Sarasin & Partners LLP Fund of Funds   Sam Jeffries, Oliver Tucker, Lucy EmpsonJanuary 2013
Contents   10 Myths of Fund Selection   Sarasin & Partners’ Investment Principles   Conclusions“ We aim to identify the...
Sarasin & Partners: Introduction                                                                                          ...
Our Fund of Funds Sarasin Global Diversified Fund of Funds                    Sarasin Global Equity Fund of Funds  50% equ...
10 Myths of Fund Selection
Myth 1. Highest rated funds are the best                                                                            Pre ra...
Myth 2. Back the most experienced managers                                                       There is a sweet spot!   ...
Myth 3. Flagship funds are safe havens                                                Flagship fund FuM and alpha over tim...
Myth 4. Never buy a bottom quartile fund                                   Performance relative to FTSE All Share         ...
Myth 5. Risk adjusted ratios alone are enough                                Share price - LHS                            ...
Myth 6. All fund managers are equally active                                   Fund A                       Fund B        ...
Myth 7. Diversification is always good                               % of Single Stock RiskThe benefits of diversification...
Myth 8. Outperforming managers must be skilled                         Relative performance vs. FTSE All Share            ...
Myth 9. Rely on past performance                                                      Top performer   How sure can we be t...
Myth 10. Stock pickers should outperform in all markets                              Scenario 1                         Sc...
Myth 10. Stock pickers should outperform in all markets                                                             Increa...
Sarasin & Partners’ Investment Principles
Our Principles            Active Portfolio                                     buy managers who are truly expressing a   ...
Now is the time for active management…                                                             Increased dispersion is...
Sarasin & Partners’ Fund of Funds provide you with:    Our established fund research capability with over £1bn assets   ...
Our Fund of Funds Sarasin Global Diversified Fund of Funds                    Sarasin Global Equity Fund of Funds  50% equ...
Appendix
Our Process  Idea Generation            Due Diligence          Portfolio Construction                                     ...
Sarasin Global Diversified Fund of FundsObjective:   25% MSCI AC World LC   25% MSCI AC World GBP Hedged                 A...
Sarasin Global Equity Fund of FundsObjective:     50% MSCI AC World LC                   Asset Allocation as at 31st Decem...
Who to contact at Sarasin & Partners                                       26
This document has been issued by Sarasin & Partners LLP, a limited liability partnership registered in England and Wales w...
Sarasin & Partners LLP        Juxon House   100 St Pauls Churchyard     London EC4M 8BUTelephone +44 (0)20 7038 7000   Fax...
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Sarasin and partners

  1. 1. Sarasin & Partners LLP Fund of Funds Sam Jeffries, Oliver Tucker, Lucy EmpsonJanuary 2013
  2. 2. Contents 10 Myths of Fund Selection Sarasin & Partners’ Investment Principles Conclusions“ We aim to identify the main traps and pitfalls in fund selection whilst inspiring conviction in active management ” 2
  3. 3. Sarasin & Partners: Introduction AUM (£bn)** 14 Funds under management: £12.4bn* 12 12.5 12.4 12.1 11.7 10 A partnership: the local management team 9.4 8 owns 40% of the company 6 7.1 7.0 6.1 Bank Sarasin, one of Switzerland’s leading 4 5.4 private banks, owns the remainder 4.0 2 1.9 Established fund research capability with over 0 £1bn of assets 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 21.0 16.6 Detailed client reporting packages Private Clients Charities Institutional Clients 32.5 Investment Funds 29.9 “A Well-Balanced and Growing Client Base” *Source: Sarasin & Partners LLP as at 31.12.12 (updated quarterly) ** Source: Sarasin & Partners LLP as at 31.12.12 (updated bi-annually); exchange rate used as at 31.12.12 is CHF:GBP = 0.6778 3
  4. 4. Our Fund of Funds Sarasin Global Diversified Fund of Funds Sarasin Global Equity Fund of Funds 50% equity neutral 100% equity neutralThe team researches the mutual fund universe,seeking “best ideas”, whilst leveraging Sarasin & Partners’ longstanding macroeconomic capability to build Fund of Fund portfolios From the left: Sam Jeffries, David Vickers, Lucy Empson, Oliver Tucker Source: Sarasin & Partners LLP, updated to 31.12.12 4
  5. 5. 10 Myths of Fund Selection
  6. 6. Myth 1. Highest rated funds are the best Pre rating performance Post rating performance Total net underperformance Information RatioOver 80% of funds underperform in the 3 years following their first 5 starrating from MorningstarBuying a fund because it has a good rating does not guarantee outperformance Source: Morey, 2003 Information Ratio: Alpha / Volatility of Alpha (i.e. tracking error) 6
