Alternative UCITS Equity FundsIs the investment case still valid?                            Andrew Cawker                ...
Agenda●   Growth in Alternative UCITS Funds●   Search for uncorrelated returns●   Absolute Insight UK Equity Market Neutra...
Alternative UCITS hedge funds Market size and growth ●   Number of funds has exploded and is     forecast to continue… ●  ...
The search for uncorrelated returns Post 2007, asset prices have become increasingly dominated by ‘Risk on/Risk off” trade...
The search for uncorrelated returnsHedge funds - beta still dominatesFrom 31 March 2005 - 31 March 2012             1,500 ...
Are high correlations here to stay?Economic deleveraging = lower trend growth, shorter cycles and increased macro volatili...
The search for uncorrelated absolute returnsAbsolute Insight UK Equity Market Neutral Fund (€890.26 million)      150     ...
Isolating the alphaInvestment process - performance focus at all stages     Idea generation is                         Lon...
Pair-trade approach allows “alpha” isolationFocus on the risks we want, minimise the risks we don’t want         Drivers o...
Isolating the alpha – a tight hedgeShort “weak” versus “strong” in automotive sector                                      ...
Isolating the alpha - active hedge managementProtecting the P&L as macro risks developLead idea: Mondi                    ...
Isolating the alpha - hedging in a “Risk on/Risk off” worldIdentifying correlated stocksLead idea: Tesco (short)          ...
Isolating the alpha – active hedge managementA hedge that went wrong Lead idea: BAE Systems (long)                        ...
Isolating the alpha – active hedge managementA hedge that went wrong  Lead idea: BAE Systems (long)                       ...
Active management of risk exposures and hedges                                                                            ...
Specialist investment teamIndividual accountability for positions allows focus                                           A...
Insight’s risk management processEliminating unwanted factor exposures and ensuring transparency                          ...
Absolute Insight UK Equity Market Neutral Fund“The search for uncorrelated investments and improved risk-adjusted returns”...
Addressing different risk return appetites2 Funds: Same investment ideas, different implementationAbsolute Insight UK Equi...
Comparisons across strategiesPrimary investment parameters              1 Limits   are those specified in the prospectus o...
BNY Mellon Absolute Return Equity FundEvolution of gross & net exposures since inception            Net exposure          ...
BNY Mellon Absolute Return Equity FundPerformance as at 31 March 2012                                                     ...
Summary●   Absolute Insight UK Equity Market Neutral Fund    – 7 year record of consistent low volatility, uncorrelated ab...
Biographies                                     Andrew Cawker – Absolute Return Portfolio Manager, Head of Specialist Equi...
Biographies (continued)                                     Matthew Cooke – Absolute Return Portfolio Manager, Specialist ...
Appendix – Fund information                              26
AppendixAbsolute Insight UK Equity Market Neutral Fund                                                 27
Absolute Insight UK Equity Market Neutral FundPerformance since capability inception*Performance indexed to 100*          ...
Absolute Insight UK Equity Market Neutral FundPerformance since inception of Ireland listed UCITS FundPerformance indexed ...
Absolute Insight UK Equity Market NeutralAbsolute returns    170    160    150    140    130    120%    110    100    90  ...
Absolute Insight UK Equity Market NeutralLow volatility: an important product feature                 90                 8...
Absolute Insight UK Equity Market Neutral FundAn uncorrelated source of returnCorrelation analysis                        ...
Portfolio constructionPair trade type                        100%                        90%                        80%   ...
Exposure analysis: sectorsPortfolio positionGross exposure (% of equity assets)   40%   35%   30%   25%   20%   15%   10% ...
Exposure analysis: market capPortfolio positionGross exposure (% of equity assets)   80%   60%   40%   20%    0%          ...
