Pictet Total Return-Kosmos –A new global long/short credit fundPictet Asset ManagementNovember 2011                       ...
Pictet-High Dividend SelectionConclusions drawn at      •   Long-only equity strategy which has proven to be a safe haven ...
High resilience during market downturn High Yield Utilities Equities tend to outperform in down markets                   ...
Hedge funds timeline at Pictet Asset Management      Total AuM: USD 1.8 bn    Alphanatics    (Mkt neutral,             Cor...
1Pictet Total Return-Kosmos
Why credit long/short?Why now?                                      Compelling returns               Diversification benef...
Hedges are responsiveCDS-Bond Basis has been volatile – but CDS remains an effective hedge       300               Barclay...
Major credit indices implying a severe default cycleHistorical real credit default rate versus today’s implied major indic...
Implied default rates                                                                                                     ...
Pictet Total Return-KosmosCredit alpha in all marketconditions             Long/short portfolio                           ...
Well-resourced environment Credit Research                         Raymond Sagayam                                        ...
Performance PTR-KosmosAt a glance                                                                                         ...
Performance global long/short credit segment%                 JAN           FEB          MAR           APR           MAY  ...
2Investment philosophy &process
Our key beliefsPrinciples built throughexperience                                                Credit alpha is enhanced ...
Focus on liquidity                                          90% minimum in investment grade. No exposure to credit below B...
Trade example cross name/sector basisBangkok Bank                                    Long risk : buy Bangkok Bank bond 5 a...
Trade example CDS long-shortTwo UK-domiciled companies                        Long risk : sell 5yr CDS BAE Systems (Baa2/B...
Trade example CDS long-shortLong risk: sell 5 yr CDS BAE Systems (Baa2/BBB+) / Short risk: buy 5yr CDS GKN Plc (Ba1/BB+)  ...
Alpha sources                      Longer time horizon (3-6 months) incorporating                     M&A themes, LBO risk...
Investment process summary                                   MACRO ENVIRONMENT ANALYSIS                                   ...
Typical portfolio exposure                      Number of positions                               Total positions (40-100)...
PTR-KosmosNet exposure evolution                              40.00%                              30.00%                  ...
3Risk management
Risk managementFocus on individual credit beta                                         INVESTMENT TEAMand duration to ensu...
VaR evolution Pictet Total Return-KosmosSince inception, well below UCITS VaR limit of 20%                                ...
VaR evolution global long/short credit segmentGlobal long/short credit segment* – Since inception, well below UCITS VaR li...
Active stop-loss approachOften the best hedge is toclose a position                              Daily return distribution...
4Portfolio
Positioning PTR-KosmosSector breakdown in %                                                                    Credit brea...
5Conclusion
Pictet Total Return-KosmosConcluding messages LONG/SHORT STRATEGY            ALL WEATHER                         INVESTMEN...
Pictet Total Return-KosmosTechnicals                •   Reference currency: EUR                          •   Legal status:...
Appendices
Investment process summary                                               MACRO ENVIRONMENT ANALYSIS                       ...
Fixed income risk team – Process overviewA dedicated risk managementteam for the fixed income unit          Our risk appro...
Fixed income risk team – Activities                Market risk monitoring                                         Performa...
Global long/short credit segment – Risk analysis exampleEvolution by risk type                                            ...
Investment teamRaymond Sagayam                                          Kazik Swiderski                                   ...
For more information, please contact:                                                                                     ...
