Montreux presentation final


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • Tomi
  • Tomi or Nick.
  • G:\\Business Support\\Performance_Risk\\PERFALL\\Hedge Funds then open data for hedge fund sheets file
  • G:\\Business Support\\Performance_Risk\\PERFALL\\Hedge Funds then open data for hedge fund sheets file
  • Montreux presentation final

    1. 1. CAZENOVE UK ABSOLUTE TARGET FUND A leader in generating absolute returns Steve Cordell, Fund Manager Citywire Montreux May 2012 For professional advisers only
    2. 2. Investment team – fund managers Steve Cordell, fund manager Julie Dean, fund manager •Joined Cazenove in 2002. •Joined Cazenove in 2002. •A senior member of the pan-European •A member of the pan-European equity equity team and manager of the team and manager of the Morningstar Cazenove UK Equity Absolute Return OBSR Bronze-rated Cazenove UK Fund, the Cazenove Leveraged UK Opportunities Fund and the Cazenove Equity Fund, the Cazenove UK Absolute UK Equity Fund. Target Fund and also the S&P AAA-rated •Joined from HSBC Asset Management Cazenove Pan Europe Fund. (Europe) Ltd where she was responsible •Joined from HSBC Asset Management for similar funds as well as institutional (Europe) Ltd where he was responsible portfolios. for several retail and institutional pan- •Graduated from St Anne’s College, European portfolios. Oxford University with a BA (Hons) in •Director of Cazenove Capital and has 18 Modern History. She has 19 years of years of investment experience. investment experience. -2-
    3. 3. Cazenove UK Absolute Target Fund in 2011: 11.2%2011 fund (Euro share class) volatility 7.5 / FTSE All-Share 24.8% Percentage 11.18% -3.46% Source: Lipper at 31/12/11 -3-
    4. 4. Cazenove UK Absolute Target Fund (CAT)• Targeting 8-10%* per annum net of fees (No hurdle rate)• Expecting maximum two thirds UK Equity Market Volatility• UCITS UK OEIC using CFDs• Launched July 2008• Two share classes: - P1 - AMC 1.25% plus 20% performance fee (with high watermark) - P2 - AMC 0.75% plus 20% performance fee (with high watermark)• Minimum investment €1,000 (P1) or €500,000 (P2)• Sterling and euro (daily hedged) accumulation shares *There is no guarantee that either the target or positive returns will be achieved -4-
    5. 5. Performance since launch Steve Cordell Appointment 40 30 20 10 0-10-20-30-40 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 Cazenove UK Absolute Target P2 GBP 9.64% FTSE All-Share TR 25.57% Source: Lipper at 31/03/12 -5-
    6. 6. Cazenove UK Absolute Target Fund: volatility since launch Source: Lipper at 31/03/12 -6-
    7. 7. Broadly market neutral approach10 worst market monthly drawdowns vs fund Source: Cazenove Capital Management at 31/03/12 -7-
    8. 8. Pan-European equity team Chris Rice Head of Pan-European EquitiesUK EuropeSteve Cordell (UK Absolute) Chris Rice (Europe Ex UK)Paul Marriage (UK Smaller Companies) Steve Cordell (Pan-Europe)Julie Dean (UK Equity) Lionel Rayon (Pan-Europe, High Alpha)John Warren (UK Smaller Companies) Kuldip Shergill (Pan-Europe, High Alpha)Matthew Hudson (Equity Income) James Sym (Europe Ex UK)David Docherty (UK Equity)Wade Pollard (UK Equity)Charlotte Morrish (UK Equity)Melanie Jenkins (Charity & Inst) All team members have sector research responsibilities as well as product responsibilities Social environment and ethical (SEE) research is integrated into our mainstream investment process – in addition we have 2 SRI analysts. -8-
    9. 9. PHILOSOPHY
    10. 10. Business cycle – a pragmatic approach Recovery Expansion Slowdown Recession Beta dominates A dom lpha ina tes a s Beta dominates ph te Al ina h do m g rowt rend G DP t Beta dominates• At turning points in the economic and stock market cycles, we would expect business cycle factors to dominate stock returns and as such we would expect to commit more of our risk capital to beta factors.• During trend periods (expansion/contraction) it is the difference between stocks and sectors which dominate stocks returns. As such we would expect to commit more risk capital to alpha factors (either fundamental or valuation anomalies). - 10 -