Event presentation   final[1]
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  1. 1. Alternative UCITS Equity FundsIs the investment case still valid? Andrew Cawker Portfolio Manager, Head of Specialist Equities at Insight Investment Prepared for professional clients only
  2. 2. Agenda● Growth in Alternative UCITS Funds● Search for uncorrelated returns● Absolute Insight UK Equity Market Neutral Fund ― Investment process ― Isolating the alpha ― Team ― Risk management● BNY Mellon Absolute Return Equity Fund ― Comparison with Absolute Insight UK Equity Market Neutral Fund● Summary● Appendices 2
  3. 3. Alternative UCITS hedge funds Market size and growth ● Number of funds has exploded and is forecast to continue… ● … despite the bad press and mixed performance ● Investors continue to look for uncorrelated investments and improved risk adjusted returns Many absolute return funds fail to deliver ‘Figures from the Financial Services Authority show that more than half of the funds in the absolute return sector failed to provide a positive return in 2011. Once inflation is taken into account, just a handful managed to provide investors with any real return...And there are only a handful of funds that manage to generate a return consistently’. Elaine Moore, FT, April 27 2012 From alpha to smart beta - the industry’s language is changing “We know we used to promise “absolute returns” (i.e., that you would make money regardless of market conditions) but this pledge has proved impossible to honour. Instead we’re going to give you “risk-adjusted” returns, or failing that, “relative” returns”. Zilch Capital LLC, The Economist, February 18 2012Source: Insight. UCITS Alternative Index Quarterly Industry Report – Q4 2011 – Alix Capital 3
  4. 4. The search for uncorrelated returns Post 2007, asset prices have become increasingly dominated by ‘Risk on/Risk off” trade Achieving portfolio diversification increasingly difficult – correlation heat map, 2005 - 2012 -Source: Insight. HSBC. 30 April 2012. 4
  5. 5. The search for uncorrelated returnsHedge funds - beta still dominatesFrom 31 March 2005 - 31 March 2012 1,500 750 1,400 700 650 1,300 600 1,200 550 500 1,100 450 400 1,000 350 900 300 Mar-05 Sep-05 Mar-06 Aug-06 Feb-07 Jul-07 Jan-08 Jul-08 Dec-08 Jun-09 Nov-09 May-10 Nov-10 Apr-11 Oct-11 Mar-12 HFRX Equity Hedge HFRX Global Hedge MSCI AC World TR (LCY)Source: Lipper, 31 March 2012. Past performance is not a guide to future returns. 5
  6. 6. Are high correlations here to stay?Economic deleveraging = lower trend growth, shorter cycles and increased macro volatility 1.6 16 1.4 14 1.2 12 1.0 10 0.8 8 0.6 6 0.4 4 0.2 2 0.0 0 1951 1961 1971 1981 1991 2001 2011 Macro vol (5 yr Std Dev of real US GDP) (LHS) US Earnings yield (using Schiller P/E) (RHS)Source: Insight. Barcap as at 31 March 2012 6
  7. 7. The search for uncorrelated absolute returnsAbsolute Insight UK Equity Market Neutral Fund (€890.26 million) 150 4500 May 2005 – March 2012 140 4000 Return (p.a.) 4.79% 130 3500 Percentage of positive months 75% Volatility (p.a.)* 1.95% 120 3000 Sharp ratio (p.a.) 0.83 Max drawdown* -1.66%(%) 110 2500 100 2000 ● Pair trades to isolate alpha ● Net exposure ≤ +/-10% of the NAV 90 1500 ● Beta ≤ +/- 0.15 May-05 Dec-05 Jul-06 Jan-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Mar-12 Sep-11 Aug-07 ● Stop loss triggers help protect capital AI UK Equity Market Neutral Fund (LHS) FTSE All Share (capital only, RHS) FTSE All Share (total return, RHS) Returns for the Fund are shown net of fees in GBPSource: Insight, as at 31 March 2012. Absolute Insight UK Equity Market Neutral Fund returns shown net of fees in GBP. * Maximum drawdown statistics calculated using monthly returns since inception.Past performance is not a guide to future performance. 7
  8. 8. Isolating the alphaInvestment process - performance focus at all stages Idea generation is Long term research, key: no maintenance What is the short term market What risks to Real-time monitoring research company worth? aware strip out? and risk management Fund manager/ analyst ideas Tactical Fundamental Hedge Portfolio buy/sell analysis identification decision Quantitative screening Stop-loss (15bp of NAV) 8
  9. 9. Pair-trade approach allows “alpha” isolationFocus on the risks we want, minimise the risks we don’t want Drivers of share prices Pair trades Looser Stock Market Direction vs. Market indices Stock vs. Hedge Sector/Style factors Market/ precision Sector/Stock Stock vs. Sector/ Stock Specifics Stock(s) Tighter 9
