aylett & co march 2014
TRANSCRIPT
Senate Group14 March 2014
Data as at 28 February 2014
USD 53%
GBP 10%
SEK 1%ASIAN 0%
JPY 0% (USD)
AUD 1%
ZAR 23%
EUR 10%CHF 2%
The Cape Argus Cycle Tour x 2
Data as at 28 February 2014
Agenda
Update on Aylett & Co.
Nedgroup Bravata Fund
Investment Strategy
Data as at 28 February 2014
Key facts• Founded in 2005
• Independent Asset Management Boutique
• Our view is long term and legacy inspired
• Bottom-up stock pickers
• Tested philosophy and robust investment process
• Integrity, energy and intelligent behaviour form part of the Aylett & Co. ethos.
Update on Aylett & Co.
Data as at 28 February 2014
Aylett at a glance• Assets under management
Update on Aylett & Co.
Data as at 28 February 2014
AUM Breakdown• Total AUM: R2.1 billion
Update on Aylett & Co.
Equity Mandates50%
Worldwide Mandates39%
Balanced Manadates8%
Absolute Return and Hedge Fund Mandates
3%
Equity Mandates
Worldwide Mandates
Balanced Mandates
Absolute Return and Hedge Fund Mandates
Product Split:
Data as at 28 February 2014
Aylett at a glance• Assets under management
• Continue to experience flows
Update on Aylett & Co.
Data as at 28 February 2014
Aylett at a glance• Assets under management
• Continue to experience flows
• Team of 8 with strong academic credentials
Update on Aylett & Co.
Data as at 28 February 2014
Aylett at a glance• Assets under management
• Continue to experience flows
• Team of 8 with strong academic credentials
• Diverse product offering
Update on Aylett & Co.
Data as at 28 February 2014
Aylett & Co. Products
Update on Aylett & Co.
Data as at 28 February 2014
Aylett & Co. Products
Update on Aylett & Co.
-500
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500
1 000
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2 000
2 500
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AuM (Mn)
Aum (Mn)
Bravata launched 1 October 2005
Equity Fund launched 3 July 2006
Hedge Fund I launched 13 June 2008
Hedge Fund II launched 1 September 2011
The Aylett Hedge Fund – 1 September 2013
Balanced Fund launched 1 November 2013
Data as at 28 February 2014
Aylett at a glance• Assets under management
• Continue to experience flows
• Team of 8 with strong academic credentials
• Diverse product offering
• Performance has been excellent across all products
Update on Aylett & Co.
Data as at 28 February 2014
-20
20
60
100
140
180
220
260
300
340
-25
0
25
50
75
100
125
150
175
200
225
Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14
Cumulative Outperformance
Aylett Equity Prescient Fund - A1
ALSI TRI* Indexed
* Total Return Index assumes dividends and distributions are reinvested**Cumulative outperformance since inception is 41.10%
Source: Bloomberg, end February 2014
AYEPF Cumulative Outperformance
AYEPF Performance
Data as at 28 February 2014
Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13
95
120
145
170
195
220
245
270
Source: Bloomberg, inception to end February 2014
Bravata
CPI Indexed
CPI + 5 Indexed
Nedgroup Bravata Worldwide Flexible Fund
Bravata Performance
Data as at 28 February 2014
Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14
50
75
100
125
150
175
200Fund Indexed
STeFI Indexed
Note: Fund structure changed on 1 September 2013 Source: Bloomberg, inception to end February 2014Fund outperformance since inception is 36.6%
The Aylett Hedge Fund
AHF Performance
Nedgroup Bravata Worldwide Flexible Fund
Data as at 28 February 2014
What is Bravata?Bravata is a rand denominated Worldwide Asset
Allocation Flexible Fund
• Worldwide: Bravata may invest in both South African and foreign markets. No minima are set for either domestic or foreign assets.
• Flexible Asset Allocation: the portfolio can invest in a flexible combination of investments in equities, bonds and money thus giving exposure to multiple asset classes.
• Rand Denominated: allows easy offshore exposure without the hassle of exchanging currency and SARB applications.
