Pictet hds final version citywire jan 2012


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Pictet hds final version citywire jan 2012

  1. 1. Pictet-High Dividend Selection Emma Stenzel Fund Distribution and Marketing For Professional Investors only January 2012
  2. 2. Agenda <ul><li>Investment case </li></ul><ul><li>Investment team and process </li></ul><ul><li>Portfolio review </li></ul><ul><li>Conclusions </li></ul><ul><li>Technicals </li></ul><ul><li>Appendices </li></ul>
  3. 3. Investment case 1
  4. 4. Low yield environment <ul><li>Europe and the UK are sliding towards recession </li></ul><ul><ul><li>Eurozone woes will weigh heavy on the UK </li></ul></ul><ul><ul><li>Political unity in Europe is unlikely in the short term </li></ul></ul><ul><ul><li>Policy response is weak so far </li></ul></ul><ul><ul><li>Significant stress in the European banking system </li></ul></ul><ul><ul><li>Cash injections from Central banks will help </li></ul></ul><ul><li>Traditional sources of income are diminished </li></ul><ul><ul><li>Bond yields at all time lows </li></ul></ul><ul><ul><li>Government policy will favour lower yields </li></ul></ul><ul><ul><li>Higher yields will carry higher risks – Greece ?? </li></ul></ul><ul><li>Equity dividends can be an alternative source of income </li></ul>Source: Pictet, -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00 1.20 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Leading index growth %m/m -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Leading index growth %m/m Eurozone sequential leading (Pictet) growth M/M The UK is not insulated from the Eurozone
  5. 5. Key characteristics <ul><li>Focus on lower volatility stocks with: </li></ul><ul><ul><li>Predictable and stable cash flows </li></ul></ul><ul><ul><li>An above average yield </li></ul></ul><ul><li>Wide investment universe: </li></ul><ul><ul><li>All sectors of the MSCI World </li></ul></ul><ul><ul><li>Developed and emerging markets </li></ul></ul><ul><li>Experienced investment team: </li></ul><ul><ul><li>Proven track record in high yield equity investing </li></ul></ul><ul><ul><li>Unique and disciplined benchmark unaware investment process </li></ul></ul><ul><li>Monthly Distribution of dividend*: </li></ul><ul><ul><li>Dividend policy reviewed annually (September)** </li></ul></ul>Aim is to deliver equity returns with lower volatility and higher dividend yields *For monthly distributing share classes (P dm USD, R dm EUR, R dm USD, I dm GBP, P dm GBP,I dm, GBP). **Current payout level for annual dividend distribution is €4.00 and €0.33 for monthly distribution.
  6. 6. Higher yielding stocks outperform over the long term Insert here your graphs and tables Source: Professor Kenneth French, Tuck School of Business, Dartmouth (website). Logarithmic scale. Stocks were divided in quartiles. The High yield had an annualised total return of 11.2%, the Medium yield had an annualised total return of 10.3%, the Low yield had an annualised total return of 9.1% and the Zero yield had an annualised total return of 8.4%. Returns on US stocks by yield, 1927-2010
  7. 7. … and enhance risk-return Source: Elroy Dimson, Paul Marsh and Mike Staunton analysis using style data from Professor Ken French, Tuck School of Business, Dartmouth, Dimensional Fund Advisors, MSCI, Thomson Reuters, Credit Suisse Research and London Business School Higher yield: top 50% yielding companies Lower yield: bottom 50% yielding companies Risk and return from alternative yield strategies, 1900–2010
  8. 8. Attractive dividend yield makes for a timely investment World Government Bond: Citigroup World Government Bond Index, World Equities: MSCI World Index, US Government Bond: Citigroup US Government Bond Index, US A Corporate Bond: Citigroup US A Corporate Bond Index, German Government Bond: Citigroup German Government Bond Index Source: Factset, as of 30/12/2011 Yield level of the Pictet-High Dividend Selection Portfolio and various asset classes
  9. 9. Enhancing the cash flow (CF) volatility and dividend yield <ul><li>Sector level: </li></ul><ul><li>We look at all sectors </li></ul><ul><li>Company level: </li></ul><ul><li>We select companies that enhance the portfolio’s cash flow volatility and dividend yield characteristics </li></ul><ul><li>We create a non cyclical growth portfolio with an attractive dividend yield profile </li></ul>Cash flow (CF) volatility: standard deviation of annual operating CF growth rate Source: Credit Suisse Holt database FY2006~ FY2010 MSCI World High Dividend Yield Companies: CF Volatility and Dividend Yield (5 year average) MSCI World High Dividend Yield Sectors : CF Volatility and Dividend Yield - 5 yr average
  10. 10. Investment team & process 2
  11. 11. Experienced investment team Bachelor's degree in International Business from University of Warwick (UK). Passed all three levels of CFA examinations. Economics degree & postgraduate Sorbonne & business degree from Institut d'Etudes Politiques (Paris) Master's degree in Business Administration from Laval University (Quebec city, Canada) Master's degree in Financial Policies and Investment Sciences from EHSAL (Brussels) Master’s degree in Economics from the University of Bern Education SG - 1994-1996 ING Aurel-Leven - 1996-1999 Puilaetco Dewaay Ixis AM - 1999-2004 Pictet & Cie - 1998-2005 Robeco - 2002-2007 UBS Brinson - 1992-1997 PAM - 2008 to date PAM - 2004 to date PAM - 2005 to date PAM - 2007 to date PAM - 1997 to date History 3.3 years experience 18 years experience 14 years experience 15 years experience 20 years experience Junior Investment Manager Senior Investment Manager Senior Investment Manager Senior Investment Manager Senior Investment Manager Piotr Stopinski Karen Kharmandarian Louis Veilleux , MBA, CFA Bruno Lippens Hans-Peter Portner , CFA Manager