    11. 11. A pragmatic approach• Sector market divides are not homogenous. They do not necessarily help us Alp Alp haa h determine the behaviour of these stocks within the cycle. d d om Alpominaa ha in tees t• Define the correlation of stocks and allocate them to seven style groupings: dom s ina tes Growth Financials Commodity cyclicals Growth defensives Consumer cyclicals Value defensives Industrial cyclicals HIGH BETA LOW BETA• Pragmatic approach combining top-down macro view with earnings based security selection ‘A pragmatic approach• Avoid permanent style / size bias is most likely to achieve• Demand for products and services changes throughout the business cycle competitive and• Operational gearing of companies impacts profitability of companies consistent returns’ - 11 -
    12. 12. Stock selection.…..variability is predictableTypical longs Slowdown Recession Recovery ExpansionTypical shortsLong Growth defensive Value defensive Industrial cyclicals Commodity cyclicals Growth Growth defensive Consumer cyclicals Industrial cyclicals Value defensives Growth Interest rate sensitive Growth Commodity cyclicals Consumer cyclicals Commodity cyclicals Consumer cyclicals Interest rate sensitive Commodity cyclicals Growth Interest rate sensitive Consumer cyclicals Interest rate sensitive Growth defensives Growth defensivesShort Industrial cyclicals Industrial cyclicals Value defensives Value defensive - 12 -
    13. 13. Horses for courses Performance relative to FTSE All-Share* Stock Sector Style 31/12/99 - 12/03/03 12/03/03 - 15/06/07 15/06/07 - 03/03/09 03/03/09 - 07/07/11 Morgan Crucible Electronic & Electrical Cyclical -74% +272% -42% +74% Bodycote Industrial Engineering Cyclical -55% +114% -26% +84% Cookson General Industrials Cyclical -80% +98% -78% +39% Diageo Beverages Defensive +147% -17% +40% 7% Unilever Food Producers Defensive +178% -35% +57% 0% Reed Elsevier Media Defensive +72% -23% +43% -4% Source: Thomson Datastream - 13 -
    15. 15. How we determine turning points in the business cycle UK Markit manufacturing PMI US ISM manufacturing PMI 70 80 65 70 60 60 55 50 50 45 40 40 35 30 30 20 2000 2002 2004 2006 2008 2010 2000 2002 2004 2006 2008 2010 Headline Index New Orders Headline Index New Orders Germany Markit manufacturing PMI China manufacturing PMIs 70 60 50 40 30 20 2000 2002 2004 2006 2008 2010 Headline Index New Orders Source: Markit & Thomson Datastream - 15 -
    16. 16. High correlation between leading indicators and earnings revisions US ISM vs S&P 500 EPS estimates S&P 500 Index vs EPS estimates UK Manufacturing PMI vs FTSE All-Share EPS estimates FTSE All-Share Index vs EPS estimates Source: Thomson Datastream - 16 -
    17. 17. Stocks also correlate to leading indicatorsLeading indicators of the cycle Industrial cyclicals follow Source: Merrill Lynch - 17 -
    18. 18. Portfolio construction Emphasis Pan-European equity strategy Where we are? meeting Where we are going? 25% Tilts weighting to reflect our business 7 style tilts cycle view Avoid permanent style / size bias Portfolio Diversified portfolio Low correlation Strength of view Position sizing Potential returns 75% Stock volatility Quantitative screening Stock selection process Qualitative screening Stock opportunities analysed more in depth - 18 -
    19. 19. Three type of trades to add value Business cycle factors Security analysis Trade Business cycle trades Relative value trades Directional trades Range 50 – 90% 0 – 10% 20 – 50% Long: GlaxoSmithKline Long: Babcock Long: Spectris E Example Short: Solvay Tech Short: Intertek Short: Talvivaara - 19 -
    20. 20. Net / gross exposures since launchAverage net exposure % Monthly gross exposure % Source: Cazenove Capital Management at 31/03/12 - 20 -
    21. 21. Cazenove UK Absolute Target Fund in 2011: 11.2%2011 fund volatility 7.5 / FTSE All-Share 24.8% Percentage 15.00 11.24% 10.00 5.00 0.00 -3.46% -5.00 -10.00 -15.00 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Cazenove UK Absolute Target P2 GBP FTSE All-Share TR Source: Lipper at 31/12/11 - 21 -
    22. 22. How we made our 11.2%* net return in 2011 Longs Shorts Net Total Estimated Contribution (bps) 488 631 1120 Largest 10 sector impacts (bps) Longs Shorts Total Support Services 138 83 222 Mining -3 203 200 Chemicals 18 116 134 Industrial Metals & Mining 131 131 Pharmaceuticals & Biotechnology 108 108 Electronic & Electrical Equipment 95 11 106 General Retailers -42 117 75 Life Insurance 46 22 66 Software & Computer Services 7 -89 -82 Media -150 -19 -169 Source: Cazenove Capital Management 12 months to 31/12/11 *P2 GBP Class - 22 -