Upcoming SlideShare
Loading in …5
×

Pictet citiwire berlin

1,248 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,248
On SlideShare
0
From Embeds
0
Number of Embeds
170
Actions
Shares
0
Downloads
43
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Pictet citiwire berlin

  1. 1. Pictet Total Return-Kosmos –A new global long/short credit fundPictet Asset ManagementNovember 2011 FOR PROFESSIONAL INVESTORS ONLY
  2. 2. Pictet-High Dividend SelectionConclusions drawn at • Long-only equity strategy which has proven to be a safe haven in turbulent markets for equity investorsCitywire 2010 –correct? – Focus on stable business structure enables solid cash flow generation – High and growing dividend income is a source of stable investment returns – Superior portfolio diversification with inflation protection • Market and economic uncertainties did require a conservative investment approach – Positive yield spread to bonds a historic precursor for outperformance • Attractive fund features – The fund continues to pay a monthly recurring dividend of 33 basis points of the original NAV – Experienced management team with a proven track record in Infrastructure investing – Unique investment process ensures superior risk managementPictet Asset Management Pictet Total Return-Kosmos 2
  3. 3. High resilience during market downturn High Yield Utilities Equities tend to outperform in down markets YTD 1M 3M 6M 1Y Global High Yield Utilities Equities vs MSCI World (total of 75 observations)Pictet-High Dividend Selection-P EUR -3.77 2.50 -2.82 -2.83 -0.10MSCI World Composite* -12.21 -1.96 -9.89 -11.39 -8.99 10%Peer group Median -9.87 -0.85 -8.17 -8.75 -2.22 23 ti es /75 ti es m m 21 ti es/75 ti es m mPeer group Average -9.27 -0.77 -7.41 -8.08 -2.07 (P robabii/ 30 times (Probability: 23 times lty : approx. 31%) 21 times / 45 times (Probability: (P robabii : approx. lty 28%) Approx. 77%) Approx. 47%)Source: Pictet Asset Management, as of 30.09.2011, performance net of fees 5% Diff. of performance 0% -30% -20% -10% 0% 10% 20% 30% -5% 7 times / 30 times (Probability: 24 times / 45 times (Probability: Approx. 23%) m 7 ti es/75 ti es m Approx. 53%) 24ti es/75ti es m m (P robabii : approx. lty 9%) -10% (P robabii :approx. lty 32%) MSCI World Return Performance Difference return of Pictet Global High Yield Utilities Equities – return of MSCI World (on a monthly basis) Pictet Global High Yield Utilities Equities: excluding costs and taxes; MSCI World: Net return Source: Thomson Reuters Data Stream, Pictet Asset Management, MSCI; Monthly basis, Mar 2005-June 2011 Pictet Asset Management Pictet Total Return-Kosmos 3
  4. 4. Hedge funds timeline at Pictet Asset Management Total AuM: USD 1.8 bn Alphanatics (Mkt neutral, Corto PTR-Corto PTR-Mandarin PTR-Kosmos PTR-Banyan Multi-Mgr) (Europe, SMID) (Europe, SMID) (China) (Credit) (Asia ex-Japan) 9/2004 7/2006 4/2010 10/2010 6/2011 11/2011 Global L/S Europe Equity Global L/S (Trading) Event Driven (Macro) Q1/2012 Q2/2012 Q3/2012Source: Pictet Asset Management, as at 30/09/2011Pictet Asset Management Pictet Total Return-Kosmos 4
  5. 5. 1Pictet Total Return-Kosmos
  6. 6. Why credit long/short?Why now? Compelling returns Diversification benefits• Global interest rates are low Attractive absolute and risk- Low correlation to long-only and volatility remains high adjusted returns in all market equities and corporate bonds conditions• Market becomes more discriminating in credit assessment• Good fit to UCITS Focus on alpha generation CDS & CDS Indices Multitude of alpha sources Effective hedging instruments within creditPictet Asset Management Pictet Total Return-Kosmos 6
  7. 7. Hedges are responsiveCDS-Bond Basis has been volatile – but CDS remains an effective hedge 300 Barclays EUR Corporate Bond Index (RHS) 0 Basis (LHS) CDS Spread (RHS) 250 -20 200 -40 150 -60 Insert here your graphs and tables 100 -80 50 -100 0 -120 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Aug-11 Sep-11 Oct-11Source: Barclays, as of 04.11.2011Pictet Asset Management Pictet Total Return-Kosmos 7
