confidential produced by: name surname date: 03.11.2005 slide 1 asset management (size 9 pt, bold);...
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CONFIDENTIAL
Asset Management (Size 9 pt, Bold); use all CAPS if legal entity
Produced by: Name Surname Date: 03.11.2005 Slide 1
CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Morningstar
June 2008
Richard Quin - Director, Credit SuissePortfolio Manager APAC, Leveraged
Investments Group
Alternative Investments
2CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
DisclaimerIssued by Credit Suisse Asset Management (Australia) Limited (CSAMA) ABN 57 007 305 384 AFSL 238390. CSAMA has used its best endeavours to ensure the accuracy, reliability and completeness of the information contained in this presentation. Subject to law, CSAMA, its directors, employees, affiliates and consultants do not provide any warranty or accept any liability for errors or omissions or any losses or damages suffered by the recipient of this presentation or any other person.
This presentation has been prepared for general information only for the intended recipients. It does not take into account an individual’s objectives, financial situation or needs, which are necessary considerations before making any investment decision. Opinions constitute our judgment at the time of issue and are subject to change.
Offers for investments in the Credit Suisse Private Investment Funds, Select Investment Funds and Wholesale Funds are made in, or accompanied by a copy of the relevant current Product Disclosure Statement (PDS). You should consider the PDS in deciding whether to acquire or continue to hold the product. If you wish to invest, you will need to complete an application form contained in, or which accompanies the current PDS. Please contact us directly should you have any queries in relation to the information in this presentation on 1300 366 890, or to obtain a copy of the PDS.
Net Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units. Total returns are calculated by adding back the Management Costs deducted. As benchmark performance is gross of fees, we recommend that the total returns performance figures be used when comparing our performance with the relevant benchmark performance. Past performance is not necessarily indicative of future performance. Returns are volatile and may vary from year to year.
3CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Investment grade spreads at recessionary levels
Source: Lehman Spreads to 6th June 2008
US Investment Grade Option Adjusted Spreads (to treasuries)
N U G G E T T A G : u s e r N a m e =n u ll& p lo t N a m e =n u ll
50
100
150
200
250
300
350
bps
1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: Lehmanlive
Source: LehmanLive.com
Key Axis Name Last Minimum Maximum Mean SD SD Change
Right Aaa Credit - OAS 94.924 25.880 28-Feb-2005 111.831 10-Mar-2008 49.514 18.735 2.232
Right Aa Credit - OAS 186.194 31.711 31-J ul-1997 224.470 18-Mar-2008 78.024 37.052 2.139
Right A Credit - OAS 231.799 48.394 28-Feb-1997 281.142 14-Mar-2008 116.344 50.177 2.717
Right Baa Credit - OAS 260.427 72.436 31-J ul-1997 374.397 10-Oct-2002 178.312 67.464 4.131
4CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Commercial Mortgage Backed Securities - CMBS
Source: Lehman Spreads to June 6th 2008
Commercial Mortgage Backed Securities
N U G G E T T A G : u s e r N a m e =n u ll& p lo t N a m e =n u ll
100
200
300
400
500
600
700
800
900
OAS
2002 2003 2004 2005 2006 2007 2008
Source: LehmanLive.com
Key Axis Name Last Minimum Maximum Mean SD SD Change
Right CMBS ERISA Eligible:AAA - OAS 240.914 51.195 08-Dec-2004 475.668 11-Mar-2008 96.874 61.806 4.103
Right CMBS ERISA Eligible:A - OAS 458.530 59.628 08-Dec-2004 904.621 14-Mar-2008 128.210126.524 7.101
5CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Bank regulatory capital credit spreads from AA rated banks
Source: Lehman Spreads to June 6th 2008
Bank Capital Securities
N U G G E T T A G : u s e r N a m e =n u ll& p lo t N a m e =n u ll
100
200
300
400
500
600
bps
2002 2003 2004 2005 2006 2007 2008
Source: LehmanLive.com
Key Axis Name Last Minimum Maximum Mean SD SD Change
Left Capital Securities - USD Banking T1 A or Better - OAS469.191 72.541 31-J an-2005 592.186 18-Mar-2008 182.479134.383 5.563
