“it wasn’t the end of the world…so what now?” – investec
TRANSCRIPT
Investec Asset Management It wasn’t the end of the world… so now what?”
The Senate Group – 14th March 2013
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Agenda
● Challenges facing low risk investors Morkel Kincaid
● “It wasn’t the end of the world… So now what?” Sumesh Chetty
● Questions and answers
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Developed market interest rates tell the story
Source: I-Net Bridge
Developed market short-term interest rates: UK (Clearing bank rate, 0.50%),
US (Fed funds rate, 0.25%), EU (repo rate, 0.75%)
0
1
2
3
4
5
6
200
7
200
8
200
9
201
0
201
1
201
2
Inte
rest ra
tes (
%)
UK Clearning Banks Base Rate US Fed Funds Rate Euro Zone Repo Rate
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A liquidity wave has driven risk assets over the short term 12-month asset class returns to end February 2013
Source: I-Net Bridge
2010 2011 2012 Q3 2012 Q4 2012 Jan 2013 Feb 2013 YTD
ALSI 18.98% 2.6% 26.7% 7.26% 10.34% 3.23% -1.89% 1.27%
ALBI 14.96% 8.8% 16.0% 5.00% 2.60% 0.07% 0.66% 0.73%
SA Cash 6.93% 5.7% 5.5% 1.36% 1.30% 0.43% 0.39% 0.82%
Listed Property 29.62% 8.9% 35.9% 10.98% 2.75% 0.99% 4.64% 5.68%
FTSE/JSE All Share: 19.3%
SA Listed Property: 35.7%
SA Cash 5.4%
SA All Bond Index: 14.3%
95
100
105
110
115
120
125
130
135
Feb -
12
Ma
r -1
2
Apr
-12
Ma
y -
12
Ju
n -
12
Ju
l -1
2
Aug
-12
Sep
-12
Oct -1
2
No
v -
12
De
c -
12
Ja
n -
13
Feb -
13
FTSE/JSE All Share !BS(J203T,E,100) SA All Bond Index !BS(JAPI05[TP],E,100) SA Cash !BS(STFIND[CL],E,100) SA Listed Property !BS(J253T,E,100)
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It’s been a golden decade for SA asset classes
Source: Morningstar, to 31 December 2012, based in Rands. Returns are calculated on a bid-to-bid basis, net of fees, with gross
income reinvested; indices are all gross of fees
Performance over 10 years (annualised)
18.7%
10.4%
8.2%
5.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Average General Equity Fund Average Bond Fund Average Money Market Fund Average Foreign Equity Fund
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Driving SA bond yields to record lows
6.0
6.5
7.0
7.5
8.0
8.5
9.0
5.2
5.4
5.6
5.8
6
6.2
6.4
6.6
6.8
7
7.2
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13
R20
8 G
ove
rnm
en
t b
on
d (
%)
JP
M G
BI-
EM
(%
)
JPMorgan GBI-EM Index (LHS)
R208 Govt bond (RHS)
Source: Bloomberg as at 18 February 2013 and I-Net-Bridge
Are income funds still relevant?
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-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
SA interest rates Keeping cash rates negative in real terms
Source: Investec Asset Management
SA real returns
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Interest rates are expected to remain lower for longer
Source: Investec Asset Management
The market has changed Opportunities still exist... they're just harder to find
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Opportunities exist to achieve meaningful real returns
Active management
Meaningful
real returns
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Active management over the years has been crucial
Source: I-Net Bridge
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2007 2008 2009 2010 2011 2012
Inflation linked bonds
Bonds
Cash
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Active management Will be crucial in a low return environment
SA fixed income team
● SA Duration
● SA Credit
● Listed Property
● Rand Hedge
London fixed income team
● Offshore Duration
● Offshore Credit
● Currencies exposure
● EM exposure
USD/ZAR exchange rate
Source: I-Net Bridge and Investec Asset Management as at 31 December 2012.
