1. Riders on the Storm
Neil Robson – Head of Global Equities
For professional investors only
August 2018
2. China and their/our environment
2
The heat is on
Global land-ocean temperature index: change in global
surface temperature relative to 1951-1980 average
temperatures
President Xi’s “Beautiful China”
“No country can retreat to their own
island, we live in a shared world and
face a shared destiny”
0
2000
4000
6000
8000
10000
Dec-65 Dec-75 Dec-85 Dec-95 Dec-05 Dec-15
China United States European Union
India Japan United Kingdom
Carbon dioxide emissions (millions of
tonnes)
Are China’s carbon dioxide emissions peaking?
Source: NASA’s Goddard Institute for Space Studies, 2017.
Berenberg Thematics, Frankfurt School/UNEP Centre/Bloomberg New Energy finance, 2016 – Global Trends in Renewable Energy Finance.
3. Towards a more beautiful China
Innovation is a critical source of competitive advantage
3
Move up the value chain Outsource the low value add
China outbound deals to Asia-Pacific ($US
billion)
Belt & Road initiative to drive broader Asian growth
through infrastructure investment
China continues to increase R&D
expenditure…
Number of companies and their share of R&D spending
within the top 1,500 R&D spenders globally
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: European Commission, IRI, Economic of Industrial Research, Goldman Sachs Global Investment Research, Berenberg Thematics 2017.
R&D refers to Research and Development. Outbound deals rounded to nearest $US billion.
4. Trade wars and profitability
4
Source: HowMuch, WTO, 2017. BEA, Bernstein U.S. Economics analysis, 2018.
Corporate profits (% of GDP)
Moving continuously higher since China’s WTO
accession
The world’s top exporters in 2017…
By total value of exports (US$bn)
Tweet by tweet, or a structural issue?
5. Innovation the dominant theme in markets
5
Source: Company data, Goldman Sachs Global Investment Research, Bloomberg, Jefferies Research, 2017.
Note: Seven largest retailers by 2010 capex: Target, Lowe’s Home Depot, Inditex, Kohl’s Best Buy, TJX. 2017-19 capital expenditure based
on estimates.
Disruptors are growing their physical scale…
Capital expenditure, $US million
0
5 000
10 000
15 000
20 000
25 000
2012 2013 2014 2015 2016 2017 2018 2019
Amazon Google Microsoft
Apple Facebook
…a trend seen across the mega tech stocks
Capital expenditure, $US million
Changing business models, disrupting competition
6. Tech intensity of GDP continues to rise
6
Source: Lam Research, Columbia Threadneedle Investments, 2018.
The rising data economy Tech intensity:
US info tech as a % of World GDP
Artificial intelligence will accelerate the trend
0,0%
0,5%
1,0%
1,5%
2,0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018e
2019e
2020e
2021e
2022e
2023e
Megabytes Gigabytes Exabytes Zettabytes
Artificial intelligence inflection
Mainframe
computing
1985-1995
Computer
proliferation
1996-2005
Global
connected user
platform
2006-2015
Data economy
2016 and
beyond
7. A bull market driven by fundamentals
7
Source: Bloomberg, Worldscope, Datastream, Goldman Sachs Global Investment Research, Columbia Threadneedle Investments, as at 31 May 2018.
Earnings development relates to rebased EBITDA of the MSCI ACWI and the MSCI ACWI Technology on a monthly view.
Technology: global market share (%) Earnings development
Ain’t no bubble here!
0
50
100
150
200
250
300
350
400
450
500
Jan-95
M
ay-97
Sep-99
Jan-02
M
ay-04
Sep-06
Jan-09
M
ay-11
Sep-13
Jan-16
M
ay-18
MSCI ACWI MSCI ACWI Technology
8. … don’t drink, don’t smoke, what do you do?
8
Source: Youth Risk Behaviour Survey, CDC, 2016. English Housing Survey, ONS, 2017. All figures rounded to the nearest percentage point.
Young people are following the rules…
% of US teenagers who…
Young consumers have it tough…
% of each age group that are home owners, England
Millennials are different Renters, not buyers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Regularly
wear a seat
belt
Ever tried
alcohol
Ever tried a
cigarette
Ever been in
a physical
fight
Smoke
cigarettes
1991 2003 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
16-24 25-34 35-44 45-64 65-74 75+
1981 1991 2001-2002 2015-2016
9. … don’t drink, don’t smoke, what do you do?
