Investec asset management


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Investec asset management

  1. 1. OEIC Solving the Income Problem Investec Diversified Income Fund John Stopford – Portfolio Manager, Co-Head of Fixed Income & Currency January 2013
  2. 2. The need for income is likely to rise...Dependency Ratios Japan 90 UK 80 US Western Europe 70 60 50 40 30 1950 1955 1960 1965 1985 1990 1995 2015 2020 2025 2030 1970 1975 1980 2000 2005 2010 2035 2040● Aging populations will need income as they move to retirement● The opportunities to earn real incomes are becoming more scarceSources: Investec Asset Management, UNPage 2 | CONFIDENTIAL11711
  3. 3. ...but retirement income continues to fall ● Annuity rates continue to fall putting pressure on retirement income − At beginning of 1990s a £100,000 pension pot - income of £15,640 − 2012 a 65 year old man will get £5,140 £15,640 £5,140 1990s 2012Source: 3 | CONFIDENTIAL11711
  4. 4. Central banks are supressing real yieldsUK Base Rate UK CPI vs. BoE Target 18 4 16 Deviation from target 3 14 Pre-Crisis average UK bank rate Post-Crisis average 12 2 10 1 8 6 0 4 -1 2 0 -2 1694 1718 1742 1766 1790 1814 1838 1862 1910 1934 1958 1982 2006 1886 Oct-02 Oct-12 Mar-09 Jan-01 Jun-06 May-07 Jan-11 Nov-01 Nov-11 Sep-03 Aug-04 Jul-05 Apr-08 Feb-10● A little bit of inflation and low borrowing costs ease the burden of too much debtSource: Investec Asset ManagementPage 4 | CONFIDENTIAL11711
  5. 5. Investors will have to look further afield for incomeMarket Yields 7.0% 6.2 6.0% 5.5 5.0% 4.3 3.9 4.0 4.0% 3.0% 2.7 2.8 1.9 2.0% 1.3 1.0% 0.5 0.0% UK Inf lation UK Corporate Bonds Global Govt Bonds Global Equities UK Equities EM Local Debt UK Cash Rate EM Hard Currency Debt UK Gilts Global High YieldSources: ONS UK CPI YoY, Bloomberg UK GBP O/N LIBOR, Merrill Lynch Global Gov’t Bond Index YTM, Merrill Lynch UK Gilt IndexYTM, MSCI Dividend Yield, FTSE Dividend Yield, Merrill Lynch UK Corporate Bond Index YTM, JP Morgan EMBIG Index YTM,JP Morgan GBI EM Index YTM, Merrill Lynch Global High Yield Constrained Index YTM, as at 3 January 2013Page 5 | CONFIDENTIAL11711
  6. 6. Equities look an increasingly attractive source of incomeDividend Yield (%) US Dividend & Bond Yields have crossed over 4.5% 16.0% Current US long-term Treasury yield 4.0% 15 year average 14.0% S&P dividend yield 3.5% 12.0% 3.0% 10.0% 2.5% 8.0% 2.0% 6.0% 1.5% 4.0% 1.0% 0.5% 2.0% 0.0% 0.0% 1925 1929 1934 1939 1944 1949 1954 1958 1963 1968 1973 1983 1988 1992 2002 2007 1978 1997 2012 UK France Japan Germany US Canada● But they also remain a source of volatilitySource: Investec Asset Management, November 2012Page 6 | CONFIDENTIAL11711
  7. 7. High Yield bonds typically pay a risk premiumExcess Return Over Treasuries Return Correlation to Gilt Returns 25% 70% 20% 60%Annualised 3 year out-performance 50% 15% 40% 10% 30% 5% 20% 0% 10% -5% 0% -10% -10% -20% -15% 200 700 1200 1700 -30% HY vs. Gilts Corporates & collateralised High Yield spread 3 years earlier vs. Gilts● Current yield spreads have tended to deliver decent out-performance historically● High Yield bonds tend to be better insulated against rising rates than other bondsSources: Investec Asset Management, Bloomberg, November 2012Page 7 | CONFIDENTIAL11711
  8. 8. Emerging Markets are no longer the world’s basket casesGross government Debt/GDP (%) Yield Premium Between EM & DM Bonds 250 Emerging Markets Developed Markets 200 150 100 50 0 Netherlands United States Singapore Indonesia Philippines United Kingdom Germany Portugal Sweden Thailand Slovenia Iceland Belgium Ireland South Africa Canada Norway Cyprus Finland Greece Peru Australia Japan Malaysia Slovak Republic France New Zealand Israel Poland Austria Spain Italy Czech Republic Turkey Mexico Nigeria Brazil Denmark Switzerland Russia Colombia Malta ChileSources: Investec Asset Management, IMF, 2012 (estimated) Sources: Investec Asset Management, JP Morgan Indices, November 2012● Emerging Market risks have tended to decline● Their bond markets still tend to pay a yield premiumPage 8 | CONFIDENTIAL11711
