Emd citywire france oct 13 final

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Emd citywire france oct 13 final

  1. 1. Ignis Absolute Return Emerging Market Debt Fund October 2013 This presentation is intended for professional clients and investment professionals only and should not be relied upon by retail investors. 1
  2. 2.  Emerging market debt has come of age with regard to size of market and breadth of instruments  An absolute return approach can take full advantage of this growing opportunity set  Uncertain return potential for long-only investment strategies as EM investors react to US tapering fears  Strategies that control risk and focus on alpha generation can shield investors from volatility Absolute return emerging market debt strategy October 13 2 Ignis Absolute Return Emerging Market Debt Fund
  3. 3. Philosophy:  Emerging market debt offers a relatively underplayed opportunity set for absolute return strategies  Analysis of short-term market dynamics, as well as fundamentals, captures the best alpha ideas Designed to deliver:  Strong risk-adjusted returns in all market conditions by capturing non-correlated alpha  Carefully controlled volatility  Low correlation with traditional asset classes Ignis Absolute Return Emerging Market Debt Fund October 13 3 Ignis Absolute Return Emerging Market Debt Fund Fund details subject to regulatory approval.
  4. 4. 0% 5% 10% 15% 20% Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Volatility** Annualised standard deviation - Emerging Market Debt Absolute Return Fund (not publicly marketed) Annualised standard deviation - JPM GBI-EM Global Diversified $ Unhedged Index** 90% 95% 100% 105% 110% 115% Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Performance Emerging Market Debt Absolute Return Fund (not publicly marketed) JPM GBI-EM Global Diversified $ Unhedged Index** Managing risk and return October 13 4 Ignis Absolute Return Emerging Market Debt Fund -3.7% 2.3% 5.3% 13.3% All data for illustrative purposes only. Performance shown is based on the Bothwell Emerging Market Debt Absolute Return Fund, a UK authorised UCITS IV fund invested in by our Life Company Client not publicly marketed to external investors. The new fund will be a Luxembourg based UCITS IV fund based on this strategy (subject to regulatory approval). Source: Ignis based on data sourced from HSBC, information since 31/01/2012 to 30/08/2013, based on HSBC Unit Trust Pricing, adjusted to account for 0.65% Annual Management Charge and 10% Performance Fee on all positive growth (no hurdle). All data in GBP. *Source: Bloomberg from 31/01/2012 to 30/08/2013 **Source: Ignis, ex post rolling 60 day volatility from 31/01/2012 to 30/08/2013 Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested.
  5. 5. Beta strategies can force you to take unintended exposure Absolute return allows individual exposures to be isolated Improves risk-adjusted return potential EMD absolute return: precision investing October 13 5 Ignis Absolute Return Emerging Market Debt Fund Type External Local Markets EM Sovereign External Debt EM Sovereign Local Debt EM Local Inflation- Linked Currency USD Local Local Exposures Sov Sprd ✓ US Rates ✓ EM Rates ✓ ✓ EM Real ✓ EM FX ✓ ✓
  6. 6. Investing in: A diverse range of EMD markets: - Local debt and rates - External debt and rates - FX A broad range of instruments - Interest Rate Swaps - CDS - Bonds - FX Ignis Absolute Return Emerging Market Debt Fund Broad investment universe Fund details subject to regulatory approval. October 13 6 Ignis Absolute Return Emerging Market Debt Fund
  7. 7. Opportunity set classified into four distinct sources of alpha Fundamental and quantitative analysis applied across each area Generating stand-alone ideas or feeding through to populate other layers October 13 7 Ignis Absolute Return Emerging Market Debt Fund Investment process: highly engineered approach Instrument Micro Country Asset class Morequantitative Morefundamental
  8. 8. Team manage €498m EM debt assets Disciplined, team-based approach Individual investment perspectives Managing external debt since 1997, local debt since 2003, EM derivatives since 2001 Ignis emerging market debt team: Diversified skill set October 13 8 Ignis Absolute Return Emerging Market Debt Fund Role Years’ experience Years at Ignis Investment perspective Background Dan Beharall Head of EM Fixed Income 18 2 Fundamental Henderson (AMP), Bankers Trust Intl Sailesh Lad Deputy portfolio manager 17 1 Market Henderson, Bluebay, Moore Capital, Credit Suisse Mikhail Volodchenko Market analyst 5 5 Quantitative Ignis Source: Ignis at 31/08/2013