9
The disruption of traditional business models
Year on year traditional pay TV subscriber growth, 000s
Estimated revenue per viewer in the US
(except eSports)*
No home, no sports, no cable… … but a rise in eSports
$82
$131
$100
$87
$116
$86 $89
$9
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
160
180
NFL
MLB
NBA
NHL
NASCAR
UFC
MLS
eSports
$/ViewerMillion
Viewers $/Viewer
Source: company data, Jackdaw Research, 2017. Barclays Research, 2017. *Based on global revenues and viewership.
Revenue and dollars per viewer rounded to the nearest million and dollar respectively.
10. Growth in e-commerce and brand values
10
The dominance of big tech…
Global gross merchandise value as a % of world GDP
Packaged foods industry:
Market share change (%)
2009-2012
… Over 1% of global GDP passes through
the Amazon/Alibaba ecosystems
Craft beer, craft gin, craft everything
-0,7%
1,7%
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
2,0%
Large Manufacturers (sales
>US$3bn)
Small Manufacturers (sales
<US$1bn)
Source: IMF, Haver Analytics, company data, Goldman Sachs Global Investment Research, Euromonitor 2017.
11. Creative destruction, competitive advantage and
your allocation to global equity
11
Source: Bloomberg, Columbia Threadneedle Investments, as at 31 May 2018.
Quality
n Quality growth is consistently undervalued
n The best protection in a turbulent world
Sustainability
Growth
potential
Return
on capital
Quality
BB Liquidating (formerly Blockbuster)
share price
0
5
10
15
20
25
30
35
Aug-99
Sep-01
Oct-03
Nov-05
Dec-07
Jan-10
Feb-12
M
ar-14
Apr-16
M
ay-18
Remember Schumpeter: “Economic progress, in
capitalist society, means turmoil”
12. Global Equity Strategy
Overview
12
n Quality growth approach
n Investing in companies with sustainably high or rising returns
n Consistency
n A well-diversified portfolio delivering top quartile risk-adjusted returns
n Experience and depth
n A highly experienced PM team utilising best ideas from our global research resources
Source: Columbia Threadneedle Investments, 2018.
13. Investment philosophy
What we mean by quality
13
Quality
n Competitive advantage manifests itself in a
company’s ability to generate high returns
on capital
n The market tends to assume that high
returns mean-revert, causing quality
companies to be undervalued
n Identifying companies with a sustainable
competitive advantage exploits this
inefficiency
Quality
14. Investment philosophy
Identifying sustainable competitive advantages
14
Source: Columbia Threadneedle Investments, Morningstar, 2018. The mention of any specific shares or bonds should not be taken as a
recommendation to deal. All intellectual property rights in the brands and logos set out in this slide are reserved by respective owners.
Quality
Cost advantage: Lowest-cost producer
Intangible assets: Brands or patents act as barrier to entry
Network effect: Value grows as more people use it
Switching costs: Costs incurred through change
Efficient scale: One of two dominant companies
Competitive
advantage
15. STANLIB Global Equity Fund
Annualised performance
15
Source: Columbia Threadneedle Investments, as at 30 June 2018. Performance shown is gross of management fees in USD.
Past performance is not a guide to future returns. Excess return is calculated on an geometric basis, annualised against the MSCI AC World Index.
1 Inception of STANLIB Global Equity Portfolio is 1 November 2012.
Annualised returns % (USD)
Relative return1
+0.3% +3.9% +2.2% +1.8% +2.1%
1,0%
15,6%
11,2%
12,0%
13,0%
0,7%
11,3%
8,8%
10,0%
10,7%
3 Months 1 Year 3 Years 5 years Since Inception¹
STANLIB Global Equity Fund MSCI AC World Index
16. Global Equity Strategy
Consistent performance and strong risk adjusted returns
16
Source: Mercer Investment Consulting, as at 31 March 2018. Risk and return characteristics calculated monthly in USD versus the MSCI AC World
Index. Bars show the positions in the universe of funds of the 95th percentile, upper quartile, median, lower quartile and 5th percentile. Past
performance should not be seen as a guide to the future. The value of investments may fall as well as rise and you may get back less than invested.