  7. 7. Myth 2. Back the most experienced managers There is a sweet spot! Source: Agarwal, Discoll, Gabaix & Laibson, 2009 7
  8. 8. Myth 3. Flagship funds are safe havens Flagship fund FuM and alpha over timeRelative Return (%) Most sectors are dominated by behemoth multi-billion pound funds which often struggle to outperform as FuM increases Source: Lipper 8
  9. 9. Myth 4. Never buy a bottom quartile fund Performance relative to FTSE All Share 1st 1st 4th Fund Peer GroupIgnoring bottom quartile managers means you often miss great buying opportunitiesBottom quartile might represent a style being out of favour, rather than poor skill Source: Lipper 9
  10. 10. Myth 5. Risk adjusted ratios alone are enough Share price - LHS Volatility (risk) - RHS Volatility (%) Return (%)Risk and return tend to move in the inverse of each otherThis means commonly used risk adjusted ratios such as the Information Ratioshould not be solely relied upon Source: Lipper 10
  11. 11. Myth 6. All fund managers are equally active Fund A Fund B Passive Overweights Underweights 40% different to 80% different to benchmark: benchmark: Limited potential to Double the potential to outperform outperformThe further a fund is from the benchmark, the greater the chance of outperforming 11
  12. 12. Myth 7. Diversification is always good % of Single Stock RiskThe benefits of diversification diminish significantly beyond 15 stocks and arevirtually nil beyond 50 stocksConcentrated portfolios can have a higher chance of outperforming Source: Brearley, 1969 12
  13. 13. Myth 8. Outperforming managers must be skilled Relative performance vs. FTSE All Share Negative skew Lucky or skilled?After fees benchmark huggers underperform on a relative basis Source: Lipper 13
  14. 14. Myth 9. Rely on past performance Top performer How sure can we be that this top performer is the most skilled?  With 3 years of past performance you have only 17% probability  To get 100% probability, you need 160 years of past performance! Source: Moss, 2009 14
  15. 15. Myth 10. Stock pickers should outperform in all markets Scenario 1 Scenario 2 Stock A Stock A Stock B Market Stock B Market Increasing dispersion = potential to outperformScenario 1 – no distinction between stocks – better to go passiveScenario 2 – higher chance of outperforming – better to go active Source: Sarasin & Partners LLP 15
  16. 16. Myth 10. Stock pickers should outperform in all markets Increased dispersion is good for stock pickersRelative Return / Dispersion (%) 1992 1997 2002 2007 2012 Source: Lipper Dispersion calculated as difference between bottom of first quartile and top of fourth quartile 16
  17. 17. Sarasin & Partners’ Investment Principles
  18. 18. Our Principles  Active Portfolio buy managers who are truly expressing a view, otherwise go passive E.g. Ardevora UK Equity +8.5% In a 150/50 structure, providing us more opportunity to outperform  leverage off experience through market Experienced Manager cycles, particularly given similar fees are paid, regardless of manager experience E.g. Baring Europe Select +2% Run by Nick Williams who has spent many years running small cap funds  Forward Looking exploit Sarasin’s macroeconomic output to identify key trends E.g. Invesco Japanese Equity Core +14% Bought pre-elections as macro team viewed LDP victory as significant Source: Lipper; performance numbers are since purchase and relative to the funds’ respective benchmarks 18
  19. 19. Now is the time for active management… Increased dispersion is good for stock pickersRelative Return / Dispersion (%) ? 1992 1997 2002 2007 2012 Source: Lipper Dispersion calculated as difference between bottom of first quartile and top of fourth quartile 19
  20. 20. Sarasin & Partners’ Fund of Funds provide you with: Our established fund research capability with over £1bn assets The longstanding macroeconomic expertise of the firm The diversification, flexibility and choice investing in Fund of Funds brings Detailed client reporting package And DT risk rated solutions: “Over 90% of Sarasin 7 Global Diversified Fund of 5 Funds is different from our major peers” 3 20
  21. 21. Our Fund of Funds Sarasin Global Diversified Fund of Funds Sarasin Global Equity Fund of Funds 50% equity neutral 100% equity neutralThe team researches the mutual fund universe,seeking “best ideas”, whilst leveraging Sarasin & Partners’ longstanding macroeconomic capability to build Fund of Fund portfolios From the left: Sam Jeffries, David Vickers, Lucy Empson, Oliver Tucker Source: Sarasin & Partners LLP, updated to 31.12.12 21
  22. 22. Appendix
  23. 23. Our Process Idea Generation Due Diligence Portfolio Construction We leverage off Sarasin’s Qualitative Consistency Screening Liquidity Cost Process Firm longstanding macroeconomic capability utilising a core Risk / Return Management satellite approach Compensation Quantitative Macroeconomic Output Attribution Risk Turnover Style Technicals Scenario Analysis A verification process 23