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Opportunities exist to achieve meaningful real returns
Corporate credit
Active management
Meaningful
real returns
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Returns in excess of government bonds1
Corporate bonds remain the bright spot Quality corporates offering higher yields than government bonds
● Corporate SA has a very
strong balance sheet
● Corporate bonds now offering
2-3% p.a above government
bonds
We only invest in
investment grade
instruments
AAA
AA
A
BBB
1Credit spreads per rating band calculated as average of spreads of each bond against its companion benchmark government bond
Source: RMB as at 31 December 2012.
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Opportunities exist to achieve meaningful real returns
A global universe – a larger opportunity set
Corporate credit
Active management
Meaningful
real returns Corporate credit
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Global fixed income offers a broad opportunity set
Annual Returns in USD for different fixed income asset types – best to worst
● Returns vary
significantly across the
range of fixed income
opportunities
● We look to hold assets
that suit the economic
environment and that
offer value
Emerging market debt Investment grade corporate bond
Treasuries Cash
Global High yield corporate bonds
Lowest
return
Source: Investec Asset Management, Bloomberg BBA 1 month LIBOR, Citigroup Treasury Index, Citigroup WGBI-ex US, JP
Morgan ELMI+ in USD to 2003, JP Morgan GBI-EM Global Diversified in USD from 2003, Merrill Lynch Global HY Index hedged
into USD, Merrill Lynch Global Corporate Index hedged into USD
Highest
return
Update: Yearly
G:\Depts\Marketing\Presentations\~MASTER PITCHBOOKS\GSF\GSF
Global Strategic Income Fund\~Evidence\GSI evidence 2.xlsx\Page 7
annual
Updated by Seamus
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
13.5% I8.9% 22.0% 27.9% 23.0% 6.3% 15.2% 18.1% 13.9% 60.9% 15.7% 9.6% 18.9%
9.2% 6.7% 11.6% 18.5% 12.1% 3.7% 10.8% 11.5% 10.1% 22.0% 15.3% 5.2% 16.8%
6.6% 4.2% 11.4% 16.9% 11.3% 3.4% 6.9% 9.0% 2.9% 16.3% 7.4% 5.0% 10.8%
2.0% 3.5% I8.4% 6.3% 5.5% 3.4% 5.2% 5.4% -4.8% 4.4% 5.8% 3.2% 2.0%
-2.6% 3.2% 1.8% 2.3% 3.5% 2.8% 3.8% 3.4% -5.2% 0.3% 5.2% 0.2% 1.5%
-5.3% -3.5% -1.0% 1.2% 1.5% -9.2% 3.1% 2.1% -26.6% -3.7% 0.3% -1.8% 0.2%
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Overall expect lower and narrower returns, but opportunities
still exist
Expected 12 month returns
Cash 5.0%
Bonds/ILB’s 6.8%
Corporate 8.8%
CPI 5.8%
Property yield 7.4%
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Investec Asset Management South African Funds – core range
Fixed Income Multi-Asset Equity
Exp
ecte
d R
etu
rn
Value
Equity
Absolute Income
Diversified Income
Money Market
Opportunity
Cautious Managed
Managed
Volatility
Moderate Low High
Opportunity Income
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SA fixed income funds Different strategies have different objectives
Fund strategy Investec Fund Sector
Money market alternatives Investec Absolute Income SA Multi-Asset Income
Domestic only – Fixed Income
Solution Investec Opportunity Income SA Multi-Asset Income
Complete - Fixed Income solution
(incl. international) Investec Diversified Income SA Multi-Asset Income
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Globally integrated fixed income investment team We are unique to the SA market FINAL VERSION 01/12/11
Fixed Income & Currency Capability Leaders
André Roux – Co-Head of Global
Fixed Income
John Stopford – Co-Head of
Global Fixed Income
Simon Howie –
South Africa & Frontier Credit4 Investment Specialists
Multi-strategy & Developed Markets Emerging Markets
John Stopford – Allocation &
Developed Credit
4 Investment Specialists
Peter Eerdmans – Emerging Markets
Debt & Currency12 Investment Specialists
Russell Silberston – Developed
Rates & Currency
7 Investment Specialists
Malcolm Charles –
Southern African Rates
4 Investment Specialists
Thanos Papasavvas
Fixed Income & Currency Strategist
5 Fixed Income & Currency Dealers
André Roux
Economic Research
Text size 15
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Second W 8
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Second W 8
Photo 1.4
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Textbox W 6.6
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Textbox W 16
Textbox H 1.44
Text size 12
● Globally integrated team
● 37 investment professionals
● Average of 13 years
investment experience
● Specialist teams with clear
accountability and
responsibility
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Investec Absolute Income Fund Compelling alternative to money market
Annualised performance
Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested.