Nedgroup Bravata
Data as at 28 February 2014
Our value proposition• Amongst peers, Bravata has performed well
Bravata Performance
Data as at 28 February 2014
Our value proposition• Amongst peers, Bravata has performed well
Bravata Performance
For internal use only as this does not comply with the code of advertising for unit trusts
YTD 1 year 2 years 3 years 5 years 7 years
2014/01/01 2013/03/01 2012/03/01 2011/03/01 2009/03/01 2007/03/01
2014/02/28 2014/02/28 2014/02/28 2014/02/28 2014/02/28 2014/02/28
Group/Investment Return Rank Return Rank Return Rank Return Rank Return Rank Return Rank
(ASISA) Wwide MA Flexible
Coronation Optimum Growth A 1.07 16 37.57 4 33.96 2 27.26 1 22.99 1 11.01 4
Foord Flexible FoF R 0.96 17 27.64 7 28.23 4 24.67 3 22.85 2
Coronation Market Plus 1.64 9 23.33 15 23.09 12 19.39 6 22.84 3 13.48 1
Efficient BCI Worldwide Flexible 0.71 19 21.60 17 23.48 10 19.03 8 18.73 4 12.75 2
Nedgroup Inv Bravata Ww Flex A 0.79 18 29.42 6 28.08 5 21.38 4 17.87 5 10.71 5
Oasis Crescent Worldwide Flexible FoF D 3.21 4 26.35 9 23.93 9 17.16 10 17.74 6
Imalivest MET Worldwide Flexible 3.08 5 43.25 1 37.25 1 24.73 2 16.52 7
MET Worldwide Opportunities FoF A -1.55 29 16.51 20 19.74 17 15.46 15 16.24 8
Marriott Worldwide Flexible FoF 0.68 20 25.36 11 24.79 7 18.62 9 15.44 9 7.80 6
MitonOptimal IP Worldwide Flex FoF A1 1.55 11 23.73 13 21.07 14 16.02 13 15.37 10
Consilium MET Worldwide Flexible 0.48 25 26.33 10 25.00 6 19.27 7 15.33 11
Quantum MET Worldwide Flexible FoF 0.59 23 23.33 16 20.69 15 15.97 14 14.59 12
Olympiad MET Worldwide Flexible FoF 0.61 22 16.11 21 19.55 18 14.98 17 13.54 13 5.01 9
Flagship IP Worldwide Flexible 5.25 1 41.13 2 23.24 11 16.19 12 13.22 14 6.44 8
Analytics ACi Worldwide Flexible FoF A 1.90 8 24.46 12 22.52 13 15.45 16 12.44 15 7.23 7
Flagship IP Worldwide Flexible FoF 4.64 2 40.35 3 28.48 3 21.12 5 11.99 16 11.94 3
GCI MET Worldwide Flexible FoF 1.35 14 17.11 19 16.57 19 11.97 18 9.47 17
Peer Group Average 1.25 26.753 24.039 18.648 16.304 9.5969
Peer Group Count 30 21 20 18 17 9
Data as at 28 February 2014
Our value proposition• Amongst peers, Bravata has performed well
• Amongst worldwide flexible choices Bravata has been a better performer than offshore flexible funds
Bravata Performance
Data as at 28 February 2014
• Amongst worldwide flexible choices Bravata has been a better performer than offshore flexible funds
Our value proposition
Bravata Performance
For internal use only as this does not comply with the code of advertising for unit trusts
Group/Investment Return Rank Return Rank Return Rank Return Rank Return Rank Return Rank
(ASISA) Wwide MA Flexible and Global Wwide Flexible
Coronation Optimum Growth A 1.07 32 37.57 7 33.96 4 27.26 2 22.99 1 11.01 4
Coronation Global Em Mkts Flex [ZAR] A -2.68 48 21.44 33 26.17 18 19.79 17 22.98 2
Foord Flexible FoF R 0.96 34 27.64 20 28.23 16 24.67 5 22.85 3
Coronation Market Plus 1.64 24 23.33 30 23.09 28 19.39 19 22.84 4 13.48 1
RE:CM Global FF A 4.45 3 47.31 1 38.66 1 30.31 1 20.14 5
Efficient BCI Worldwide Flexible 0.71 36 21.60 32 23.48 26 19.03 21 18.73 6 12.75 2
Old Mutual Intl Gth FoF A 2.47 16 43.99 2 35.55 3 25.69 3 18.30 7 8.64 9
Nedgroup Inv Bravata Ww Flex A 0.79 35 29.42 17 28.08 17 21.38 13 17.87 8 10.71 5