  10. 10. Isolating the alpha – a tight hedgeShort “weak” versus “strong” in automotive sector Fiat and DaimlerLead idea: Fiat (short) 9 60 8 55● Bias towards weaker end markets: Mediterranean, low margin, mass-market product 7 50 6 45 5 40● Weak balance sheet; unfunded pension liabilities worsened at 4 35 Chrysler 3 30 2 25● Valuation not “cheap” enough on our analysis Jan-11 Mar-11 Jun-11 Sep-11 Nov-11 Feb-12 Fiat (lhs) Daimler (rhs) Short Fiat versus long DaimlerHedge: Daimler (long) 11.0 Position closed● Better end markets: high margin luxury cars (with good 10.5 Position exposure to emerging market growth) and trucks 10.0 opened 9.5 Price ratio 9.0 8.5● Strong balance sheet 8.0 7.5 7.0● Insufficient valuation premium on our analysis 6.5 6.0 Jan-11 Mar-11 Jun-11 Sep-11 Nov-11 Feb-12Source: Insight/Bloomberg as at 16 February 2012. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investmentrecommendations. 10
  11. 11. Isolating the alpha - active hedge managementProtecting the P&L as macro risks developLead idea: Mondi Mondi versus FTSE 250● Vertically integrated paper and packaging group Changed hedge 0.052● Major capex projects finish: 0.050 Position 0.048 opened ― cash flow increases dramatically Position 0.046 closed ― not reflected in valuation 0.044 0.042● Outlook for paper prices improves with industry consolidation Changed hedge 0.040 0.038● Strong peer share performance Mar-10 May-10 Jul-10 Sep-10 Oct-10 Dec-10 Feb-11 Apr-11 May-11 Emerging markets and materials sectorHedge(s): FTSE 250 →mining sector →FTSE 250 54,000 250● FTSE 250 removes markets risk, but Mondi is a cyclical and 50,000 230 emerging market exposed stock 46,000 210 42,000 190● Tightened hedge in early Feb versus the mining sector 38,000 170 34,000 150● Mid-March switched hedge back to FTSE 250 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 MSCI EM LCY (lhs) MSCI World Materials LCY (rhs)Source: Insight/Bloomberg as at 31 July 2011. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investmentrecommendations. 11
  12. 12. Isolating the alpha - hedging in a “Risk on/Risk off” worldIdentifying correlated stocksLead idea: Tesco (short) Tesco: consensus earnings estimates & share price● Competitive environment becoming more challenging 0.41 6 0.40 ― consumer under pressure 5 0.39 ― competitors becoming more efficient 0.38 4 0.37 3 0.36● Consensus earnings expectations weakening while share price 0.35 2 resilient 0.34 1 0.33 0.32 0● Our analysis suggested shares vulnerable to earnings Aug-07 Jun-08 May-09 Apr-10 Feb-11 Jan-12 disappointment BEst Standard EPS GAAP+ 2012* A (lhs) Share price (rhs) Short Tesco versus long AstraZeneca 10.5 Position closedHedge: AstraZeneca (long) 10.0 9.5● Historical close correlation 9.0 Position Price ratio 8.5 opened● Hedge “defensive” style characteristics with lower earnings 8.0 disappointment risk 7.5 7.0 6.5 6.0 Dec-10 Mar-11 Jun-11 Sep-11 Nov-11 Feb-12Source: Insight/Bloomberg as at 16 February 2012. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investmentrecommendations. 12
  13. 13. Isolating the alpha – active hedge managementA hedge that went wrong Lead idea: BAE Systems (long) BAE Systems estimates momentum – EPS & sales ● Global defence and security company ● Downward pressure on defence spending well known and appeared to be discounted into share price ● Management adapted to environment – focus on margins and cash flow versus growing top-line ● Earnings downgrade risk considered low Source: Insight/Redburn partners as at 11 November 2011 BAE Systems versus FTSE 250 index Hedge: FTSE 250 index 0.032 Position ● Investors need to adjust to slower growth world 0.030 opened 0.028 ● Many index constituents more exposed to earnings downgrade risk 0.026 Hedge changed 0.024 Dec-10 Mar-11 May-11 Aug-11 Oct-11 Jan-12 Source: Insight/Bloomberg as at 13 January 2012.Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. 13