Market indices are gross of fees. Periods less than one year are not annualised.
*Inception date: 1 July 2003
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1 year 3 years p.a. 5 years p.a. Since inception*
Investec Absolute Income
SA money market sector average
Investec Absolute Income 7.1% 7.1% 8.6% 8.8%
SA money market sector average 5.4% 5.9% 7.7% 8.0%
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Investec Diversified Income Fund Complete fixed income solution
● A diversified fixed income retail fund, established in 2008
● Globally integrated approach drawing on the best investment ideas from the SA and
London teams
● Diversified strategic allocation to multiple sources of uncorrelated fixed income returns
● Actively manages the asset allocation between cash, government bonds, inflation linked
bonds, corporate bonds and listed property in SA and abroad
● Offshore assets are actively managed with currency hedging
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Investec Diversified Income Fund Complete fixed income solution for SA investors
Corporate bonds:
Overweight (40%)
Foreign Exposure (incl. Credit linked
notes):
Actively managed
Money market:
NCDs = higher income yields and liquid
Government bonds and Property:
Underweight
Portfolio allocation
Source: Investec Asset Management 22 February 2013
Duration: 1year and 3 months
Yield: 5.8%
Government Bonds, 24.0%
Money Market (NCDs), 22.0% Foreign
Exposure, 13.0%
Floating Rate Notes, 23.0%
Corporate Bonds, 15.0%
Inflation-Linked
Bonds, 2.0%
Property, 1.0%
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Investec Diversified Income Fund Complete fixed income solution for SA investors
Source: Morningstar as at 31 January 2013. Returns are calculated on a bid-to-bid basis, net of fees, with gross income reinvested
Inception date: 29 August 2008
0%
2%
4%
6%
8%
10%
12%
3 months 1 year 3 years p.a.
Investec Diversified Income 1.8% 9.6% 9.8%
ALBI 1-3 1.3% 5.5% 6.8%
STeFI 1.3% 5.5% 6.0%
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Summary
● Challenging macroeconomic conditions prevail
− Low / negative real returns
− Lower and narrower returns from SA income assets
● Opportunities exist
− Active management
− Corporate credit
− Global diversification
● Investec Asset Management offers a globally integrated and experienced team
managing a complete fixed income solution
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Sumesh Chetty
Portfolio Manager
6 years with the firm
11 years of industry experience
Sumesh is a portfolio manager at Investec Asset
Management with responsibility for our absolute return
strategies. He is co-portfolio manager of the Investec
Cautious Managed Fund and the Investec Absolute
Balanced Fund.
He joined the firm in 2007 from Metropolitan Asset
Managers where he managed the Metropolitan
Absolute Return Fund from 2005. Before joining
Metropolitan, Sumesh spent three years as an
investment actuary at Metropolitan Employee Benefits,
where he was responsible for managing smooth bonus
funds. Sumesh began his career at Swiss Re Life &
Health, where he spent over three years as an actuarial
specialist.
Sumesh graduated from the University of Cape Town
with a Bachelor of Business Science (Honours) degree
in Actuarial Science and a Post Graduate Diploma in
Actuarial Science. He is also a Fellow of the Institute of
Actuaries in the United Kingdom.
Years updated
2013
Biographies
Sumesh Chetty, Portfolio Manager
It wasn’t the
end of the world…
So what now?