  24. 24. Sarasin Global Diversified Fund of FundsObjective: 25% MSCI AC World LC 25% MSCI AC World GBP Hedged Asset Allocation as at 31st December 2012 40% BofA Merrill Lynch Broad Market 10% CashKey HoldingsEquity  Threadneedle American Extended Alpha  Cartesian Enhanced Alpha  Findlay Park AmericanBonds Currency  LGIM All Stocks Gilt Index  Sterling 70.7%  Insight Long Dated Corporate Bond  Dollar 27%  Euro 2.3%Alternatives  Yen 0%  Bluecrest AllBlue  Third Point Offshore Source: Sarasin & Partners LLP 24
  25. 25. Sarasin Global Equity Fund of FundsObjective: 50% MSCI AC World LC Asset Allocation as at 31st December 2012 50% MSCI AC World GBP HedgedKey Equity HoldingsUK  Cartesian Enhanced AlphaUS  Findlay Park American  GAM North American CurrencyEurope  Sterling 59%  Baring Europe Select  Dollar 35%  Euro 6%Japan  Yen 0%  Polar Capital Japan Source: Sarasin & Partners LLP 25
  26. 26. Who to contact at Sarasin & Partners 26
  27. 27. This document has been issued by Sarasin & Partners LLP, a limited liability partnership registered in England and Wales with registered number329859 whose registered address is Juxon House, 100 St Pauls Churchyard, London EC4M 8BU. Sarasin & Partners LLP is authorised andregulated by the UK Financial Services Authority. This seminar is intended solely for information purposes and as such is not a solicitation, or anoffer to buy or sell any security, or a recommendation to make an investment based on the contents of this presentation. Neither Sarasin &Partners LLP nor Sarasin Investment Funds Limited provide investment or tax advice. If you are in any doubt you should seek independent adviceas to whether an investment is suitable for you prior to undertaking investment activity.Information provided in this presentation does not constitute independent investment research or advice. In this seminar we refer to the SarasinFund of Funds OEIC and its sub-funds (the "Funds"), and not those funds of any competitors. There may be other funds and/or products in thewider market which meet your investment objectives and requirements. The information on which the document is based has been obtained fromsources that we believe to be reliable, and in good faith, but we have not independently verified such information and no representation orwarranty, express or implied, is made as to their accuracy. All expressions of opinion are subject to change without notice.There are risks involved with investing in a collective investment scheme and each Fund carries its own risks. This notice does not explain all therisks involved in investing in the Funds and you should therefore ensure before you invest in the Funds, that you read the current prospectus andrelevant key investor information document(s) which contain further information regarding the Funds and the applicable risk warnings. If in anydoubt, you should consult your financial advisor.Please note that the value of shares and the income from them can fall as well as rise and you may not get back the amount originally invested.This can be as a result of market movements and also of variations in the exchange rates between currencies. When calculating performance, allthe costs charged to the fund were included to give the net performance. Performance was calculated on the basis of net asset values (NAV) andnet dividends reinvested. Additional commissions, costs and taxes charged at the investor level have a negative impact of performance. Taxtreatment depends on the individual circumstances of each person and may be subject to changes in the future.The Funds will invest in other collective investment schemes including both regulated and unregulated collective investment schemes (such ashedge funds). Investment in unregulated collective investment schemes carries additional risks as such schemes may not be under the regulationof a competent regulatory authority, may use leverage and may carry increased liquidity risks.As an investor in other collective investment schemes, a Fund will bear its proportion of expenses of such collective investment schemes., and willassume any specific risks associated with such collective investment schemes. These fees will be in addition to the management fees and otherexpenses which a Fund bears directly with its own operations. For efficient portfolio management, the Funds may also invest in derivatives. Thevalue of these investments may fluctuate significantly, but the overall intention of the use of derivative techniques is to reduce volatility of returns.Sarasin & Partners LLP and/or any other member of the Bank Sarasin group accepts no liability or responsibility whatsoever for any consequentialloss of any kind arising out of the use of this document or any part of its contents. For your protection, telephone calls may be recorded.© 2013 Sarasin & Partners LLP – all rights reservedThis document can only be distributed or reproduced with permission from Sarasin & Partners LLP.Please contact marketing@sarasin.co.uk 27
  28. 28. Sarasin & Partners LLP Juxon House 100 St Pauls Churchyard London EC4M 8BUTelephone +44 (0)20 7038 7000 Fax +44 (0) 20 7038 6850

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