  14. 14. Isolating the alpha – active hedge managementA hedge that went wrong Lead idea: BAE Systems (long) Cobham consensus earnings expectations and share ● Remains attractive given low earnings expectations/valuation price 0.24 2.6 ● Looking to tighten beta hedge in a “risk-on” market 0.23 2.4 0.22 2.2 Hedge: Cobham (short) 0.21 2.0 ● Defence and aerospace equipment company 0.20 1.8 0.19 1.6 ● More exposed to US defence spending cuts 0.18 1.4 Dec-10 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 BEst Standard EPS Adjusted+ 2012* A (lhs) Price ● Following meeting the company, our analysis suggested  cost savings programme insufficient  management change unhelpful  expect earnings disappointment BAE Systems versus Cobham  more expensive than BAE Systems 1.8 1.7 ● However – Cobham’s results proved OK 1.6 Position  earnings and dividend upgrade 1.5 opened  sharp share price reaction 1.4 1.3 ● Look to close position (no stop-loss) 1.2 Dec-10 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12Source: Bloomberg as at 30 April 2012. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investment recommendations. 14
  15. 15. Active management of risk exposures and hedges Tightened hedges to reduce factor risk Gross exposure reduced (decomposition of gross exposure by trade type) 80% 4400 100% 90% 4300 75% 80% 4200 70% 70% 4100 60% 4000 50% 65% 3900 40% 60% 3800 30% 20% 3700 55% 10% 3600 0% Apr-11 Oct-11 Feb-11 Jul-11 May-11 Jan-11 Jun-11 Dec-10 Aug-11 Sep-11 Mar-11 50% 3500 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 UKEMN Gross (LHS) FTSE All-Share TR (RHS) Stock vs Sector Stock vs Index Stock vs Stock Source: Insight as at 31 December 2011. Source: Insight estimates as at 31 October 2011. 15
  16. 16. Specialist investment teamIndividual accountability for positions allows focus Absolute Return Team ● Founding managers have worked together since May 2005 Andrew Cawker* (23yrs) Iain Brown* (25yrs) Richard Howarth* (17yrs) ● Research targets a small number of high conviction ideas David Headland (13 years) Russell Wright (15yrs) Matthew Cooke (7yrs) ● Collaborative culture Product Manager + Dealer ● Individual accountability for positions ● Supported by: Matthew McKelvey Stephen Quantrell  dedicated dealer (25yrs) (20yrs)  quantitative risk analysts Quantitative Risk Analytics + Income Fund Manager  experienced income manager Julien Lederer (11yrs) Tim Rees Vladimir Sovetkin (5yrs) (28yrs)Data as at 31 December 2011( ) denotes years of industry experience* Founding managers 16
  17. 17. Insight’s risk management processEliminating unwanted factor exposures and ensuring transparency Absolute Return • Overall responsibility and oversight of Investment Committee internal investment guidelines Investment Risk Team • Independent supervisory risk function; operates at arm’s length • Portfolio managers ensure adherence to investment guidelines Fund Management Teams • Stop loss review triggers (40bps of Stop/think levels NAV) Quantitative • Performs detailed risk analyses; formal Strategy Team monthly discussions with underlying portfolio managers Absolute Return Investment Committee Reza Vishkai Abdallah Andrew Giles Adrian Grey Matthew Merritt Andrew Stalker Julien Lederer Sonja Uys Nauphal HEAD OF HEAD OF FIXED HEAD OF MULTI HEAD OF HEAD OF PRODUCT SPECIALIST CIO CIO SOLUTIONS INCOME ASSET INVESTMENT QUANTITATIVE MANAGER INVESTMENTS INVESTMENTS STRATEGY RISK STRATEGYSource: Insight, as at 31 March 2012 17
  18. 18. Absolute Insight UK Equity Market Neutral Fund“The search for uncorrelated investments and improved risk-adjusted returns” Monthly since inception (11 May 2005) Absolute Insight UK MSCI World Equity Market Neutral Hedge Government Corporate Total Return 1 2 3 4 5 – Net UK equities funds bonds bonds Property (GBP Hedged) Compound return 38.03% 57.08% -6.18% 42.71% 43.50% 24.25% -7.51% Volatility 1.95% 15.43% 8.99% 3.18% 5.14% 5.92% 17.23% Maximum drawdown -1.66% -41.09% -29.52% -2.98% -10.65% -36.73% -52.13% 1. FTSE All-Share Index (GBP) Total Return 2. HFRX Equity Hedge Index (USD) 3. JP Morgan Global Government Bond Index Hedged GBP TR 4. BarCap Global Agg Corporate Index (GBP hedged) 5. IPD UK Monthly Property Index (GBP hedged). Returns are based on an inception date of 31 May 2005 as this index is priced monthly. Many absolute return funds fail to deliver The one fund doing absolutely what it says on the tin ‘In the past year, a small number of funds have provided investors with ‘The Absolute Insight UK Equity Market Neutral Fund, managed by positive returns, including the Absolute Insight UK Equity Market Andrew Cawker along with three co-managers, is the only fund in the IMA Neutral Fund.’ Absolute Return Sector to have posted positive returns over every 12-month Elaine Moore, FT, April 27 2012 rolling period from 31 March 2008 to 29 February 2012...That is 36 out of 36 periods, 100% delivery, top marks.’ Esther Armstrong, Portfolio Adviser, March 22 2012Source: Lipper as at 31 March 2012. The net returns are based on an annual management charge of 1% and a performance fee of 10%, the calculation of the latter as defined in the fund prospectus. Nocharges are applied to the comparisons. Calculations have used the prices from the Absolute Insight Plus UK Equity Market Neutral Fund until 28 February 2007. This fund was domiciled in Cayman andrun in the same way as the Absolute Insight UK Equity Market Neutral Fund, an Ireland domiciled fund whose performance we show from 28 February 2007 to 31 March 2012. The Cayman fund’sperformance has been incorporated to show performance since inception of Insight Investment’s capability. 18
  19. 19. Addressing different risk return appetites2 Funds: Same investment ideas, different implementationAbsolute Insight UK Equity Market Neutral Fund BNY Mellon Absolute Return Equity FundKey facts Key facts ● Fund launch: 28 February 2007 (strategy launch May 05) ● Fund launch: 31 January 2011 ● Aim: to generate returns with low levels of volatility, irrespective of ● Performance aim: The performance aim of the Fund is to deliver cash (1- broad market direction month GBP LIBOR) + 6% to 8% p.a. over a market cycle (typically 5 to 7 years) before fees. The performance aim is not a guarantee, may not be ● Specialist asset manager: Insight achieved and a capital loss may occur. Funds which have a higher ● Experienced investment team with established track record performance aim generally take more risk to achieve this and so have a ● Domiciled: Dublin greater potential for the returns to be significantly different than expected. ● Available currencies: GBP and EUR ● Specialist asset manager: Insight ● Experienced team with established absolute return track record ● Domiciled: DublinInvestment policy/guidelines ● Available currencies: GBP, USD and EUR ● Market neutral approach ● Low risk Investment policy/guidelines – Low volatility ● Lead ideas consistent with market neutral strategy with scope for: – Low drawdowns − Larger positions – Stop loss triggers − Dynamic management of hedge size (full, partial, unhedged) ● Seek to participate in rising markets but demonstrate low participation in falling markets − Stop loss triggers ● Invests in companies primarily in Europe (including the United Kingdom and countries which may be considered emerging markets within Europe) 19
  20. 20. Comparisons across strategiesPrimary investment parameters 1 Limits are those specified in the prospectus or internal where appropriateSource: Insight. As at 30 March 2012. Past performance is not a guide to future performance. 20
  21. 21. BNY Mellon Absolute Return Equity FundEvolution of gross & net exposures since inception Net exposure Gross exposure (%) (%) 14% 620 135% 620 12% 600 600 110% 10% 580 580 85% 8% 560 560 6% 60% 540 540 4% 35% 520 520 2% 10% 500 500 0% -2% 480 -15% 480 05-Oct-11 31-Jan-11 07-Mar-11 17-May-11 21-Jun-11 26-Jul-11 09-Nov-11 15-Dec-11 19-Jan-12 23-Feb-12 30-Mar-12 11-Apr-11 31-Aug-11 05-Oct-11 31-Jan-11 07-Mar-11 17-May-11 21-Jun-11 26-Jul-11 09-Nov-11 15-Dec-11 19-Jan-12 23-Feb-12 30-Mar-12 11-Apr-11 31-Aug-11 BNY Mellon Absolute Return Equity - Net Exposure (lhs) BNY Mellon Absolute Return Equity - Gross Exposure (lhs) MSCI AC World TR LCY (rhs) MSCI AC World TR LCY (rhs)Source: Insight, Bloomberg, as at 31 March 2012. Portfolio holdings are subject to change at any time without notice, are for information purposes only and should not be construed as investmentrecommendations. Past performance is not a guide to future performance. 21
  22. 22. BNY Mellon Absolute Return Equity FundPerformance as at 31 March 2012 Percentage Growth Total Return, In Local Currency Since Inception To 31/03/2012 3.78% 1.97% -15.75% Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 BNY Mellon Absolute Return Equity T EUR Hdg 1.12 0.21 0.34 0.33 -0.01 -1.11 0.47 -0.27 0.08 0.33 0.49 0.27 -0.22 Monthly Share ClassSource: Lipper Hindsight . Fund performance calculated as total return, including annual management charge, but excluding initial charge, income reinvested gross of tax, expressed in share class currency.Indices used are the Local Currency versions of the MSCI World and HFRX Hedge Indices. The impact of the initial charge, which may be up to 5%, can be material on the performance of your investment.Performance figures including the initial charge are available upon request. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currencymovements. When you sell your investment you may get back less than you originally invested. Past performance is not a guide to future performance. 22