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Agenda
● Our investment philosophy
● Challenges facing investors
● Implications for portfolio construction
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South Africa Absolute Return team
Co-Chief Investment Officers - John McNab, Domenico Ferrini
Experienced Portfolio Managers – 20 managers
Equity
Growth: Richard Middleton
Value: John Biccard, Rajay
Ambekar
Active Quants: Grant Irvine-Smith
General: Chris Freund
Sector: Angelique de Rauville, Neil
Stuart-Findlay
RI: Malcolm Gray
Fixed Income
André Roux, John Stopford
Duration: Malcolm Charles
High Income: Vivienne Taberer
Cash: Lisa McLeod
Credit: Simon Howie, Marshall
Brown, Steven Loubser
Absolute Return
Clyde Rossouw
Sumesh Chetty
Common research platform – 21 analysts
Implementation and pre-trade compliance – 3 members
Dealing – 5 dealers
Performance measurement, attribution & risk – 6 analysts
As at November 2012
CIO: John McNab, Domenico Ferrini
Managers: Gail, Rajay, John B, Grant, Adrian, Richard, Daniel, Clyde,
Sumesh, Chris F, Malcolm G, Angelique, Neil SF, John S, Andre, Vivienne,
Malcolm, Simon, Marshall, Steven,
Analysts: Rob, Chris S, Sarine, Rudiger, Grant, Diane, Rhynhardt, John T,
Abrie, Peter, Mabuse, Chanel, Nancy, Londa, Duncan, Sandile,
Implementation: Jacqui, Cindy, Morne
Dealers: Doug, Kagiso, Francois, Ryan, Lisa, Tsitsi
Attribution: Andrew, Thabani, Muzz, Ian, Terry, Khaya
Lisa excluded from dealers - she appears as a pm in this case.
Clyde Rossouw
14 years with the firm
19 years experience
Sumesh Chetty
6 years Investec
11 years experience
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Investec Opportunity Fund Long term consistent outperformance
Investec Opportunity Fund relative to new sector:
South Africa Multi Asset – High Equity
Source: Morningstar as at January 2013.
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Investec Opportunity
SA Money Market sector average
SA Bond sector average
SA AA variable equity sector average
SA equity general sector average
Foreign equity general sector average
5%
7%
9%
11%
13%
15%
17%
19%
0% 2% 4% 6% 8% 10% 12% 14% 16%
Retu
rn p
.a.
Standard Deviation p.a.
Risk vs Return scatterplot: 10 years to 31 December 2012
Source: Morningstar as at 31 December 2012. Returns are calculated on a bid-to-bid basis, net of fees, with gross income
reinvested. Market indices are gross of fees.
Investec Opportunity and Cautious Managed Funds A proven investment process
Quality-centric
Valuation-bias
Risk-cognisant
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Risk is defined primarily as the risk of losing money
Downside volatility is more detrimental than overall volatility
Investec Opportunity and Cautious Managed Funds Our investment philosophy
Outperforming inflation with the lowest possible risk
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The rules of absolute investing
Rule number 1: Never lose money
Rule number 2: Never forget rule # 1
Why?
-30% +43%
R 100
R 70
R 100
Start Year 1 Year 2
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High quality opportunities with a valuation bias
● We prefer predictable cash flows over
uncertainty
● We only buy uncertainty if paid
handsomely for it
● ‘Cheap’ is not ‘value’
● We prize franchise value highly
● We do not change our minds often
Emphasis on quality and consistency to ensure long-term sustainable growth
Quality
Cash Flow Balance
Sheet Management
Brand /
Competitive
Advantage
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It wasn’t the end of the world… So what now?
Select opportunities can still be found
We are cautiously optimistic
• Global risks still remain
• Local risks have increased
• Market sentiment appears overly bullish
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Bond yields at historic lows Limited potential returns
6
8
10
12
14
16
18
20
Jan-9
4
Jun-9
4
No
v-9
4
Apr-
95
Sep-9
5
Feb
-96
Jul-9
6
De
c-9
6
Ma
y-9
7
Oct-
97
Ma
r-9
8
Aug-9
8
Jan-9
9
Jun-9
9
No
v-9
9
Apr-
00
Sep-0
0
Feb
-01
Jul-0
1
De
c-0
1
Ma
y-0
2
Oct-
02
Ma
r-0
3
Aug-0
3
Jan-0
4
Jun-0
4
No
v-0
4
Apr-
05
Sep-0
5
Feb
-06
Jul-0
6
De
c-0
6
Ma
y-0
7
Oct-
07
Ma
r-0
8
Aug-0
8
Jan-0
9
Jun-0
9
No
v-0
9
Apr-
10
Sep-1
0
Feb
-11
Jul-1
1
De
c-1
1
Ma
y-1
2
Oct-
12
%
Yield on the generic 10 year government bond
Source: I-Net Bridge, to 31 December 2012.