  8. 8. Major credit indices implying a severe default cycleHistorical real credit default rate versus today’s implied major indices’ default rate 6 5 Default Rates (%) 4 3.9 3 2.8 2 2.1 1 0 1920 1922 1925 1928 1930 1933 1936 1939 1941 1944 1947 1950 1952 1955 1958 1961 1963 1966 1969 1972 1974 1977 1980 1982 1985 1988 1991 1993 1996 1999 2002 2004 2007 2010 Moodys Investment Grade issuer weighted annual default rate iTraxx Main implied annual default rate iTraxx Fin Senior implied annual default rate CDX IG implied annual default rateSource: Moody’s, BNP Paribas, as of 07.11.2011Assumed Recovery Rate: 40%Pictet Asset Management Pictet Total Return-Kosmos 8
  9. 9. Implied default rates Annual BE default rate Annual BE default rate Index Spread (bps) # Constituents Rating breakdown (%) (# credits) iTraxx Main 175 125 10% AA; 40% A; 2.8 3.5 50% BBB iTraxx Senior Fins 252 25 32% AA; 60% A; 3.9 1.0 8% BBB CDX IG 125 125 3% AA; 26% A; 2.1 2.6 BBB 63%; BB 7%Source: Moody’s, BNP Paribas, as of 07.11.2011Assumed Recovery Rate: 40%Pictet Asset Management Pictet Total Return-Kosmos 9
  10. 10. Pictet Total Return-KosmosCredit alpha in all marketconditions Long/short portfolio Return target Actively managed relative – Credit return between 6 and 10% p.a. (net of value trading strategy fees) above Eonia – over a 3 to 5 year investment horizon – with a conservative volatility profile of 5 to 8% A management team with extensive credit experience & complementary skill set Developed the strategy together for 10 years UCITS III Focus on liquidity compliant with weekly liquidity Investing in a wide range of global, liquid mainly investment grade credit instrumentsPictet Asset Management Pictet Total Return-Kosmos 10
  11. 11. Well-resourced environment Credit Research Raymond Sagayam Other Investment Teams Senior Investment Manager (6 credit analysts) Global Bonds Emerging Debt Kazik Swiderski European Investment Grade Equity Research Senior Investment Manager European High Yield (13 equity analysts) Maani Hariri Economic Analysis Portfolio Analyst Trade Executions (10 execution professionals in (2 investment professionals) Geneva and Singapore) Quantitative Analysis Operations (2 investment professionals) Transactional Processing Portfolios Control & Validation Risk Management (11 investment professionals) Pictet Total Return-Kosmos INVESTMENT TEAMPictet Asset Management Pictet Total Return-Kosmos 11
  12. 12. Performance PTR-KosmosAt a glance Gross exposure by asset type – longs in %Inception 23 June 2011 Bonds 18.3Return for October 0.2% CDS 15.1YTD return1 2.0% Credit derivatives indices 18.5Cumulative return since inception1 2.0% Credit index options 0Volatility -Fund size EUR 148m Gross exposure by asset type – shorts in % Bonds 0Credit positions CDS 79.4 Number % Credit derivatives indices 0Long 11 51.9 Credit index options 0Short 21 79.41 As a % of gross exposure% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD EONIA2011 0.21 0.8 0.9 -0.1 0.2 2.01 0.4 Cumulative performance since inception1 2.0 0.41 Partial month/year. Performance net of fees of PTR-Kosmos-I EUR in EUR since inception 23.06.2011. Source: Pictet Asset Management, as at 31.10.2011.Pictet Asset Management Pictet Total Return-Kosmos 12
  13. 13. Performance global long/short credit segment% JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Total Return2010 0.7 2.3 1.5 0.6 5.22011 1.3 0.8 1.0 0.7 -0.2 0.5 0.9 1.2 6.5 Cumulative performance since inception1 12.0Since inception1 Return Annualised volatility Sharpe ratio Sortino ratioGlobal long/short credit segment 12.0% 2.4% 3.3 6.9EONIA 0.8% - - - Correlationvs iBoxx Euro Index Worldwide -0.1 - - -vs Barclays Euro Agg Comp. -0.1 - - -vs MSCI World 0.0 - - -1The portfolio managers have been managing the long/short credit segment of Pictet’s multi-strategy market neutral hedge fund since September 2010. Inception date: 06.09.2010. Source: Pictet AssetManagement, as of 31.08.2011. Performance data are stated in EUR gross of feesPictet Asset Management Pictet Total Return-Kosmos 13
  14. 14. 2Investment philosophy &process