  23. 23. Summary● Absolute Insight UK Equity Market Neutral Fund – 7 year record of consistent low volatility, uncorrelated absolute returns – Pair trade approach and investment process focuses on isolating alpha – Stop loss policy and active hedging helps limit drawdowns● BNY Mellon Absolute Return Equity Fund – launched January 2011, targeting higher returns – Aims to capture some market upside – Uses existing process to help limit drawdown experience 23
  24. 24. Biographies Andrew Cawker – Absolute Return Portfolio Manager, Head of Specialist Equities Andrew joined the UK equity team at Insight in April 2003. He is Head of Specialist Equities and has portfolio management responsibility for equity long/short portfolios. Prior to Insight, Andrew was an Associate Partner at Invesco Global Asset Management (Amvescap plc) where he was involved in developing specialist UK equity business alongside the management of a range of UK and global equity portfolios. He was also responsible for pan-European analysis for the retail, food, beverages and tobacco sectors. Andrew began his investment career at Prudential Portfolio Managers in 1988, ultimately becoming a Director, with responsibility for UK equities. He holds a BA honours degree in Business Studies from the City of London Polytechnic. Iain Brown – Absolute Return Portfolio Manager, Specialist Equities Iain joined the UK equity team at Insight in July 2002 and is responsible for the management of equity long/short portfolios. Before joining Insight, he spent six years at Norwich Union Investment Management, latterly as Head of Institutional Investment. Prior to this he spent eight years at CIN / Goldman Sachs as a portfolio manager. Iain began his career as an investment analyst with Credit Lyonnais in 1987 following a number of short-term roles, including two years with stockbroker, Charlton Seal. Iain holds a MA degree in Geography from Fitzwilliam College, Cambridge University. Richard Howarth – Absolute Return Portfolio Manager, Specialist Equities Richard joined the UK equity team at Insight in January 2002 and is responsible for the management of equity long/short portfolios. Prior to Insight, he held a fund management role at Brewin Dolphin for five years. He began his career as trainee portfolio manager with Capel-Cure Myers Capital in 1994. Richard holds a BA honours degree in Economics from the University of Nottingham and is an Associate of the CFA Society of the UK. David Headland – Absolute Return Portfolio Manager, Specialist Equities David joined Insight in August 2010 as a portfolio manager within our equity long/short team. This followed a brief spell with a European equity research boutique after his previous role at Insight from 2002 to November 2009 as co-portfolio manager for a European equity market neutral fund. David started his career at Norwich Union in 1998 and later became a highly successful portfolio manager at Morley Fund Management. He graduated from Leeds University with a BA honours degree in Economics and is an Associate of the CFA Society of the UK.CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute 24
  25. 25. Biographies (continued) Matthew Cooke – Absolute Return Portfolio Manager, Specialist Equities Matthew joined Insight in September 2005 as a graduate trainee and completed rotations in fixed income before joining the equity team in 2005 as a UK investment analyst. He became a UK small cap portfolio manager in 2007 before transitioning to focus on absolute return in 2009. Matthew holds a BSc honours degree in Economics with Accounting from Loughborough University, as well as the Investment Management Certificate from the CFA Society of the UK. He is a CFA charterholder. Russell Wright – Absolute Return Analyst, Specialist Equities Russell joined Insight in September 2004 as an equity analyst with responsibility for recommending ideas for a wide range of mandates. He now focuses on generating trade ideas for absolute return mandates primarily in the