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Low short term rates resulting in negative real returns
Source: Investec Asset Management
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Investec Cautious Managed Fund Putting your cash to work – the search for real income
Inflation-linked bonds as an alternative to cash
Source: I-Net Bridge; Investec Asset Management to 31 December 2012.
100
102
104
106
108
110
112
114
116
118
120
Jan-1
2
Feb
-12
Ma
r-1
2
Apr-
12
Ma
y-1
2
Jun-1
2
Jul-1
2
Aug-1
2
Sep-1
2
Oct-
12
No
v-1
2
De
c-1
2
Inflation-linked bonds Cash
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Building a better bond portfolio Our best Inflation Linked Bond
British American Tobacco PLC
• Global tobacco manufacturer with dominant position in
many international markets
• 35% ROE and Operating Margins of 35%
• Global Drive Brands (Dunhill, Pall Mall, Kent, Lucky
Strike) – the key drivers of growth
• On-going share buybacks
• Dividend Yield of 3.8%
• FCF yield of 4.8%
Earnings per share growth of 12% p.a.
Dividends per share growth of 14% p.a.
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Stretched valuations in select parts of the SA equity market
Resources relative to Industrials
0.5
0.7
0.9
1.1
1.3
1.5
1.7
Jan-0
3
Apr-
03
Jul-0
3
Oct-
03
Jan-0
4
Apr-
04
Jul-0
4
Oct-
04
Jan-0
5
Apr-
05
Jul-0
5
Oct-
05
Jan-0
6
Apr-
06
Jul-0
6
Oct-
06
Jan-0
7
Apr-
07
Jul-0
7
Oct-
07
Jan-0
8
Apr-
08
Jul-0
8
Oct-
08
Jan-0
9
Apr-
09
Jul-0
9
Oct-
09
Jan-1
0
Apr-
10
Jul-1
0
Oct-
10
Jan-1
1
Apr-
11
Jul-1
1
Oct-
11
Jan-1
2
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Resources expensive
relative to industrials
Resources cheap
relative to industrials
Source: I-Net Bridge.
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Bottom-up stock selection
Historic PE and subsequent real total returns
Source: I-Net Bridge.
Investec Opportunity Fund
ALSI
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Investec Opportunity Fund Quality companies, reasonable valuations
Source: I-Net Bridge and Investec Asset Management as at 31 December 2012
Company %
Assore 5.7
British American Tobacco 3.9
Sasol 3.5
MTN Group 3.2
Newgold Issuer 3.2
Tiger Brands 3.0
Impala Platinum Holdings 2.6
Steinhoff International Holdings 2.5
Santam 2.0
Richemont 1.7
Total 31.3
Top 10 holdings as % of fund
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0
0.5
1
1.5
2
2.5
20
00/0
6/0
1
20
01/0
2/0
1
20
01/1
0/0
1
20
02/0
6/0
1
20
03/0
2/0
1
20
03/1
0/0
1
20
04/0
6/0
1
20
05/0
2/0
1
20
05/1
0/0
1
20
06/0
6/0
1
20
07/0
2/0
1
20
07/1
0/0
1
20
08/0
6/0
1
20
09/0
2/0
1
20
09/1
0/0
1
20
10/0
6/0
1
20
11/0
2/0
1
20
11/1
0/0
1
20
12/0
6/0
1
EPS T12M(ASR/AGL)
Last Px (ASR/AGL)
Associated Ore A great asset in our portfolio, held for 8 years
Source: I-Net Bridge
Anglo shares outstanding have grown 6X
Before buying back shares in 2007
No change in Assore since 1950
Assore’s profits have grown
faster than Anglos by 20% p.a.
But you still only pay 10 times
earnings!