  15. 15. Our key beliefsPrinciples built throughexperience Credit alpha is enhanced by considering relative value globally Agility reaps rewards – stay liquid, nimble and never ‘bigger than the market’ Risk parameters alone do not capture overall portfolio risk Close scrutiny of behavioural drivers is key Downside protection matters – often the best hedge is to close a positionPictet Asset Management Pictet Total Return-Kosmos 15
  16. 16. Focus on liquidity 90% minimum in investment grade. No exposure to credit below BB-/Ba3 Long positions Short positions Hedging instruments • Bonds (corporates, sovereigns, • CDS • Government bond futures, interest financials, covered, convertibles1) • Credit derivatives indices2 rate swaps & interest rate futures • CDS • Credit index options – to hedge interest rates risk • Credit derivatives indices2 • Spot and forward trades – to hedge currency risk • Interest rate options EXCLUDED INSTRUMENTS Structured credit, ABS, tranched credit products, loans and unrated credits1Trading at their bond floor.2 Credit indices: e.g. iTraxx Europe, iTraxx HiVol, iTraxx Financials, Itraxx Asia ex-Japan, CDX NAPictet Asset Management Pictet Total Return-Kosmos 16
  17. 17. Trade example cross name/sector basisBangkok Bank Long risk : buy Bangkok Bank bond 5 and 10yr (A3/BBB+)One of the leading Thai banks Short risk : buy Kingdom of Thailand 5yr CDS (Baa1/BBB+)New issue of 5 and 10yr USDbondsMACRO ENVIRONMENT ANALYSIS • Uncertain political situation in Thailand: Thai geopolitical component hedged via a Sovereign CDS • Positive view on market conditions for commercial banksCREDIT FUNDAMENTAL ANALYSIS MANAGEMENT QUALITY ANALYSIS TRADE IMPLEMENTATION ANALYSISThailand’s largest bank with approximately USD Met with president of Bangkok Bank Scarcity of Asian bank bonds outside Korea60bn in assets Above average disclosure/transparency and ThailandWell capitalised with acceptable loan Threat of acquisitions remained, but confident Low supply expectations for bank sector inconcentration and improving profits this would be financed prudently Thailand CDS trading at circa 87 bps (much tighter than the two Bangkok Bank bonds) at the time Conviction score: 4 Possible future sovereign issuance in USD remainedSource: Pictet Asset Management, BloombergPictet Asset Management Pictet Total Return-Kosmos 17
  18. 18. Trade example CDS long-shortTwo UK-domiciled companies Long risk : sell 5yr CDS BAE Systems (Baa2/BBB+)BAE Systems Short risk : buy 5yr CDS GKN Plc (Ba1/BB+)GKN PlcMACRO ENVIRONMENT ANALYSIS • Overall reduction in UK and US defense spending • Benign macro environment as both are UK-domiciled corporates (non-Financials)CREDIT FUNDAMENTAL ANALYSIS MANAGEMENT QUALITY ANALYSIS TRADE IMPLEMENTATION ANALYSISCyclical versus non-cyclical premium not No perceived difference between the two Likely exclusion of GKN Plc from the Itraxxadequate across the market companies Crossover indexBAE well placed in the mid-BBB rating Took profit as soon as exclusion of GKN Plc wascategory, low level of leverage, strong balance announcedsheetGKN Plc had high leverage and tight spread fora below investment grade creditSource: Pictet Asset Management, BloombergPictet Asset Management Pictet Total Return-Kosmos 18
  19. 19. Trade example CDS long-shortLong risk: sell 5 yr CDS BAE Systems (Baa2/BBB+) / Short risk: buy 5yr CDS GKN Plc (Ba1/BB+) Absolute CDS Spread spread levels summary CDS spread differentialSource: BloombergPictet Asset Management Pictet Total Return-Kosmos 19
  20. 20. Alpha sources Longer time horizon (3-6 months) incorporating M&A themes, LBO risk, bond buyback activity and other types corporate action Deliberate long or short view ex. Long risk: buy E.ON GBP bonds ex. Long risk: buy Gerresheimer 2018 bonds EVENT- DIRECTIONAL / Short time horizon (1 day/1week) which DRIVEN RELATIVE capitalise on near-term dislocations and Long bonds and short a different name via TRADES VALUE arbitrage opportunities CDS in an entirely different region or sector ex. Long risk. buy IPIC bonds in euro and $ ex. Long risk: buy Bangkok Bank bonds CROSS NAME / Short risk: buy Thailand CDS ACTIVE TRADING SECTOR