industrial and property sectors, and is involved in the implementation and management of those trades. Before joining Insight he worked for HSBC as an analyst where he was responsible for leisure sector analysis. Prior to HSBC, Russell worked at Baring Asset Management, which he joined in 1987, as an investment analyst covering leisure, construction, chemicals and retail sectors. Russell holds a BSc honours degree in Business and Japanese from the University of Cardiff and is a CFA charterholder. Matthew McKelvey – Head of Product Management, Specialist Investments Matthew joined Insight in June 2007. He is responsible for business development and reporting to clients on investment strategy and performance. Prior to joining Insight, Matthew held the position of Investment Director for global equities at Fidelity International. There he was responsible for reporting to clients and intermediaries on investment strategy and performance, as well as developing their global equity business. Matthew began his industry career at Merrill Lynch Investment Managers, (formerly Mercury Asset Managers and now BlackRock) in 1986 where he held various roles within their equity division, latterly as a Director and Business Manager for global equities. Matthew is an Associate of the CFA Society of the UK.CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute 25
  26. 26. Appendix – Fund information 26
  27. 27. AppendixAbsolute Insight UK Equity Market Neutral Fund 27
  28. 28. Absolute Insight UK Equity Market Neutral FundPerformance since capability inception*Performance indexed to 100* Returns (%)* 150 10 Cumulative return 140 8 6.30 5.51 130 6 4.79 % 3.54 3.16 120 4 2.17 1.77 2.02 110 2 0.75 1.09 0.72 0.28 0.23 0.58 100 0 May 05 Sep 06 Feb 08 Jun 09 Nov 10 Mar 12 2012 YTD 2011 2010 2009 2008 3yr pa Since inception AI UK Equity MN capability 3 Month GBP Libid Fund 3 Month GBP Libid (pa)*Fund risk statistics* Monthly performance* Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012 0.2 0.2 -0.1 0.3Annualised volatility¹ 1.95% 2011 0.5 -0.1 1.0 0.2 0.2 0.4 -0.1 -0.4 0.3 -0.1 0.0 0.3 2.2Historic beta² 0.01 2010 0.5 -0.1 0.1 0.2 -0.1 -0.2 0.2 0.2 0.0 0.6 0.1 0.2 1.8 2009 0.3 0.2 1.2 0.3 1.1 0.3 0.2 0.1 0.1 0.2 -0.3 -0.1 3.5Sharpe ratio 0.83 2008 0.7 0.3 -0.3 1.0 0.7 1.2 0.9 -0.2 -0.1 0.8 0.8 0.3 6.3Maximum drawdown³ -1.66% 2007 0.6 0.7 0.5 0.6 0.8 0.8 0.3 0.7 -0.1 1.4 -1.1 0.4 5.6 2006 0.8 1.2 0.9 -0.0 -1.0 -0.6 -0.0 1.3 0.5 1.2 2.3 1.5 8.2 2005 - - - - 0.1 1.1 0.8 1.6 0.5 -0.0 0.4 0.6 5.2Data as at 31 March 2012. *Calculations use fund prices from the Absolute Insight Plus UK Equity Market Neutral fund from 11 May 2005 to 28 February 2007. This Fund was domiciled inCayman Islands and run in the same way as the Absolute Insight UK Equity Market Neutral Fund, an Ireland-domiciled Fund, the performance of which we show from 28 February 2007 onwards.The Cayman Fund’s performance has been incorporated to show performance since inception of Insight Investment’s capability. All performance data is GBP and net of fees; ¹ Annualisedvolatility calculated using monthly data since inception; ² Beta measured using weekly returns since inception 11 May 2005 against FTSE All Share; ³ Maximum drawdown statistics calculatedusing monthly returns since inception B0078 28
  29. 29. Absolute Insight UK Equity Market Neutral FundPerformance since inception of Ireland listed UCITS FundPerformance indexed to 100 Returns (%)* 7 6.30 125 6 5.51 120 5 4 3.54 3.59 115 % 3 2.58 2.17 110 1.77 2 1.09 0.75 0.58 105 1 0.28 0.23 100 0 Feb 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 2012 YTD 2011 2010 2009 2008 Since inception AI UK Equity MN (Dublin) 3 Month GBP Libid Fund 3 Month GBP Libid (pa)*Fund risk statistics* Monthly performance* Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTDAnnualised volatility¹ 1.63% 2012 0.2 0.2 -0.1 0.3 2011 0.5 -0.1 1.0 0.2 0.2 0.4 -0.1 -0.4 0.3 -0.1 0.0 0.3 2.2Historic beta² 0.01 2010 0.5 -0.1 0.1 0.2 -0.1 -0.2 0.2 0.2 0.0 0.6 0.1 0.2 1.8Sharpe ratio 0.62 2009 0.3 0.2 1.2 0.3 1.1 0.3 0.2 0.1 0.1 0.2 -0.3 -0.1 3.5 2008 0.7 0.3 -0.3 1.0 0.7 1.2 0.9 -0.2 -0.1 0.8 0.8 0.3 6.3Maximum drawdown³ -1.22% 2007 - - 0.5 0.6 0.8 0.8 0.3 0.7 -0.1 1.4 -1.1 0.4 4.3Data as at 31 March 2012. Inception date: 28 February 2007. All performance data is GBP and net of fees; 1 Annualised volatility calculated using monthly data since inception; ² Beta measuredusing weekly returns since inception 28 February 2007 against FTSE All Share; ³ Maximum drawdown statistics calculated using monthly returns since inception B0078 29