Oasis Crescent Worldwide Flexible FoF D 3.21 7 26.35 23 23.93 24 17.16 24 17.74 9
Imalivest MET Worldwide Flexible 3.08 8 43.25 3 37.25 2 24.73 4 16.52 10
MET Worldwide Opportunities FoF A -1.55 47 16.51 36 19.74 33 15.46 30 16.24 11
Marriott Worldwide Flexible FoF 0.68 37 25.36 25 24.79 22 18.62 22 15.44 12 7.80 11
MitonOptimal IP Worldwide Flex FoF A1 1.55 26 23.73 28 21.07 30 16.02 28 15.37 13
Consilium MET Worldwide Flexible 0.48 42 26.33 24 25.00 21 19.27 20 15.33 14
Quantum MET Worldwide Flexible FoF 0.59 40 23.33 31 20.69 31 15.97 29 14.59 15
Discovery Global Balanced FoF 2.98 11 34.58 11 29.94 11 22.12 10 14.48 16
Marriott International Growth FF A 2.94 12 36.29 9 31.97 7 23.17 6 14.30 17 7.66 13
Peer Group Count 49 37 36 34 33 20
2012/03/01
2014/02/28
2011/03/01
2014/02/28
2009/03/01
2014/02/28
2007/03/01
2014/02/28
2014/01/01
2014/02/28
2013/03/01
2014/02/28
YTD 1 year 2 years 3 years 5 years 7 years
Nedgroup Bravata Worldwide Flexible Fund
Portfolio Detail
Data as at 28 February 2014
Bravata Portfolio Detail
Top 15 Holdings % NAV (physical)
1 Berkshire Hath-B 5%
2 Cisco Systems 4%
3 Orbis-Jpn Eqt Us 4%
4 Wal-Mart Stores 3%
5 Loews Corp 3%
6 Bank Ny Mellon 2%
7 Sanofi 2%
8 Barclays Africa 2%
9 Tesco Plc 2%
10 Redwood Trust 2%
11 Carrefour Sa 2%
12 Recm & Calibre L 1%
13 Leucadia Natl 1%
14 Bp Plc 1%
15 Pargesa Holdi-Br 1%
Total 36.0%
Bonds 9%
Cash44%
Equity 47%
Asset Allocation
Data as at 28 February 2014
Bonds 9%
Cash44%
South African Equity
6%
USA Equity24%
European Equity6%
UK Equity4%
Japanese Equity
4%
Swedish Equity0%
Australian Equity1%
Swiss Equity2%
Other47%
Asset Allocation & Equity Split• Total AUM: R828 million
Bravata Portfolio Detail
Data as at 28 February 2014
Regional Currency Exposure
Bravata Portfolio Detail
USD 53%
GBP 10%
SEK 1%ASIAN 0%
JPY 0% (USD)
AUD 1%
ZAR 23%
EUR 10%CHF 2%
Data as at 28 February 2014
Investments with great yields
Bravata Portfolio Detail
Data as at 28 February 2014
Income Enhancing Strategies• ALE Property Group
Bravata Portfolio Detail
Data as at 28 February 2014
ALE Property Group
Data as at 28 February 2014
Income Enhancing Strategies• ALE shares ▫ Aug 2010 bought ALE shares to the value of AUS $326,000
▫ June 2012 profit + dividends amount to AUS $81,000
▫ Yield of approximately 12% per annum
ALE Property Group
Data as at 28 February 2014
Income Enhancing Strategies• ALE shares
• ALE notes▫ April 2011 started buying ALE notes
▫ Bought to the value of AUS $205,000
▫ To date have earned roughly AUS $42,000
▫ Yield of approximately 20%
ALE Property Group
Data as at 28 February 2014
Income Enhancing Strategies• ALE currency swaps
ALE Property Group
31 May 2013 24 June 2013 18 July 2013 11 August 2013
8.2
8.4
8.6
8.8
9
9.2
9.4
9.6
9.8
Rand vs AUS $
Data as at 28 February 2014
Income Enhancing Strategies• ALE shares
• ALE notes
• ALE currency swaps▫ June 2013 – Aug 2013 currency swaps
▫ Rand weakened against the AUS $
▫ Swapped to the value of AUS $200,000
▫ Earned roughly R107,000
(R98,000 profit + R11,000 interest)
ALE Property Group
Data as at 28 February 2014
Income Enhancing Strategies• ALE Property Group
• Barclays Group
Bravata Portfolio Detail
Data as at 28 February 2014
Income Enhancing Strategies
Barclays
Data as at 28 February 2014
Investment Ideas that worked• Reinet
Reinet
Data as at 28 February 2014