BASIS RISK- ADJUSTED OVERALL CREDIT INDEX PORTFOLIO LONG/SHORT NEGATIVE BASIS Long bond and long CDS on the same name Insufficient single-name ideas on the long or to hedge the default risk short side or aiming at reducing directional risk ex. Long risk: buy Experian 2020 EUR bonds ex. Long/short risk: Itraxx Fin Senior, Itraxx Asia CDS FINANCIALS vs short risk: buy CDS Ex-Japan LONG/SHORT RELATIVE VALUE Long and short views are expressed through Pairs across names in the financials space CDS typically of the same maturity and also across the capital structure ex. Long risk: sell 5 yr CDS BAE ex. Long risk: buy HBOS 2017 USD Covered Short risk: buy 5yr CDS GKN bonds vs short risk: buy Santander CDSPictet Asset Management Pictet Total Return-Kosmos 20
  21. 21. Investment process summary MACRO ENVIRONMENT ANALYSIS 100+ p.a. meetings with senior management Market technicals 40-100 Regular review of conviction score Behavioural long & short considerations positions TRADE INVESTMENT Search for CREDIT FUNDAMENTAL MANAGEMENT IMPLEMENTATION UNIVERSE catalyst ANALYSIS QUALITY ANALYSIS ANALYSIS FINAL PORTFOLIOPictet Asset Management Pictet Total Return-Kosmos 21
  22. 22. Typical portfolio exposure Number of positions Total positions (40-100). Number of longs and shorts are approximately equal Short exposure Synthetic exposure via CDS, credit derivatives indices and credit index options Interest rate risk Interest rate risk is hedged using government bond futures and interest rate swaps Currency risk The fund is denominated in EUR. Currency risk is hedged using forward and spot trades Long positions 50-150% Short positions 75-200%Credit Gross exposure* 200-300% Net exposure* ±25%* Excluding extreme market conditions - These figures represent anticipated typical exposure and not limits. Leverage in the portfolio is achieved through repos, deposits and credit derivatives. Leverageis computed by adding the notional long and short exposures. The aim is to operate at under 4x the capital base using this approach.Pictet Asset Management Pictet Total Return-Kosmos 22
  23. 23. PTR-KosmosNet exposure evolution 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 30.06.11 20.07.11 09.08.11 29.08.11 18.09.11 08.10.11 28.10.11Source: Pictet Asset Management, as of 31.10.2011Pictet Asset Management Pictet Total Return-Kosmos 23
  24. 24. 3Risk management
  25. 25. Risk managementFocus on individual credit beta INVESTMENT TEAMand duration to ensure thatdirectional risk is managed INDIVIDUAL CREDIT MACRO RISK BETA & DURATION FACTORS MONITORING LIQUIDITY & PORTFOLIO RISK ACTIVE CONCENTRATION ACTIVELY MANAGED STOP-LOSS RISK AT GROSS AND NET APPROACH LEVEL RIGOROUS RISK MONITORING DAILY PORTFOLIO INDEPENDENT RISK MONITORING USING & COMPLIANCE CUSTOMISED ‘RISK MONITORING METRICS’ FIXED INCOME RISK PAM RISK CONTROL TEAM TEAM Pictet Total Return-Kosmos 25
  26. 26. VaR evolution Pictet Total Return-KosmosSince inception, well below UCITS VaR limit of 20% Var 99% 1 month % 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 27.06.2011 11.07.2011 25.07.2011 08.08.2011 22.08.2011 05.09.2011 19.09.2011 03.10.2011 17.10.2011 31.10.2011Source: Pictet Asset Management, as of 31.10.2011Pictet Asset Management Pictet Total Return-Kosmos 26
  27. 27. VaR evolution global long/short credit segmentGlobal long/short credit segment* – Since inception, well below UCITS VaR limit of 20% % 3.00 VAR 99% 1 month 2.50 2.00 1.50 1.00 0.50 0.00 10.09.2010 10.10.2010 10.11.2010 10.12.2010 10.01.2011 10.02.2011 10.03.2011 10.04.2011 10.05.2011 10.06.2011 10.07.2011 10.08.2011 10.09.2011*The portfolio managers have been managing the long/short credit segment of Pictet’s multi-strategy market neutral hedge fund since September 2010. Inception date: 06.09.2010Source: Pictet Asset Management, as of 16.09.2011Pictet Asset Management Pictet Total Return-Kosmos 27