  12. 12. Investment team & resources Karen Kharmandarian Senior Investment Manager Financials European & Emerging Markets Utilities INVESTMENT MANAGERS Hans-Peter Portner , CFA Senior Investment Manager Head of Sector Theme & Funds Louis Veilleux , MBA, CFA Senior Investment Manager Energy, Industrials & Materials North American Utilities Bruno Lippens Senior Investment Manager Telecom Services, IT & Healthcare Piotr Stopinski Junior Investment Manager Consumer Goods PAM EQUITY RESEARCH CREDIT RESEARCH EMERGING MARKETS DEVELOPED MARKETS SMALL CAP TEAM PAM STRATEGY UNIT RISK MANAGEMENT
  13. 13. Summary of investment process INVESTABLE UNIVERSE: HIGH DIVIDEND DEFENSIVE EQUITIES GLOBAL EQUITIES DATABASE HIGH DIVIDEND EQUITIES <ul><li>Cash flow volatility: </li></ul><ul><li>Selecting stocks with below High Dividend Equities median cash flow volatility </li></ul>Proprietary quantitative screening: Level of dividend yield Liquidity Stock volatility Cash flow volatility In-depth qualitative analyses of potential of dividend (scoring): Business franchise Management Valuation Industry dynamics Risk control: Currency and sector allocation c.700 companies USD 10tn market cap c.340 companies USD 5.7tn market cap c.60-100 companies PICTET-HIGH DIVIDEND SELECTION Higher than average dividend yield relative to global equities database Market cap >$ 500m Quantitative: Price momentum tool Holt screening Earnings revision monitoring Qualitative: Management meetings Pictet research Input other investment teams Sell side research Industry contacts Idea Generation Portfolio weight
  14. 14. Investment process example: Altria Portfolio construction (Screening) No adjustment for dividend yield and liquidity. Slight adjustment for stock volatility while 1.2% adjustment for CF volatility (~ 22% above investable universe median of 18%). Company (Scoring) 1% due to positive business franchise (score +0.6), strong management score (score +1.6) and positive valuation score (+1.0). Company score = +0.6*40% +1.6*20% + 1.0*40% = +1.0% Industry factor No particular discount on FX, margin and financial leverage Source: Pictet Asset Management, as of 30/12/2011 Quantitative Screening 2.5% 0% 1.0% 1.5% -1.5% 3.0% 0 1 2 3 4 5 % Starting weight Initial weight* Qualitative analysis (Scoring) Industry factor Portfolio weight * Liquidity, volatility, yield and CF volatility are calibrated. The sum of initial weights is calibrated to 50% on a pro rata basis and is a function of the sustainable fund size and the structure of the investable universe. Investment process example
  15. 15. Portfolio review 3
  16. 16. Successful high yield investor since 2005 Established track record in a high yield equities fund developed for Japanese market Source: Pictet, Net of fees performance, as at 31/05/2010. Rebased to 100. Source: Pictet, Net of fees performance, as of 31/12/2010 Portfolio Net performance (March 2005 - May 2010) in EUR 15.3% 13.1% 13.8% Risk 1.7% 4.7% 5.9% Annualized return *Inception March 2005 8.7% 1.4% 3.3% 2010 28.8% 5.6% 13.4% 2009 -38.9% -27.1% -30.1% 2008 -1.9% 9.6% 10.1% 2007 7.4% 21.5% 23.6% 2006 21.0% 23.2% 21.5% 2005* MSCI World MSCI World Utilities Portfolio
  17. 17. Review of performance as of December 30, 2011 Source: Pictet, data as at 30/12/2011 in EUR, net of fees -1.4% -3.1% 0.2% 11.2% 3.6% -3.1% MSCI World Composite* 3.3% -0.1% 1.5% 4.5% 1.7% -0.1% Pictet-High Dividend Selection-P EUR Since inception 1 year 6 months 3 months 1 month YTD   Performance of Pictet-High Dividend Selection in EUR since inception (May 2010)
  18. 18. Sector and market cap breakdown Source: MSCI, Pictet Asset Management, as of 30/12 /2011 Sector breakdown Market cap breakdown
  19. 19. Region and currency breakdown Source: MSCI, Pictet Asset Management, as of 30/12 /2011 Rest of the World: SEK, CAD, BRL, HKD, JPY, AUD, CKZ, ZAR, IDR & SGD. Emerging markets amount to 8.3% of total. Region breakdown Currency breakdown
  20. 20. Credit quality Source: MSCI, Pictet Asset Management, as of 30/12 /2011 83% INVESTMENT GRADE Outstanding credit quality Credit rating
  21. 21. Conclusions 4
  22. 22. Conclusions <ul><ul><li>Aims to provide equity returns with lower volatility and higher dividend yields: </li></ul></ul><ul><ul><ul><li>Strong and predictable cash flows lead to more attractive dividend income </li></ul></ul></ul><ul><ul><ul><li>High and growing dividend is a source of stable investment returns </li></ul></ul></ul><ul><ul><li>Global investment universe </li></ul></ul><ul><ul><li>Benchmark unaware </li></ul></ul><ul><ul><li>Market and economic uncertainties require a defensive investment approach and a focus on recurring income </li></ul></ul><ul><ul><li>Substantially higher dividend yield versus other traditional yielding asset classes </li></ul></ul><ul><ul><li>Experienced management team with a proven track record in High Dividend Yield equities </li></ul></ul><ul><ul><li>Unique investment process developed over many years </li></ul></ul>Why invest in Global High Dividend Yield equities? Why now? Why Pictet?