  9. 9. Fundamental EM growth and inflation seem to be bottoming out US tapering talk pushed UST yields to 12m high Market Heavily invested EM market following huge inflows Limited available carry resulted in higher leverage from hedge funds Momentum funds had become net long Quantitative Spread to UST returned to tighter end of range Term premium less than in G7 by widest margin over 3 year range Outcome Position: long local markets 2012, neutral 2013 Trade example: cutting long to EM local Source: Ignis, Bloomberg at 23/08/2013 9 Ignis Absolute Return Emerging Market Debt Fund Asset class October 13 - 1 2 3 4 5 6 7 8-120 -100 -80 -60 -40 -20 - 20 40 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 % Normalisedmarketlevels Risk Asset Performance S&P 500 US Treasury 10yr Yield JPM EMBI GD Hard Currency Bond Index Spread Yield Difference JPM GBI-EM Local Index vs 5yr UST -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 - 0.2 0.4 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 % EM Term Premium vs G5 -3 -2 -1 - 1 2 3 4 5 6 7 8 9 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 % EM Inflation and GDP Growth Inflation GDP Growth
  10. 10. Fundamental Expectation that neither central bank likely to act in near term Fed-taper jitters meant all assets exhibited volatility Market Anecdotal evidence that Malaysian pension funds would underwrite the market Quantitative Two year rates had almost identical beta Analysis identified the relative movement as mostly ‘noise’ Outcome Position: long Malaysian Ringgit 2y Interest Rate Swap versus Thailand Baht 2y Interest Rate Swap Trade example: relative value Malaysia versus Thailand Interest Rate Swap Source: Bloomberg at 27/08/2013 10 Ignis Absolute Return Emerging Market Debt Fund Country October 13 Exit point Entry point 60 65 70 75 80 85 90 May 13 Jun 13 Jul 13 Aug 13 Malaysian Ringgit 2 year vs Thailand Baht 2 year Interest Rate Swap
  11. 11. Fundamental President Chavez died in March 2013, elections called for April Public sentiment favoured a PSUV candidate and further policy uncertainty Market Venezuela remained a crowded position – expected investors would seek hedge/exit Quantitative An inverted spread curve allowed us to take bearish view via CDS, with long position in shorter-dated bond at higher spread Outcome Position: long 3y bond, short via 5y CDS Trade example: relative value Long Venezuelan bond versus CDS Source: Bloomberg at 27/08/2013 11 Ignis Absolute Return Emerging Market Debt Fund October 13 Exit point Entry point -150 -100 -50 - 50 100 150 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Venezuela 5yr CDS basis Instrument
  12. 12. Fundamental EM sell-off affecting 5-10y segment of yield curves Polish zloty did not weaken aggressively during sell- off Central bank reiterated dovish sentiment, cutting rates in June and July Market Polish bonds – one of the most heavily owned EM assets Quantitative Polish 10y area offered poor carry and limited upside Polish curve too flat for end stages of easing cycle Outcome Position: long 2y Interest Rate Swap, short 10y Interest Rate Swap Trade example: slope trade Poland Interest Rate Swap steepener Source: Bloomberg at 27/08/2013 12 Ignis Absolute Return Emerging Market Debt Fund Micro October 13 Entered 60 70 80 90 100 110 120 May 13 Jun 13 Jul 13 Aug 13 Polish Zloty 2y Interest Rate Swap vs 10y Interest Rate Swap Still in the trade
  13. 13. Calibrated trade sizing methodology Alpha target 400bps Assumed Information Ratio 0.75 Average number of positions 25 Expected monthly position volatility 25bps Expected position correlation 0.4 Position size as duration contribution 0.35 Disciplined risk budgeting October 13 13 Ignis Absolute Return Emerging Market Debt Fund Expected number of positions and inter-correlation Expected Sharpe Performance objective Individual position size Fund details subject to regulatory approval.
  14. 14. Tactical risk management October 13 14 Ignis Absolute Return Emerging Market Debt Fund Aggregated portfolio risk Country risk Position risk • Total VaR • Total Exposure • Rate sensitivity • FX exposure • Correlation • Stop loss/review Risk measurement and monitoring undertaken independently
  15. 15. 0 5 10 15 20 25 30 -1.6% -1.4% -1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% Frequency Histogram showing distribution of weekly returns* Normal distribution at current volatility Positive skew of returns 1.6%1.4%1.2%1.0%0.8%0.6%0.4%0.2%0.0%-0.2%-0.4%-0.6%-1.0% -0.8%-1.2%-1.4%-1.6%  Performance (since launch): 5.30%  Annualised performance (since launch): 3.35%  Average weekly return: 0.06%*  Annualised standard deviation: 2.42%  Information ratio: 1.20 October 13 15 Ignis Absolute Return Emerging Market Debt Fund All data for illustrative purposes only. Performance shown is based on the Bothwell Emerging Market Debt Absolute Return Fund, a UK authorised UCITS IV fund invested in by our Life Company Client not publicly marketed to external investors. The new fund will be a Luxembourg based UCITS IV fund based on this strategy (subject to regulatory approval). Source: Ignis based on data sourced from HSBC, information since 31/01/2012 to 30/08/2013, based on HSBC Unit Trust Pricing, adjusted to account for 0.65% Annual Management Charge and 10% Performance Fee on all positive growth (no hurdle). All data in GBP.*Based on weekly data from 31/01/2012 to 30/08/2013. Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested.