  28. 28. Active stop-loss approachOften the best hedge is toclose a position Daily return distribution – Global long/short credit segment*Disciplined about cuttinglosses but acknowledge thatpremature cuts can impactperformance *The portfolio managers have been managing the long/short credit segment of Pictet’s multi-strategy market neutral hedge fund since September 2010. Inception date: 06.09.2010 Source: Pictet Asset Management, as of 7.11.2011Pictet Asset Management Pictet Total Return-Kosmos 28
  29. 29. 4Portfolio
  30. 30. Positioning PTR-KosmosSector breakdown in % Credit breakdown in % Long Short Long ShortAuto 0.0 0.0 AAA 6.6 0.0Basic Materials 0.0 3.3 AA 3.5 0.0Communications 12.3 5.3 A 19.2 39.7Consumer, Cyclical 0.0 16.8 BBB 4.1 39.7Consumer, Non-Cyclical 0.0 15.2 BB 0.0 0.0Financial 14.2 8.7 Index 18.5 0.0Industrial 0.0 10.2 Regional breakdown in %Media 0.0 0.0 Long ShortGovernment 7.0 11.8 Europe 25.1 43.6Utilities 0.0 0.0 LatAm 0.0 0.0Technology 0.0 8.2 Central & Eastern Europe 7.5 4.8Energy 0.0 0.0 MENA 3.5 8.2Index 18.5 0.0 Asia 3.6 3.6 North America 12.3 19.2Source: Pictet Asset Management, as of 31.10.2011.Pictet Asset Management Pictet Total Return-Kosmos 30
  31. 31. 5Conclusion
  32. 32. Pictet Total Return-KosmosConcluding messages LONG/SHORT STRATEGY ALL WEATHER INVESTMENT TEAM LEGAL FRAMEWORK A true long / short product An all market conditions A management team with UCITS compliant with investing in a wide range of strategy extensive credit experience weekly liquidity global, liquid mainly and complementary skill investment grade credit set (developed the strategy instruments together for 10 years)Pictet Asset Management Pictet Total Return-Kosmos 32
  33. 33. Pictet Total Return-KosmosTechnicals • Reference currency: EUR • Legal status: Luxembourg SICAV - Part I - UCITS IV compliant • EU Saving Directive: in scope - tax • NAV calculation: weekly on Friday • Notice period: 5 business days prior to NAV (5pm on Friday, Luxembourg time) • Performance fee: 20% with high watermark • Hurdle rate: Eonia • Launch date: 23 June 2011 (NAV = EUR 100) Class ISIN Code Management Fee Adm & Custody Fees I EUR* LU0635020901 1.10% 0.40% P EUR LU0635021032 1.60% 0.40% I GBP* LU0635021115 1.10% 0.40% P GBP LU0635021206 1.60% 0.40% HI USD* LU0635021388 1.10% 0.45% HP USD LU0635021545 1.60% 0.45% HI CHF* LU0635021974 1.10% 0.45% HI GBP* LU0635021628 1.10% 0.45% HP GBP LU0635021891 1.60% 0.45% HP CHF LU0635022196 1.60% 0.45% (*) Minimum initial investment: EUR 1,000,000 or equivalent converted to USD/GBP/CHF on the date of NAV calculationPictet Asset Management Pictet Total Return-Kosmos 33
  34. 34. Appendices
  35. 35. Investment process summary MACRO ENVIRONMENT ANALYSIS 100+ p.a. meetings with senior management Market technicals Regular review of Behavioural 40-100 conviction score considerations long & short positions CREDIT TRADE INVESTMENT Search for FUNDAMENTAL MANAGEMENT IMPLEMENTATION UNIVERSE catalyst ANALYSIS QUALITY ANALYSIS ANALYSIS FINAL PORTFOLIO • Global, liquid mainly In house credit & • Industry, competition • Coherent business • Use of technical • Optimal risk/reward investment grade equity research analysis strategy factors to decide on profile credit instruments External brokers • Capital structure – Quality timing of entry, • Risk management • Credit rating ≥ BB- & investment • Financial – Transparency sizing and exit /Ba3 banks performance – Corporate • Confirmation bias, • Credit rating vision anchoring issues, • Bondholder vs. herd behaviour, shareholder focus overconfidencePictet Asset Management Pictet Total Return-Kosmos 35
  36. 36. Fixed income risk team – Process overviewA dedicated risk managementteam for the fixed income unit Our risk approach is driven by risk Proprietary risk model implementation Daily risk reports principles • Summary report • Risk target – Horizontal view across all • Risk limit portfolios Portfolio • Diversification Risk – Annual volatility, Monte Carlo & risk RISK model VaR data SYSTEM • Risk attribution report – Focus on a specific portfolio Backtesting – Detailed views: IR risk, spread risk, Forex risk, country risk REGULAR RISK REVIEWSPictet Asset Management Pictet Total Return-Kosmos 36
