible Bonds at UBS Global Asset Management
  11. 11. UBS Global Asset ManagementYour partner for convertible bonds• One of Europe’s largest convertible bond manager (currently roughly 2.4 bn EUR under management)• Excellent long term track record in Europe, Asia and Global rewarded by several “Lipper” and “€uro am Sonntag” fund awards as well as with a AA Citywire rating.• Stable management team with a long investment experience in convertible bonds• Team can leverage UBS Global Asset Managements resources across equity, credit, derivative and asset allocation• Broad global market network the team can access for valuable insights, liquidity, new issuesData: As of 31 May 2012 10
  12. 12. Convertible bond – investment processOur main goals Give access to the convertible bond asset class – Benefit from its long term attractive risk/reward characteristics – Making use of our privileged access to a stream of attractively priced new issues – Benefit from opportunities across regions, credit quality, structures – Offer regional as well as global portfolios Add value with active portfolio management – Leveraging UBS Global Asset Management global research platform – Equities – Fixed income & Credit – Derivatives & Convertible bond specific – Asset Allocation & Currencies – Strong risk management infrastructure 11
  13. 13. Convertible bond – investment processMain steps Bottom up convertible bond selection based on – Underlying equity view – Issuer credit view – Convertible bond theoretical valuation as well as specific terms and conditions – Bond risk/reward profile Choosing the most attractive bonds Portfolio construction taking into account – Risk and factor exposures – Asset allocation and currency views – Characteristics of the portfolio Combining them into an attractive portfolio 12
  14. 14. Bringing it all togetherOur views on the drivers are weighted by their importance Junk Bond proxy “Real” Equity proxy convertible bond Value of convertible bond Equity Credit Investment value ) it y ar e (p a lu ev ar g sh in rly Convertible specific de Un Equity value Equity Drivers Credit Convertible specific Buy candidate Sell candidate “positive” view “neutral” view “negative” viewNote: For illustration purposes only 13
  15. 15. What we do and what we don’t do WE DO WE DON’T Select bonds in a bottom up perspective  Buy bonds just because they are in a benchmark Set strategies in absolute terms  Buy overpriced positions just because Look at all available opportunities (equity, they are “defensive” credit, sector, geography, structure) thanks to our broad research  Buy overpriced positions just because they are investment grade Leverage our internal research  Buy overpriced positions just because of Tend to like convexity (“real”/balanced liquidity convertibles)  Arbitrage bonds valuation anomalies Use a comprehensive database to monitor the entire convertible bond universe  Buy or sell stocks or equity futures as their risk profile is linear Invest in a long only way  Set a top down strategy and then fill it Have a strong focus on risk & diversification up with bonds Have a long term investment horizon  Build up cash as a tactical position Maintain strong relations with relevant  Take significant currency bets counterparties 14
  16. 16. Section 3Performance & Positioning
  17. 17. Track RecordOur bottom up approach adds value over the cycleSource: MorningstarData: as of 31 May 2012These figures refer to the past. Past performance is not a reliable indicator of future results. 16
  18. 18. Track RecordStrong correlation to changes in market valuations15% 610% 4 5% 2 0% 0-5% -2-10% 3M Change in Global Convertible Bond Cheapness (RHS) -4 Relative Performance UBS (LUX) Bond Sicav - Convert Global-15% -6 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12Source: UBS Global Asset Management; Bank of America Merrill LynchData: as of 15 May 2012These figures refer to the past. Past performance is not a reliable indicator of future results. 17
  19. 19. UBS (LUX) Bond Sicav – Convert Global (EUR)Credit quality Breakdown per region (based on underlying equity) AAA Europe 10.1% 14.0% 0.3% 8.8% 5.0% AA 9.8% Asia ex Japan 35.4% A US 25.1% BBB Japan BB 37.0% 42.1% Other markets 12.4% B and belowCurrency Exposure: EUR: 101.3 Characteristics6.0% Average delta 30.7% Average equity premium 150.5% Average effective duration 1.443.0% Average premium to inv. value 8.7% Nicely 0.9% 0.8% 0.7% 0.7% 0.4% 0.4% Average running yield 3.4% balanced0.0% Percentage investment grade 61.0% -1.1% -0.9% -0.8% Yield to worst 3.0%-3.0% -2.3% Number of bonds in fund 118 MYR GBP USD AUD HUF NZD AED HKD SEK Other Fund profile BalancedSource: UBS Global Asset ManagementData: as of 31 May 2012 18
  20. 20. Portfolio Management Team – Convertible BondsLong Term Experience in Managing Convertible Bonds Alain Eckmann, CFA Dominic Locher Executive Director Associate Portfolio Manager Senior Portfolio Manager Geneva University, Master of Mathematics FHNW Zurich, MAS Banking & Finance Investment Experience: 18 years, Investment Experience: 3 years, with UBS for 15 years with UBS for 6 years Daniel Lutz Uli Sperl, CFA Associate Director Executive Director Portfolio Manager Senior Portfolio Manager HWZ Zurich, Bachelor of BA Munich University, Master of Economics Investment Experience: 11 years, Investment Experience: 13 years, with UBS for 15 years with UBS for 8 yearsData: as of April 2012 19