11 11
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Platinum industry cost curves Impala Platinum is our preferred platinum stock
Mim
osa
Tw
o r
ivers
Pla
tin
um
Mile
Zim
pla
ts
Moto
tolo
West ta
ilin
gs
Modik
wa
Maru
la
Impala
Boschkoppie
Mogala
kw
ena
Am
andelb
ult
Kro
ondal
Unio
n
Lonm
in
Nort
ham
Ruste
nburg
Marikana
CT
RP
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
"Cas
h co
sts+
sust
aini
ng c
apex
" (R
/5P
GE
+A
u oz
)
R10,500/ounce
Page 46 | CONFIDENTIAL
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7.0
7.5
8.0
8.5
9.0
9.5
Jan-1
2
Jan-1
2
Feb
-12
Ma
r-1
2
Ma
r-1
2
Apr-
12
Ma
y-1
2
Ma
y-1
2
Jun-1
2
Jul-1
2
Jul-1
2
Aug-1
2
Sep-1
2
Oct-
12
Oct-
12
No
v-1
2
De
c-1
2
De
c-1
2
Jan-1
3
SA specific risks have been on the rise
• Labour unrest
• Rating agency downgrades
• Rand depreciation
• Political uncertainty
• Risk of foreign outflows
Source: I-Net Bridge.
Page 47 | CONFIDENTIAL
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Offshore Equity High quality global franchises at attractive valuations
Name Weight PE FCF Yield DY EM % Sales
Nestlé (Nescafe, Maggi ,Nesquik) 5.6% 16.6 4.5 3.7 41%
Japan Tobacco (Camel, Winston, Mild Seven, B&H) 5.1% 13.4 11.4 3.0 28%
Samsung Electronics (Samsung) 4.8% 8.2 4.8 0.6 75%
Imperial Tobacco Group (Davidoff, Gauloises, West) 4.8% 11.1 5.8 4.9 40%
Microsoft Corp (Windows, Office, Xbox, Bing) 4.5% 8.8 11.7 3.5 13%
Reckitt Benckiser Group (Nurofen, Finish, Vanish, Dettol, Strepsils) 4.4% 12.5 6.6 3.4 35%
Unilever (Axe, Knor, Blue Band, Lipton, Dove, Lux, Flora, Omo) 4.4% 17.2 5.4 3.4 55%
Anheuser-busch Inbev ( Budweiser, Beck's, Stella Artois ) 4.3% 17.4 7.7 2.6 56%
International Business Machines (IBM) 4.1% 11.7 6.8 1.8 21%
Coach (Coach) 4.0% 14.1 6.6 2.1 13%
Total/Average 46.0% 13.1 7.1 2.9 37.7%
Source: Investec Asset Management to 31 December 2012.
Top 10
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Nestlé – the quintessential franchise stock
Source: DataStream, company data, Investec Asset Management, USD Total Return Index
This is not a buy or sell recommendation for any particular stock
Nestle has outperformed the market through multiple
cycles due to compounding and steadily increasing
exposure to EM
Share price: source of
return 1973 - 2012
Business (profit) growth 8.1%
Valuation uplift 2.7%
CAGR % 13.1%
05101520253035404550
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
2000 2005 2010 2015 2020
% o
f sale
s
Popula
tion (
m)
% of Nestle Sales
EM Population (Million)
Develop Market Population(Million)
EM is adding 1bn new emerging market consumers by
2020
50
500
5,000
Jan-9
0
Jan-9
1
Jan-9
2
Jan-9
3
Jan-9
4
Jan-9
5
Feb
-96
Feb
-97
Feb
-98
Feb
-99
Feb
-00
Mar-
01
Mar-
02
Mar-
03
Mar-
04
Mar-
05
Ap
r-06
Ap
r-07
Ap
r-08
Ap
r-09
Ap
r-10
May-1
1
May-1
2
Lo
g s
cale
MSCI World Nestle
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12573
Investec Cautious Managed Fund Income generation and real returns at lower volatility
Domestic -cash
29.4%
Domestic -bonds25.0%
Offshore -equities18.9%
Domestic -equities18.7%
Offshore -cash3.5%
Commodities -gold4.5%
Source: Investec Asset Management as at 31 December 2012
● High quality stocks to provide real capital growth in volatile markets with lower levels of risk
SA Equities
● Preferred asset class
● High quality global franchises on attractive valuations
Offshore Equities
● Uncorrelated returns – provides protection in uncertain markets Gold
● Bonds and ILBs provide a superior return to cash which yields a negative real return
SA Fixed interest
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Investec Opportunity Fund Long term real wealth creation