Reinet
22/01/2014 (eur) (zar)
Reinet NAV Value Value %NAV
Listed 2 843 41 757 72%
BAT shares 2 843 41 757 72%
Other 0 0 0%
Unlisted 1 378 20 201 35%
Cash 229 3 357 6%
Derivative asset - pull and call options -4 -484 0%
Other -478 -7 007 -12%
Sub-Total 3 968 58 248 100%
Minority Interest -14 -205 0%
Total 3 954 58 043 100%
Data as at 28 February 2014
Discount to NAV• Why would it trade at a discount?
1. Can buy underlying investments yourself2. Holdco costs
a) Management Feeb) Performance Fee
3. They tend to keep the cash
• BUT it is not justified…1. Who better to know when to sell BAT?2. History of treating minorities fairly3. Exceptional returns earned on investments to date
(which we cannot get exposure to)4. Performance Fee based on Euro price, but got headroom
(free ride)
Reinet
Data as at 28 February 2014
Discount History
Reinet
Data as at 28 February 2014
Discount moved from 34% to 25%
Reinet
34%25%
Investment Strategy
Data as at 28 February 2014
• Deflation at the FED
Investment Strategy
Data as at 28 February 2014
US New One Family Houses Sold • Annual total
Investment Strategy
Data as at 28 February 2014
• South Africa: Aggregate Valuations
Investment Strategy
Data as at 28 February 2014
• South Africa vs. Emerging Markets Valuations
Investment Strategy
Data as at 28 February 2014
• The Naspers effect
Investment Strategy
Data as at 28 February 2014
• The Naspers effect
Investment Strategy
Data as at 28 February 2014
• The Naspers effect
Investment Strategy
Data as at 28 February 2014
• SA economic slowdown
Investment Strategy
Data as at 28 February 2014
• SA economic slowdown
Investment Strategy
Data as at 28 February 2014
• SA market is expensive
Investment Strategy
Data as at 28 February 2014
• Taxation
Investment Strategy
Data as at 28 February 2014
International (Offshore Equity)• Large Caps
• Predictable
• Balance Sheet Strength
• Majority US
• Small bets: Australia, Japan
Investment Strategy
Data as at 28 February 2014
Looking forward• Avoid long term bonds
• Maintain maximum exposure offshore
• Increase exposure to small cap and mid cap markets
• “Cash is the ultimate contrarian bet”
Investment Strategy
Data as at 28 February 2014
Aylett Wwide Flexible Performance
Investment Strategy
Data as at 28 February 2014
Aylett & Co. is an authorised financial services provider approved by the Registrar ofFinancial Services Providers (www.fsb.co.za) to provide intermediary services andadvice in terms of the Financial Advisory and Intermediary Services Act 45 of2002. Market fluctuations and changes in rates of exchange or taxation may have aneffect on the value, price or income of investments. Since the performance offinancial markets fluctuates, an investor may not get back the full amount invested.Past performance is not necessarily a guide to future investment performance.Information and opinions have been compiled or arrived at by Aylett & Co. fromsources believed to be reliable, but Aylett & Co. does not accept liability for any lossarising from the use hereof nor makes any representation as to their accuracy orcompleteness. Any underlying research or analysis has been procured by Aylett & Co.for its own purposes and may have been acted on by Aylett & Co. or an associate forits or their own purposes.
Thank you