    23. 23. Risk on, risk off… Macro dominates markets now UK defensives % PER premium vs cyclicals Commodity prices vs USD Source: Thomson Datastream 23
    24. 24. OUTLOOK
    25. 25. … and in the real world The boom and bust of America’s housing market UK, US and Eurozone bank lending China money supply vs copper Prices • UK supported by QE - just • Credit crunch in Eurozone – recession likely • China growth/inflation balance more sustainable – easing started • US muddle through - at risk from European contagion? Source: Thomson Datastream / Bloomberg - 25 -
    26. 26. Can the US economy continue to surprise on the upside? US economic surprise indicator The global output cycle: American outperformance US corporate profits as a % GDP at an all time high US NFIB smaller companies business optimism Source: Bloomberg & Thomson Datastream - 26 -
    27. 27. Can the UK & Europe grow?UK BOE QE To date, planned and consensus forecast for end-2012 FTSE All-Share earnings forecasts UK GDPUK GDP German export orders Source: Thomson Datastream / Bloomberg & BofA Merrill Lynch European Equity Strategy - 27 -
    28. 28. Summary• Genuine asset diversifier• Highly liquid strategy• Macro / business cycle expertise• Low volatility, incremental returns• Utilises European equities if needed• Flexible trading approach - 28 -
    29. 29. Risk management – UK Absolute TargetNICK BUCKNELL joined Cazenove in 2003. He is Head of Risk and is responsible for risk managementacross equities, bonds and hedge funds. Nick is also involved in providing strategic asset allocation advice.Prior to joining Cazenove Capital, Nick held similar positions at Newton Investment Management and MerrillLynch Investment Managers. Nick graduated from Exeter University with a first class degree inMathematical Statistics & Operational Research. Nick is a Fellow of the Institute of Actuaries and has 15years of investment management experience. Leverage & stock controls Independent monitoring Size, style, hedging • Max 200% gross exposure • Daily VaR monitoring and stress testing done • Unconstrained sector positioning (typical range 100 – 175%) in-house • Bias to large and midcap • Max 50% net exposure (typically up to +/-25%) • Fortnightly factor analysis • No automatic stop loss • Will not invest in unquoted stocks • Monthly analysis of realised performance • Will use CFD’s • Normal positions <5% NAV • Monthly liquidity analysis • Use of futures & ETF’s • Typically 30 – 50 holdings on each side of the • Selective investment in European markets balance sheet • Can buy options or write calls - 29 -
    30. 30. QUESTIONS
    31. 31. Regulatory information and risk warningsIssued by Cazenove Capital Management which is the name under which Cazenove Capital Management Limited and CazenoveInvestment Fund Management Limited both authorised and regulated by the Financial Services Authority provide investment products andservices. Past performance is not a guide to future performance. The value of investments and the income from them may go down aswell as up and an investor may not get back the amount originally invested and may be affected by fluctuations in exchange rates. Thelevels and bases of tax assumptions may change. This document is for information purposes only and does not constitute an offer to enterinto any contract/agreement nor is it a solicitation to buy or sell any investment or to provide any services referred to therein. Thisdocument is intended for Professional Advisers, Professional Intermediaries and non-private clients only.The Cazenove UK Absolute Target Fund is registered for sale in the following jurisdictions: Austria, Denmark, France, Germany,Guernsey, Ireland, Italy, Jersey, Luxembourg, The Netherlands, Singapore, Spain, Sweden, Switzerland, The United Kingdom.Further information on the performance fee and risks of the fund can be found in the full Prospectus and Key Investor Informationdocument (KIID). The KIIDs are available in the following languages German, Swiss-German, Danish, Spanish, French, English, Italian,Dutch, Swedish. - 31 -