  23. 23. Technicals 5
  24. 24. Technicals <ul><li>Name: Pictet-High Dividend Selection </li></ul><ul><li>Law: Sicav part I of Luxembourg Law </li></ul><ul><li>Consolidation currency: EUR </li></ul><ul><li>Calculation: daily; settlement NAV + 3 </li></ul><ul><li>Inception: 14 May 2010 </li></ul><ul><li>Fund size: EUR 440mn, as per 31 December 2011 </li></ul><ul><li>Dividend: Reinvested (I, P, R) or distributed (P dy, P dm) </li></ul><ul><li>Benchmark: MSCI World (net div reinvest) </li></ul><ul><li>Share classes: </li></ul>* I-Share: min investment EUR 1'000'000, or equivalent for USD, GBP and CHF share classes Source: Pictet, as at 30/09/2011 1.75% 0.30% 1.60% LU0503635202 P USD 1.78% 0.30% 1.60% Y LU0503636275 P dy CHF 1.72% 0.30% 1.60% Y LU0503635467 P dm USD 1.34% 0.30% 1.20% Y LU0503635970 P dm GBP 1.79% 0.30% 1.60% LU0503636358 P CHF 0.86% 0.30% 0.80% LU0503635111 I USD * 0.93% 0.30% 0.80% LU0503633769 I EUR * 0.63% 0.30% 0.60% Y LU0503635897 I dm GBP * 0.60% 2.30% 2.30% 2.30% 2.30% 1.60% 1.60% MF(%) LU0503635897 LU0503635541 LU0503634734 LU0503635624 LU0503635038 LU0503634577 LU0503634221 ISIN TER(%)** Admin/ Custody Dividend distribution Class 0.63% 0.30% Y I dm GBP * 1.76% 0.30% Y P dy EUR 2.44% 0.30% Y R dm USD 2.42% 0.30% R USD 2.44% 0.30% R EUR 2.43% 0.30% Y R dm EUR 1.71% 0.30% P  EUR
  25. 25. Pictet Asset Management SA Route des Acacias 60, 1211 Geneva 73 Tel: +41 58 323 3333 Fax: +41 58 323 2040 Pictet Asset Management Limited Authorised and regulated by the Financial Services Authority Moor House, Level 11 120 London Wall London EC2Y 5ET Tel: +44 20 7847 5000 Fax: +44 20 7847 5300 Pictet Asset Management (“PAM”) definition: In this document, Pictet Asset Management includes all the operating subsidiaries and divisions of the Pictet group that carry out institutional asset management: Pictet Asset Management SA, a Swiss corporation registered with the Swiss Financial Market Supervisory Authority FINMA, Pictet Asset Management Limited, a UK company authorised and regulated by the Financial Services Authority, and Pictet Asset Management (Japan) Limited, a Japanese company regulated by the Financial Services Agency of Japan. This document is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. This document has been issued in Switzerland by Pictet Asset Management SA and/or Pictet & Cie and in the rest of the world by Pictet Asset Management Limited and may not be reproduced or distributed, either in part or in full, without their prior authorisation. For UK investors, the Pictet and Pictet Total Return umbrellas are domiciled in Luxembourg and are recognised collective investment schemes under section 264 of the Financial Services and Markets Act 2000. Swiss Pictet funds are only registered for distribution in Switzerland under the Swiss Fund Act, they are categorised in the United Kingdom as unregulated collective investment schemes. The Pictet group manages hedge funds, funds of hedge funds and funds of private equity funds which are not registered for public distribution within the European Union and are categorised in the United Kingdom as unregulated collective investment schemes. For US investors, the Shares of the funds managed by the Pictet Group are being offered to United States tax-exempt investors Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act. For more information, please contact your Pictet client relationship manager