Left Capital Securities - USD Banking UT2 A or Better - OAS311.355 62.630 30-Nov-2001 440.694 27-Mar-2008 142.169 94.107 6.969
6CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
High yield bonds spreads not near recessionary levels
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%F
-89
F-9
1
F-9
3
F-9
5
F-9
7
F-9
9
F-0
1
F-0
3
F-0
5
F-0
7
Sp
ec
ula
tiv
e D
efa
ult
Ra
te (
%)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
CS HY Index Spreads (RHS)
Moody's Global HY Default Rate
Source: CS & Moody's Investor Service, January 1989 to May 2008
7CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Loans look cheaper than High Yield Bonds
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
D-9
1
D-9
2
D-9
3
D-9
4
D-9
5
D-9
6
D-9
7
D-9
8
D-9
9
D-0
0
D-0
1
D-0
2
D-0
3
D-0
4
D-0
5
D-0
6
D-0
7
High Yield Peak Leveraged Loans Peak
CS HY Index Spread Swapped to Libor CS LL Index Discount Spread (3Y) (Currently 6.26%)
Source: Moodys
31-Jan-91 to 30-April-08 Source: CS, Bloomberg
8CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Peak in excess returns follows peak in spreads – Investment Grade
Baa Credit - Option Adjusted Spread (LA), 31/01/1991, 270 bp
Baa Credit - Option Adjusted Spread (LA), 22/10/2002, 348 bp
U.S. Credit Baa - Excess Return 12 Month (RA), 31/01/1992, 5%
U.S. Credit Baa - Excess Return 12 Month (RA), 23/10/2003, 13%
0 bp
50 bp
100 bp
150 bp
200 bp
250 bp
300 bp
350 bp
400 bpM
ay-9
0
Nov
-90
May
-91
Nov
-91
May
-92
Nov
-92
May
-93
Nov
-93
May
-94
Nov
-94
May
-95
Nov
-95
May
-96
Nov
-96
May
-97
Nov
-97
May
-98
Nov
-98
May
-99
Nov
-99
May
-00
Nov
-00
May
-01
Nov
-01
May
-02
Nov
-02
May
-03
Nov
-03
May
-04
Nov
-04
May
-05
Nov
-05
May
-06
Nov
-06
May
-07
Nov
-07
May
-08
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Baa Credit - Option Adjusted Spread (LA) U.S. Credit Baa - Excess Return 12 Month (RA)
Source: Lehman Brothers and CS Data range : May 1990 to May 2008
9CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Peak in excess returns follows peak in spreads – Leveraged Loans
Discount Spread (3Y) (LHS), 31-Oct-02, 6.32%
12M AUD Excess Return (RHS), 31-Oct-03, 12.1%
-0.50%
0.50%
1.50%
2.50%
3.50%
4.50%
5.50%
6.50%
7.50%D
ec-9
2
Jun-
93
Dec
-93
Jun-
94
Dec
-94
Jun-
95
Dec
-95
Jun-
96
Dec
-96
Jun-
97
Dec
-97
Jun-
98
Dec
-98
Jun-
99
Dec
-99
Jun-
00
Dec
-00
Jun-
01
Dec
-01
Jun-
02
Dec
-02
Jun-
03
Dec
-03
Jun-
04
Dec
-04
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Discount Spread (3Y) (LHS)
12M AUD Excess Return (RHS)
Source: Lehman Brothers and CS Data range : Dec 1992 to May 2008
10CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Peak excess returns follows peak in spreads – High Yield BondsCS HY Index Spread bps (LHS),
31-Oct-02, 1,080 bp
CS HY Index Spread bps (LHS), 31-Dec-90, 1,096 bp
Lehman's US HY rolling 12M Excess Return (RHS), 31-Oct-03, 31%
Lehman's US HY rolling 12M Excess Return (RHS), 31-Jan-92,
26%
0 bp
100 bp
200 bp
300 bp
400 bp
500 bp
600 bp
700 bp
800 bp
900 bp
1,000 bp
1,100 bp
Aug
-89
Feb
-90
Aug
-90
Feb
-91
Aug
-91
Feb
-92
Aug
-92
Feb
-93
Aug
-93
Feb
-94
Aug
-94
Feb
-95
Aug
-95
Feb
-96
Aug
-96
Feb
-97
Aug
-97
Feb
-98
Aug
-98
Feb
-99
Aug
-99
Feb
-00
Aug
-00
Feb
-01
Aug
-01
Feb
-02
Aug
-02
Feb
-03
Aug
-03
Feb
-04
Aug
-04
Feb
-05
Aug
-05
Feb
-06
Aug
-06
Feb
-07
Aug
-07
Feb
-08
-35%
-25%
-15%
-5%
5%
15%
25%
35%
CS HY Index Spread bps (LHS)
Lehman's US HY rolling 12M Excess Return(RHS)
Source: Lehman Brothers and CS Data range : August 1989 to May 2008
11CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Forced deleveraging repriced asset classes early in the cycle
Technical dislocation (liquidity crunch) or credit crunch – weeding
Risk still remains general or systemic and is not yet company specific
Better lending term good for banks and credit investors
– Higher spreads, Fees, Covenants and Discounts
Poorer fundamentals
Priced for disaster not perfection.
Summary
12CREDIT SUISSE ASSET MANAGEMENT (AUSTRALIA) LIMITEDABN 57 007 305 384 AFSL 238390
Current market opportunities
Risk Management
- Less cash, Secured but look for opportunities down the capital structure
2008 picking through the wreckage
- Assets sold by geared investors: loans, CLOs and bank capital securities
Hedging company specific risk or idiosyncratic risk
- Basis trades, Equity delta, a few short trades
Tactical trading
- Not a deer in the headlights.
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