Domestic -equities, 41.6%
Offshore -equities, 18.1%
Domestic -cash , 15.8%
Domestic -bonds, 14.9%
Commodities -Gold, 3.2%
Offshore -cash, 3.1%
Offshore -bonds, 2.6%
Domestic -property, 0.7%
Investec Opportunity Fund
● High quality stocks to provide real capital growth in volatile markets with lower levels of risk
SA Equities
● Preferred asset class
● High quality global franchises on attractive valuations
Offshore Equities
● Uncorrelated returns – provides protection in uncertain markets Gold
● Bonds and ILBs provide a superior return to cash which yields a negative real return
SA Fixed interest
Source: Investec Asset Management as at 31 December 2012
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Superior long-term returns A focus on risk, quality and valuation
Investec Opportunity
SA Money Market sector average
SA Bond sector average
SA AA variable equity sector average
SA equity general sector average
Foreign equity general sector average
5%
7%
9%
11%
13%
15%
17%
19%
0% 2% 4% 6% 8% 10% 12% 14% 16%
Retu
rn p.a
.
Standard Deviation p.a.
Risk
cognisant
Quality
centric
Valuation
bias
Source: Morningstar as at 31 December 2012.
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Investec Asset Management International Funds – Core Range
Global Fixed Income Global Multi-Asset Global Equity
Exp
ecte
d R
etu
rn
Global Strategic Equity (USD)
Worldwide Equity Feeder (ZAR)
Global Equity (USD)
Global Opportunity Income FoF (ZAR)
Money Market (USD, EUR, GBP)
Global Strategic Managed Feeder (ZAR)
Global Strategic Managed (USD)
Global Equity FoF (ZAR)
Global Franchise (USD)
Volatility
Moderate Low High
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Investec GSF Global Franchise Fund
● Highly differentiated 'global franchise' philosophy
● Concentrated portfolio and not benchmark constrained
● Low historic correlation with traditional benchmarks
● Record of long-term outperformance:
− participating meaningfully in up markets
− with smaller draw-downs in down markets
− lower than average absolute volatility
● Managed by a globally integrated investment team based in London and Cape
Town
We seek to invest in companies with business models which can provide some
certainty in uncertain markets
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Investec GSF Global Franchise Fund Performance track record
Past Performance figures are not audited and should not be taken as a guide to the future
Source: Lipper, dates to 28 February 2013, NAV based, (inclusive of all annual management fees but excluding any initial charges),
gross income reinvested, in USD
*Inception date: 10 April 2007
Annual performance in USD Cumulative performance in USD
Update
Monthly
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Apr 07 Jan 08 Oct 08 Jul 09 Mar 10 Dec 10 Sep 11 Jun 12 Feb 13
Investec GSF Global Franchise A Acc
MSCI AC World NR (MSCI World NR pre 1/10/11)
28.8
0.3
1 month 3 months YTD 1 year 3 years p.a. 5 years p.a.
Since inception
p.a.*
Investec GSF Global Franchise A Acc 1.2% 5.2% 5.3% 13.6% 11.6% 5.6% 5.0%
MSCI AC World NR (MSCI World NR pre 1/10/11) 0.0% 7.0% 4.6% 9.3% 9.5% 1.4% 0.4%
Relative performance 1.2% -1.8% 0.7% 4.4% 2.1% 4.2% 4.6%
Quartile ranking 1 3 2 1 1 1 1
5.9%
-32.6%
36.1%
5.9%7.4%
14.7%
5.3%3.9%
-40.7%
30.0%
11.8%
-5.9%
16.1%
4.6%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2007 (Apr) 2008 2009 2010 2011 2012 2013 (YTD)
Investec GSF Global Franchise A Acc
MSCI AC World NR (MSCI World NR pre 1/10/11)
Thank you www.investecassetmanagement.com
Page 56 | CONFIDENTIAL
12573
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