  30. 30. Absolute Insight UK Equity Market NeutralAbsolute returns 170 160 150 140 130 120% 110 100 90 80 70 May 05 Jan 06 Sep 06 Jun 07 Feb 08 Oct 08 Jun 09 Mar 10 Nov 10 Jul 11 Mar 12 AI UK Equity MN capability FTSE All Share (total return) FTSE All Share (capital only)Data as at 31 March 2012. *Calculations have used the prices from the Absolute Insight Plus UK Equity Market Neutral fund from 11 May 2005 to 28 February 2007. Thisfund was domiciled in Cayman and run in the same way as the Absolute Insight UK Equity Market Neutral fund, a Dublin domiciled fund whose performance we show from28 February 2007 to 31 March 2012. The Cayman fund’s performance has been incorporated to show performance since inception of Insight Investment’s capability. UKEquity Market Neutral capability returns shown gross of fees B0078 30
  31. 31. Absolute Insight UK Equity Market NeutralLow volatility: an important product feature 90 80 70 60Volatility (%) 50 40 30 20 10 0 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 AI UK Equity Market Neutral capability FTSE 100 Volatility calculations have used the prices from the Absolute Insight UK Equity Market Neutral (Dublin) from 3 December 2007 to 31 March 2012. Volatility is defined as the annualised standard deviation of the latest rolling 20-day returns. Fund return analysis shown gross of charges. The FTSE 100 index is a total return index with income reinvested. Source: Insight Investment & Rimes; Currency: GBP B0078 31
  32. 32. Absolute Insight UK Equity Market Neutral FundAn uncorrelated source of returnCorrelation analysis AI UK equity market neutralUK Equity Market Neutral Fund 1.00HFR Global Hedge Fund USD 0.22HFR Equity Market Neutral USD 0.05HFR Absolute Return USD 0.20HFR Macro USD 0.23FTSE All Share 0.10S&P 500 (USD) 0.05Corporate Bonds -0.01Gilts -0.11Emerging Market Debt 0.06Property -0.04Commodities 0.10Data as at 31 March 2012. *Calculations use fund prices from the Absolute Insight Plus UK Equity Market Neutral Fund from 11 May 2005 to 28 February 2007. This Fundwas domiciled in Cayman Islands and run in the same way as the Absolute Insight UK Equity Market Neutral fund, a Dublin fund whose performance we show from28 February 2007 to 31 March 2012. The Cayman fund’s performance has been incorporated to show performance since inception of Insight Investment’s capability. Allfigures are quoted in GBP Note: Figures represent gross performance data B0078 32
  33. 33. Portfolio constructionPair trade type 100% 90% 80% 70% % of gross exposure 60% 50% 40% 30% 20% 10% 0% Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Sep-05 Dec-05 Mar-06 Sep-06 Dec-06 Mar-07 Sep-07 Dec-07 Mar-08 Sep-08 Dec-08 Mar-09 Sep-09 Dec-09 Mar-10 Sep-10 Dec-10 Mar-11 Sep-11 Dec-11 Mar-12 Stock versus Stock Stock versus Index Stock versus SectorData as at 31 March 2012Absolute Insight Plus UK Equity Market Neutral Fund (Cayman domiciled fund) until October 2009 and Absolute Insight UK Equity Market Neutral/Dublin domiciled fund since then B0078 33
  34. 34. Exposure analysis: sectorsPortfolio positionGross exposure (% of equity assets) 40% 35% 30% 25% 20% 15% 10% 5% 0% Consumer Consumer Energy Financials Health care Industrials Information Materials Telecommunication Utilities discretionary staples technology services % of gross equity exposure Min MaxNet exposure (% of NAV) 8% 6% 4% 2% 0% -2% -4% -6% Consumer Consumer Energy Financials Health care Industrials Information Materials Telecommunication Utilities discretionary staples technology services % of NAV Min MaxData as at 31 March 2012. Absolute Insight UK Equity Market Neutral Fund (Ireland domiciled fund). Min and max levels refer to the range experienced over the period 31 January 2008 to 31March 2012 B0078 34
  35. 35. Exposure analysis: market capPortfolio positionGross exposure (% of equity assets) 80% 60% 40% 20% 0% Large cap Mid cap Small cap (>£2.5bn) (>£500m) (<£500m) % of gross equity exposure Min MaxNet exposure (% of NAV) 8% 6% 4% 2% 0% -2% -4% -6% -8% Large cap Mid cap Small cap (>£2.5bn) (>£500m) (<£500m) % of NAV Min MaxData as at 31 March 2012Absolute Insight UK Equity Market Neutral Fund (Ireland domiciled fund) B0078 35

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