  37. 37. Fixed income risk team – Activities Market risk monitoring Performance monitoring Daily Control of risk limits and pick up of portfolios to focus on Monitoring of the daily performance • Summary report • Alerts to fund managers • Risk Attribution report • Analysis of abnormal variations Weekly Analysis of current risk level, diversification, consistency Analysis of weekly variations within the same investment team • Alerts to fund managers and Head of Fixed Income – Risk evolution graphs • Identification of most important sources of – Boxplots out/underperformance – Risk analysis graphs by sector/country – Concentration analysis Monthly / In depth risk budgeting analysis, level of risk consumption In-depth performance attribution by sources of alpha Quarterly versus risk target, split by alpha sourcesPictet Asset Management Pictet Total Return-Kosmos 37
  38. 38. Global long/short credit segment – Risk analysis exampleEvolution by risk type Risk contribution by sector*The portfolio managers have been managing the long/short credit segment of Pictet’s multi-strategy market neutral hedge fund since September 2010. Inception date: 06.09.2010Pictet Asset Management Pictet Total Return-Kosmos 38
  39. 39. Investment teamRaymond Sagayam Kazik Swiderski Maani HaririSenior Investment Manager Senior Investment Manager Portfolio AnalystTotal Return Credit Total Return Credit Total Return CreditRaymond Sagayam joined Pictet Asset Kazik Swiderski joined Pictet Asset Management Maani Hariri joined Pictet Asset Management inManagement in 2010 and is a Senior Investment in 2010 and is a Senior Investment Manager in 2011 and is a Portfolio Analyst in the Total ReturnManager. the Total Return Credit team. Credit teamBefore joining Pictet, Raymond was a Managing Before joining Pictet, Kazik was a Managing Before joining Pictet, he was Risk Manager atDirector with Swiss Re Asset Management, head of Director with Swiss Re where he established the Sorrell Capital and Investment Analyst atdollar and euro investments, focusing on credit global proprietary credit trading business in 2001. Gyldmark Investment Management in London.relative value strategies. Prior to this he worked for As of mid 2008 he was given the responsibility of Maani holds a BSc in Finance from the New YorkBank Brussels Lambert (ING) trading US Credit. managing the Swiss Re Asset Management London University, Stern School of Business.He has traded credit across all major geographies credit team. He started his career at Sociétéand began his career at ING Barings in Emerging Générale (1984) where he ran several tradingMarkets in 1997. desks. In 1996 he worked at Nomura London as a proprietary trader, and then in 1998 he joinedRaymond holds a BSc in Economics from the ABN Amro to run the asset swap trading group.London School of Economics & Political Science(LSE) and a MA in Contemporary Theology in theCatholic Tradition from the Heythrop College,University of London. He is also a CFAcharterholder.Pictet Asset Management Pictet Total Return-Kosmos 39
  40. 40. For more information, please contact: Pictet Asset Management SA Route des Acacias 60, 1211 Geneva 73 Pictet Asset Management Limited Authorised and regulated by the Financial Services Authority Moor House, Level 11 120 London Wall London EC2Y 5ETThis marketing document is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of or located in any locality,state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Funds (Europe) S.A., 3 Boulevard Royal, L-2449 Luxembourg.The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken anysteps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Taxtreatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if thisinvestment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested.Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.Past performance is neither guarantee nor a reliable indicator of future results. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. Thismarketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to theirinvestment in the fund or funds mentioned in this document.This document is for professional investors only. www.pictet.comPictet Asset Management Pictet Total Return-Kosmos 40

×