  21. 21. Uli Sperl, CFASenior Portfolio ManagerExecutive DirectorYears of investment industry experience: 13Education: University of Munich (Germany), Masters degree in Economics Uli Sperl is a Senior Portfolio Manager within the Asymmetric Portfolio Solutions team. He is responsible for the management and strategy of convertible bond funds. The managed funds won several “Lipper” & “€uro am Sonntag” fund awards. He joined UBS in 2005. Before, he worked as a portfolio manager at Activest Investment in Munich. His responsibilities included global index-linked equity portfolios as well as European convertible bond portfolios. In 2008 Uli successfully completed the post graduate “Certified Rating Analyst” program at the Hochschule St. Gallen (HSG). Uli is co-author of the publication “The benefits of convertible bonds” and has repeatedly published on convert related matters in financial newspapers such as “NZZ” and “Finanz & Wirtschaft”. In addition, he is a member of the Swiss CFA Society and of the CFA Institute. 20
  22. 22. DisclaimerFor marketing and information purposes by UBS. For professional investors only. This document has been issued by the German registered UBS Deutschland AG respectively UBS GlobalAsset Management (Deutschland) GmbH. Both are subsidiaries of UBS AG, a company registered under the Laws of Switzerland. This document is for distribution only under such circumstancesas may be permitted by applicable law. It was written without reference to any specific or future investment objective, financial or tax situation or requirement on the part of a particularindividual or group. The document is for information purposes only and is not intended to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy orsell any securities or related financial instruments. The products or securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. The informationand opinions contained in this document have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith, but is not guaranteed asbeing accurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the document. The details and opinions contained in this document areprovided by UBS without any guarantee or warranty and are for the recipients personal use and information purposes only. Past performance of investments (whether simulated or actual) isnot necessarily an indicator of future results. The performance shown, unless not otherwise specified, is after costs but does not take account of any commissions and costs charged whensubscribing to and redeeming units. Commissions and costs have a negative impact on performance. Should the currency of a financial product or service not match your reference currency,performance may rise or fall due to currency fluctuations. All such information and opinions are subject to change without notice. UBS AG and / or other members of the UBS Group may have aposition in and may make a purchase and / or sale of any of the securities or other financial instruments mentioned in this document. This document may not be reproduced, redistributed orrepublished for any purpose without the written permission of one of the above mentioned companies. This document contains statements that constitute “forward-looking statements”,including, but not limited to, statements relating to our future business development. While these forward-looking statements represent our judgments and future expectations concerning thedevelopment of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. Prospectuses,simplified prospectuses, the articles of association or the management regulations as well as annual and semi-annual reports of UBS funds are available free of charge from UBS Deutschland AGor from UBS Global Asset Management (Deutschland) GmbH, Bockenheimer Landstraße 2-4, 60306 Frankfurt am Main. Source for all data and charts (if not indicated otherwise): UBS GlobalAsset Management.© UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.Für Marketing- und Informationszwecke von UBS. Nur für professionelle Anleger. Herausgeberin des vorliegenden Dokumentes sind die nach deutschem Recht registrierten UBSDeutschland AG beziehungsweise UBS Global Asset Management (Deutschland) GmbH. Beide sind Tochtergesellschaften der unter schweizerischem Recht registrierten UBS AG. Die Verteilungdes vorliegenden Dokumentes ist nur unter den in dem anwendbaren Recht abgefassten Bedingungen gestattet. Das Dokument wurde unabhängig von spezifischen oder künftigenAnlagezielen, einer besonderen finanziellen oder steuerlichen Situation oder individuellen Bedürfnissen eines bestimmten Empfängers erstellt. Das Dokument dient reinenInformationszwecken und stellt weder eine Aufforderung noch eine Einladung zur Offertstellung, zum Vertragsabschluss, zum Kauf oder Verkauf von irgendwelchen Wertpapieren oderverwandten Finanzinstrumenten dar. Die im vorliegenden Dokument beschriebenen Produkte bzw. Wertpapiere können in verschiedenen Gerichtsbarkeiten oder für gewisse Anlegergruppenfür den Verkauf ungeeignet oder unzulässig sein. Die im vorliegenden Dokument zusammengetragenen Informationen und erlangten Meinungen basieren auf vertrauenswürdigen Angabenaus verlässlichen Quellen, erheben jedoch keinen Anspruch auf Genauigkeit und Vollständigkeit hinsichtlich der im Dokument erwähnten Wertpapiere, Märkte und Entwicklungen. DieAngaben in diesem Dokument werden ohne jegliche Garantie oder Zusicherung zur Verfügung gestellt, dienen ausschließlich zu Informationszwecken und sind lediglich zum persönlichenGebrauch des Empfängers bestimmt. Die vergangene Performance (ob simuliert oder effektiv) ist keine Garantie für zukünftige Entwicklungen. Die dargestellte Performance, soweit nichtausdrücklich anders vermerkt, versteht sich nach Kosten, lässt aber allfällige bei Zeichnung und Rücknahme von Anteilen erhobene Kommissionen unberücksichtigt. Kommissionen und Kostenwirken sich nachteilig auf die Performance aus. Sollte die Währung eines Finanzproduktes oder einer Finanzdienstleistung nicht mit Ihrer Referenzwährung übereinstimmen, kann sich diePerformance aufgrund der Währungsschwankungen erhöhen oder verringern. Jegliche Information oder Meinung kann sich jederzeit ohne Ankündigung ändern. 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