1 Inception of Global Equity strategy is 31 December 2003.
Performance versus peers since 31 December 20031
17. Global Equity Strategy
Summary
17
n Quality growth approach
n Investing in companies with sustainably high or rising returns
n Consistency
n A well-diversified portfolio delivering top quartile risk-adjusted returns
n Experience and depth
n A highly experienced PM team utilising best ideas from our global research resources
Source: Columbia Threadneedle Investments, 2018.
18. STANLIB Global Equity Fund
Portfolio snapshot
18
Top 10 active holdings Absolute (%) Active (%)
Alphabet Inc. 5.0 3.4
Alibaba Group 3.3 2.9
CRH Plc 2.6 2.6
Goldman Sachs Group 2.5 2.5
Centene Corporation 2.4 2.3
Diamondback Energy, Inc. 2.1 2.1
Charles Schwab 3.6 2.0
HDFC Bank Limited 2.2 2.0
JPMorgan Chase & Co. 2.1 1.9
Unilever PLC 2.1 1.9
Top 10 Total 27.8% 23.6%
Fundamental statistics Portfolio Benchmark
Number of stocks 59 2,768
Average holding period 3.7 years --
Active position 86.53% --
Beta 1.03 --
Market capitalisation weighting
Source: Columbia Threadneedle Investments, as at 30 June 2018.
Benchmark is the MSCI AC World Index. Cash position of 2.3% not shown. The mention of stocks is not a recommendation to deal.
5%
43%
52%
2%
36%
60%
<$7bn
$7-$50bn
$50bn+
Portfolio Index
19. STANLIB Global Equity Fund
Current positioning
19
Source: Columbia Threadneedle Investments, as at 30 June 2018. Benchmark is the MSCI AC World Index. Cash position of 2.3% not shown.
Regional weighting Sector weighting
26%
18%
14%
10%
8%
8%
6%
5%
2%
0%
0%
20%
17%
11%
7%
12%
11%
8%
5%
3%
3%
3%
Technology
Financials
Health Care
Energy
Cons. Disc.
Industrials
Cons. Staples
Materials
Real Estate
Utilities
Telecoms
Portolio Index
67%
10%
9%
6%
4%
2%
57%
15%
12%
6%
8%
4%
North America
Europe ex. UK
Emerging Markets
United Kingdom
Japan
Far East ex. Japan
Portfolio Index
21. Disclaimer
21
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests or the
investment may go down as well as up and past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can
engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from the Manager.
Portfolio performance figures are calculated for the relevant class of the portfolio, for a lump sum investment, on a NAV-NAV basis, with income
reinvested on the ex-dividend date. Individual investor performance may differ due to initial fees, actual investment date, date of reinvestment of
income and dividend withholding tax. A Fund of Funds portfolio is a portfolio that invests in other portfolios of collective investment schemes that levy
their own charges, which could result in a higher fee structure for the Fund of Funds portfolio. A Feeder Fund portfolio is a portfolio that invests in a
single portfolio of a collective investment scheme that levies its own charges, which could result in a higher fee structure for the Feeder Fund. Money
Market portfolio is not a bank deposit account. The price of a participatory interest is targeted at a constant value. Where a portfolio derives its income
primarily from interest-bearing instruments, the yield (if shown) is a current effective yield calculated daily.
The manager of the Scheme is STANLIB Collective Investments (RF) (Pty) Limited (the Manager). The Manager is authorised in terms of the
Collective Investment Schemes Control Act, No. 45 of 2002 (CISCA) to administer Collective Investment Schemes (CIS) in Securities. Liberty is a full
member of the Association for Savings and Investments of South Africa (ASISA). The Manager is a member of the Liberty Group of Companies.
STANLIB Asset Management (Pty) Ltd, an authorised financial services provider (FSP), FSP No. 719, under the Financial Advisory and Intermediary
Services Act (FAIS), Act No. 37 of 2002.
Additional information including, but not limited to, brochures, rankings, credit ratings, awards, application forms and annual or quarterly reports, can
be obtained from the Manager on request and from the Manager’s website (www.stanlib.com).
The information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the suitability or
potential value of any information contained herein. STANLIB Asset Management (Pty) Ltd does not expressly or by implication propose that the
products or services offered in this document are appropriate to the particular investment objectives or needs of any existing or prospective client.
Potential investors are advised to seek independent advice from an authorised financial adviser in this regard.