  16. 16. Emerging Market Debt Absolute Return Fund MSCI World Index Citigroup World Gov't Bond Index iBoxx Non Sovereign EUR Barclays Capital Global High Yield JPM Emerging Market Bond Index USD JPM GBI-EM Global Diversified $ Unhedged Emerging Market Debt Absolute Return Fund 1.00 MSCI World Index -0.09 1.00 Citigroup World Gov't Bond Index -0.12 -0.11 1.00 iBoxx Non Sovereign EUR -0.07 -0.07 0.71 1.00 Barclays Capital Global High Yield -0.02 0.70 0.11 0.17 1.00 JPM Emerging Market Bond Index USD -0.10 0.41 0.47 0.46 0.65 1.00 JPM GBI-EM Global Diversified $ Unhedged -0.07 0.66 0.18 0.12 0.74 0.61 1.00 Low correlation to other risk assets October 13 16 Ignis Absolute Return Emerging Market Debt Fund Correlation 1.00 0.80 0.60 0.40 0.20 0.00 -0.20 -0.40 -0.60 -0.80 -1.00 All data for illustrative purposes only. Performance shown is based on the Bothwell Emerging Market Debt Absolute Return Fund, a UK authorised UCITS IV fund invested in by our Life Company Client not publicly marketed to external investors. The new fund will be a Luxembourg based UCITS IV fund based on this strategy (subject to regulatory approval). Source: Ignis based on data sourced from HSBC, information since 31/01/2012 to 30/08/2013, based on HSBC Unit Trust Pricing, adjusted to account for 0.65% Annual Management Charge and 10% Performance Fee on all positive growth (no hurdle). All data in GBP. Source: Bloomberg for all market index data (local currency shown) from 01/02/2012 to 30/08/2013. Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested.
  17. 17. 95% 100% 105% 110% 115% Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Performance Emerging Market Debt Absolute Return Fund (not publicly marketed) JPM GBI-EM Global Diversified $ Unhedged Index** Delivering performance October 13 17 Ignis Absolute Return Emerging Market Debt Fund All data for illustrative purposes only. Performance shown is based on the Bothwell Emerging Market Debt Absolute Return Fund, a UK authorised UCITS IV fund invested in by our Life Company Client not publicly marketed to external investors. The new fund will be a Luxembourg based UCITS IV fund based on this strategy (subject to regulatory approval). Source: Ignis based on data sourced from HSBC, information since 31/01/2012 to 30/08/2013, based on HSBC Unit Trust Pricing, adjusted to account for 0.65% Annual Management Charge and 10% Performance Fee on all positive growth (no hurdle). All data in GBP. *Source: Bloomberg from 31/01/2012 to 30/08/2013 Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested. -3.7% 5.3%
  18. 18. Emerging market debt has come of age An absolute return approach can take full advantage Investors should seek managers of risk as well as return Conclusion October 13 18 Ignis Absolute Return Emerging Market Debt Fund
  19. 19. Disclosure This material is prepared and presented for informational purposes to provide an introduction to the business activities of Ignis Investment Services Limited. It relates to the discretionary investment management services of Ignis Investment Services Limited, it does not constitute an offer to sell or a solicitation of any offer to invest in Ignis Investment Services Limited or any funds managed by Ignis Investment Services Limited. It is provided to the named recipient only and may not be passed to any other person. The views expressed do not constitute investment advice. This material does not form any part of any contract for the sale or purchase of any investment. The Ignis Absolute Return Emerging Market Debt Fund is still subject to regulatory approval therefore all information in this presentation is subject to change. Past performance is not a guide to future performance. The absolute return nature of the strategy means it is targeting positive returns, but this is not a guarantee and investors may not get back the original capital invested. Performance shown in this presentation is based on the Bothwell Emerging Market Debt Absolute Return Fund, a UK authorised UCITS. The new Fund will be a sub fund of Luxembourg SICAV based on this strategy (subject to CSSF approval). Although the investment strategy of the new Fund will be based on the strategy of the UK authorised UCITS, it may not replicate all investments on a like for like basis from launch. This communication has promotional purposes and is intended as a summary. It does not constitute an invitation, offer, solicitation or recommendation to purchase or sell shares in the Strategy. It is only intended for distribution to Investment Professionals. Distribution of this document and the offering of shares in certain jurisdictions may be restricted by law and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. The views expressed do not constitute investment advice. This document does not form any part of any contract for the sale or purchase of any investment. This document has been issued by Ignis Investment Services Limited registered in Scotland Number SC101825. Registered Office: 50 Bothwell Street, Glasgow G2 6HR. Authorised and regulated by the Financial Conduct Authority. Ignis Absolute Return Emerging Market Debt Fund 19 October 13

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