  9. 9. Multi-asset approach can exploit diversified sources of yieldCalendar Year Returns in GBP for different assets – best to worst Highest return Lowest return● Multi-asset approach aims to avoid the tail-risks associated with single asset strategies● Exposure is actively managed to reflect evolving investment opportunities and risks● Well placed to exploit yield potential of both developed and emerging marketsSource: Investec Asset Management, Bloomberg FTSE 100 Index Total Return for Equities; 50:50 JP Morgan EMBIG & ELMI+index prior to 2002 then 50:50 JP Morgan EMBIG & GBI_EM for EM Bond in GBP for EM Debt; Merrill Lynch European Non-Financial High Yield Constrained Index hedged into GBP for High Yield; 1/3rd mix of Equities, EM Debt & High Yield for MixedPage 9 | CONFIDENTIAL11711
  10. 10. Investec Diversified Income Fund● Aims to provide an attractive yield through an actively managed multi-asset portfolio● Managed by highly experienced portfolio manager John Stopford, backed by a specialist Multi-Asset team● Uses the breadth and depth of Investec’s global investment capabilities across the developed and emerging world● Actively manages downside risk● RDR-ready share class and part of Investec’s Managed Solutions RangeAs at 30 November 2012 A-class I-classDistribution yield 5.6%* 5.6%*Underlying yield 3.9%* 4.7%* Seeking attractive income from a diversified portfolio of “global best ideas”* The Distribution Yield reflects the amount that may be expected to be distributed over the 12 months beginning 1 October 2012, as a percentageof the mid-market unit price of the Fund. The Underlying Yield reflects the annualised income expected to be received by the Fund. Both are basedon a snapshot of the portfolio as at 30 November 2012, are not guaranteed, will vary over time and take no account of any preliminary charge. TheDistribution Yield is higher than the Underlying Yield because the Fund’s expenses are charged to capital. This has the effect of increasing theFund’s distribution (which may be taxable) whilst reducing its capital to an equivalent extent and may constrain future capital and income growth.Page 10 | CONFIDENTIAL11711
  11. 11. Multi-Asset approach to providing diversified income Equities High Yield Emerging Market Debt Equities ● Focus on large and medium-cap companies with high Global Franchise Monthly High Blended EMD and sustainable yield Universe Strategy Strategy High Yield debt ● High-yielding companies with strong balance sheets Temple Bar Emerging markets debt Universe ● Attractive yield opportunities relative to developed markets debt 20-40% of Portfolio 0-50% of Portfolio 0-50% of Portfolio Indentifying attractive opportunities within leading Investec strategiesThe investment team can also invest in attractive opportunities across listed property, infrastructure and the broader fixed incomemarket. These internal parameters are subject to change without notification necessarily to investorsPage 11 | CONFIDENTIAL11711
  12. 12. Diversified IncomeDiversified Income teamteam and specialist supportMulti-asset core and specialist support 26/07/2012 Diversified Income team (A 14 strong multi-asset team with an average experience 15 years in industry, 10 years at Investec) Strategy Leader John Stopford (22*) Portfolio Manager Co-Head of Fixed Income & Currency Emerging Markets Debt & Contrarian Equities Currency Alastair Mundy (24*) – Head of Contrarian, Core team Peter Eerdmans (18*) – Head of Emerging Portfolio Manager Markets Debt & Currency 13 team members with average experience 12 team members with average experience of 14 years in industry, 6 years at Investec of 10 years in industry, 5 years at Investec Philip Chris Max Seamus Saunders (31*) Freund (22*) King (28*) Vasey (8*) Global Equities High Yield Clyde Rossouw (18*) – Portfolio Manager Kieran Roane(12*) – Investment Specialist 6 team members with average experience of 14 team members with average experience 11 years in industry, 6 years at Investec of 11 years in industry, 5 years at Investec* Industry experience A highly experienced, multi-disciplinary team A highly experienced, multi-disciplinary team* Industry experiencePage 12 | CONFIDENTIAL11711
  13. 13. Diversified asset exposure and defensive equity holdings helpto control riskAsset Allocation Contributions to Expected Volatility Cash, 2% Equities, Portf olio 26% FX EMD, 33% EMD Bond Futures CDS Tilts, 7% Credit Equity Futures Tilts Credit, 32% Equities -1% 0% 1% 2% 3% 4% 5% 6%● Expected volatility c.40% of UK equity market and c.2/3rds of High Yield● Risk exposure managed to reflect relative value and changing economic conditionsSource: Investec Asset Management, as at 17 December 2012The portfolios may change significantly over a short period of time. Tilts include listed property and infrastructurePage 13 | CONFIDENTIAL11711
  14. 14. Why the Investec Diversified Income Fund?● Targets an attractive yield through an actively managed multi-asset portfolio● Managed by highly experienced portfolio manager backed by a specialist Multi-Asset team● Uses the breadth and depth of Investec’s global investment capabilities across the developed and emerging world● Actively manages downside risk● RDR-ready share class and part of Investec’s Managed Solutions Range● Distribution Technology risk profiled 4 Attractive income from a diversified portfolio of “global best ideas”Dynamic Planner is a registered trademark of Distribution TechnologyPage 14 | CONFIDENTIAL11711
  15. 15. OEIC Thank you
  16. 16. Contact detailsFergus McCarthy Charles WilsonSales Director Sales DirectorTel: +44 (0) 20 7597 1891 Tel: + 44 (0)20 7597 2184Email: Email: charles.wilson@investecmail.comInvestec Asset ManagementWoolgate Exchange25 Basinghall StreetLondonEC2V 5HAUnited Kingdomwww.investecassetmanagement.comTelephone calls may be recorded for training and quality assurance purposes.Issued by Investec Asset Management, January 2013Page 16 | CONFIDENTIAL11711
  17. 17. Important informationThis communication is not for general public distribution. If you are a private investor and receive it as part of a general circulation, pleasecontact us at +44 (0)20 7597 1900. The value of this investment, and any income generated from it, will be affected by changes ininterest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating tothe assets in which it invests. The Fund’s investment objective will not necessarily be achieved and investors are not certain to makeprofits; losses may be made. Past performance should not be taken as a guide to the future. Performance would be lower had initialcharges been included and will vary between different share classes dependant upon their applicable charges. Returns to individualinvestors will vary in accordance with their personal tax status and tax domicile.All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions statedare honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particularsecurity. The portfolio may change significantly over a short period of time.This communication is provided for general information only. It is not an invitation to make an investment nor does it constitute an offerfor sale. The full documentation that should be considered before making an investment, including the Prospectus and Key InvestorInformation Documents or Offering Memorandum, which set out the fund specific risks, is available from Investec Asset Management.This communication should not be distributed to private customers who are resident in countries where the Fund is not registered for saleor in any other circumstances where its distribution is not authorised or is unlawful. Please to check registrations by country. For Funds registered in Switzerland, the Prospectus,Key Investor Information Documents and Report & Accounts may be obtained free of charge from the Swiss Representative and PayingAgent, RBC Dexia Investor Services Bank S.A., Esch-sur-Alzette, Badenerstrasse 567, P.O. Box 101, CH-8066 Zurich.In the USA, this communication should only be read by institutional investors, professional financial advisers and, at their exclusivediscretion, their eligible clients, but must not be distributed to US Persons.THIS INVESTMENT IS NOT FOR SALE TO US PERSONS.Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management Limited, which isauthorised and regulated by the Financial Services Authority, January 2013.Page 17 | CONFIDENTIAL11711